How I Earned A Lot More on Projects by Changing My Pricing Strategy

Those are fixed-bid projects, not time & materials with time increments of days or weeks.

But the real reason I am commenting is to point out that your results - 3x overage - are exactly the rule of thumb that gets cited for fix-bid: Take your expected level of effort and triple it.

"As an example, if I was proposing to build a website capable of creating an additional $100,000 of profit annually, I would ask the client to make an investment of $40,000 in their website."

Exactly. Leaving aside the sleight of hand of comparing hypothetical/perceived benefit with actual cost, what you've really got here is a consultant offering you $60,000 of benefit this year. If another consultant can do the same job but only charge you $20,000, then they have offered you $80,000 of benefit this year. Assuming both are being honest about the expected benefit and can do work of a similar quality within their quoted budgets, so one really is just pricing higher arbitrarily, who are you going to choose?

Value-based pricing is interesting to discuss, and it's certainly a more rational and business-like way of handling engagements than billing your time out hourly in something not so far from an employment relationship. However, the value added is benefit minus cost. Unless you really are the only game in town, you can't just raise your rates until they are 99% of the value you claim to generate for your client and argue that it's still a good deal for them because they're 1% better off if they use you than if they hadn't. That ignores the third option of using someone else.

That third option is a possibility for almost every client of almost every consultant. If you as a consultant have the sales and marketing skills to find clients who will believe that they don't have that option and convince them that you really are the only sensible choice and they should pay your inflated rates accordingly, then good for you. However, please don't pretend that winning jobs at those inflated rates has anything to do with some natural value proposition rather than simply being better at sales and marketing.

Maybe it becomes more ethically dubious when the consultant is taking advantage not of the client's ignorance in the field where they're paying for advice but of their ignorance of the consulting market itself in that field. Even then, it's the natural position that a new customer doesn't know the sellers' market, and a large chunk of sales and marketing is based on trying to convince uncertain prospective customers to buy from you and not someone else, so again it's hard to find any objective standard for what is fair and what is unfairly taking advantage. (This is a major argument for licensing practitioners in industries where bad advice can be particularly damaging, such as healthcare, law and accountancy.)

One thing that is very clear is that the value-based pricing approach only works if you can find some credible and quantifiable means to demonstrate the value you might offer to a client. If you work in a field like conversion optimisation, that's easy enough. If you (or your consultancy including colleagues/subs) are building an entire system that will have concrete benefits for the business, you can probably do it too. If you build software in general, maybe as part of a wider team or making incremental functional changes to an existing system as many freelancers/contractors do, then it's not the same situation.

This is why it sometimes irritates me when a handful of HN celebrities post repeatedly about raising rates and changing the basis for charging as if everyone can do it, even in response to someone who would obviously have to fundamentally change the kind of work they do before the advice would make sense for them. It sets false expectations, and potentially damages the careers of people who go out to customers/clients with unrealistic expectations and wind up missing out on reasonably profitable work. Worse, it could tarnish their reputation and leave unhappy clients behind, because even though they did what they said they'd do, the client later discovered they'd paid well over the odds and felt ripped off. It's never happened to me, because I choose not to work that way, but I've seen it happen to others and the results are never pretty.