How do most of you charge by the hour or by the project? What are the pros and cons of each? What do you recommend?

I think it all depends on the scope of the work. If it is a two hour sit down to provide them some advice on a problem then we would charge an hourly rate $75-$125. If the issue was a major issue we usually bill on a flat rate for the project but we have a strict process in place in order to avoid scope creep.

How did you determine your $75-$125 fee?

It is a little bit less than what they charged at my old firm that was a lot larger than mine.

Has a lot to do with the industry you are in and what the "standard" rates are. We (IT consulting) can get $2500/day for some work that is 3-4 weeks in length, but it would be tough for us to get $300/hr if we were bidding on an hourly rate project. As CCC said, he used rates from his old firm. We do the same - $125-$150/hr when we need to, but I much prefer to bid on a 30-60 day "project" as I can command the higher rates due to the overall quality of the project deliverables.