A COO asks: “What is your day rate?” A consultant who knows his trade answers a different question: what is the work, what does it produce, and what is the right shape of fee for that shape of work. Day rates are a habit, not a pricing model. This piece is the working explainer for the three shapes I use, how they actually run, and how to tell which one fits.
Why day rates persist anyway
Day rates are easy to compare, easy to budget for, and easy to stop. They convert the consultant into a unit of labour, which is the form the buyer’s procurement system already knows how to process. They are also, when the work has a named output or a measurable result, the worst deal on the table for both sides. The buyer pays for time spent rather than work delivered; the consultant is incentivised to extend the engagement rather than to finish it.
The arguments for day rates collapse the moment the work has a defined edge. The arguments hold when the work is exploratory, the scope changes weekly, or the buyer genuinely needs the flexibility to redirect the consultant on a Tuesday.
The three shapes that beat the day rate
Outcome-based pricing comes in three honest shapes. Each is the right answer for a different kind of work.
1. Fixed price per output
A defined deliverable, a fixed fee, and a date in writing. The consultant carries the risk of how long it takes. The buyer carries the risk that the deliverable as defined turns out to be the wrong thing.
This is the right shape for self-contained pieces of work: an audit, a memo, a policy, a diagnostic, a piece of analysis. It is the model behind every self-service tool on this site, and the model behind any pre-deal read in M&A integration. The key is that the output is nameable in one sentence and the buyer can read it when it arrives.
2. Base plus value share
A modest monthly retainer plus an agreed share of measured value against a co-signed baseline. The base covers the consultant’s time at a reduced rate; the share aligns the consultant’s incentive with what the engagement is actually for.
This is the right shape for delivery work where the prize is measurable: synergy realisation in an M&A integration, a named cost-out program, a recovery of a stuck program where the re-baseline produces a concrete number. The discipline is in the baseline. Without a co-signed methodology, named timing, and documented attribution, value-share is an argument waiting to happen.
3. Equity for startups
A reduced or zero cash fee against a stake in the business. The consultant is paid in the same currency the founders are paid in. Slots are limited because the risk profile is high; the engagement only makes sense if the consultant believes the business will be worth more in two years than the cash fee would have been.
This is the right shape for early-stage startups that have a real problem the consultant can address but cannot afford the cash, and where the consultant has a real opinion on the outcome. Anything else is a charity engagement dressed up as investment.
The three controls that stop the model gaming itself
Outcome-based pricing fails when one side feels the other is extracting unfairly. Three controls, used together, prevent that on both sides:
- A co-signed baseline. Written before the work starts. Names the methodology, the timing, the inflation and currency assumptions, and what counts as a result. The baseline document is signed by both parties; the engagement does not start without it.
- A cap on upside. Value-share without a cap rewards extraction. A cap (a multiple of the cash fee, a ceiling on percentage of realised value, a sunset clause) keeps the model honest at the high end.
- A documented attribution method. What counts as the consultant’s contribution, what counts as something the business would have realised anyway, and how disputes are resolved. The method is written before the work starts, not negotiated in arrears.
When day rates still win
To be fair to day rates: there are three cases where they remain the right answer.
- Genuinely exploratory work. No output can be named because the question itself is being shaped. A day rate is the right shape for a six-week investigation that may change direction twice.
- High-flexibility engagements. The buyer genuinely needs to redirect the consultant week by week, and value the optionality more than the cost.
- Small engagements. The work is short enough that the friction of agreeing a baseline costs more than the day rate would. A day or two of work falls in this category.
Everything else, in my experience, is a day rate by habit. The test is the question “what is this engagement for?” If the answer is a named output or a measurable result, there is a better fee shape than the day rate.
How I price
I run three deal shapes and no day rate. Fixed price per output for the self-service tools and the Passage™ Sound and Bearings reads. Base plus value share for Passage™ Transit and Harbour, for stuck program recovery, and for AI delivery work where the prize is measurable. Equity for early-stage startups against a limited number of slots a year.
Which shape fits your work is the conversation. The two-minute fit check scores it in six questions and tells you which model the rubric points at. The score reads the same whether you hire me or not, which is the point.
The honest summary
Day rates are a habit. They are the worst pricing model for any engagement where the work has a defined edge, because they reward the wrong thing on both sides. Outcome-based pricing replaces the unit of labour with the unit of delivered value, and aligns the consultant with the buyer for the duration. The three shapes (fixed price per output, base plus value share, equity) cover most engagements honestly. The discipline is in the controls: a co-signed baseline, a cap, and a documented attribution method.
Run the fit check below if you want to see which shape the rubric points at for your specific work. The score is honest in both directions.