Don't charge hourly; daily at minimum, but you can go much higher than this. We bill monthly and have quarterly commits.
Raise your rates. Raising your rates also raises the quality of your clients.
Fixed vs. T&M isn't an either/or. At Matasano, our standard engagement was "bid" fixed, with a single price tag, but backstopped with a T&M extension clause (which we rarely used). Clients want to know what they're paying, and you can tell them, while also retaining the discretion to start a meter running if the project goes over.
Don't nickle-and-dime clients. If you're trying to squeeze a small number of clients, you're doing it wrong. Serious returns from consulting come from scaling up to larger engagements and to multiple large clients. If you're a pain to deal with, that's going to take longer to happen; you'll get stuck in a local maxima that is a real drag to be in long term.
We have two prices: free and expensive. This is liberating; at Latacora, we're totally unafraid to do work that other firms would charge significantly for (we've done whole assessments for people gratis), because we are super clear (and a serious financial commitment) to engage for real. But even at Matasano, where our engagements were super variable in price, we were still happy to do lots of stuff for free. I'm pretty sure consulting is karma based; I don't try to map out exactly where the karma is flowing, I just try to feed it and assume good things will happen later, and that's always proven out for me.
Look for ways to specialize. A trading firm would rather do business with a trading development consultancy than a development consultancy, and, if they couldn't find a trading development consultancy, they'd prefer a development consultancy over a generic IT consultancy.
Remember the difference between an employee and a principal is that employees always get paid; when business is light, principals don't eat. To anyone thinking about consulting for-serious I'd tell them to plan on hiring! But be very careful about how and when you do it.
Get an accountant. Get an accountant! GET AN ACCOUNTANT.
A lawyer is also helpful. There are two strategies I've seen with respect to contracts: the "just sign everything" strategy and the "get everything reviewed" strategy. We've always been on the latter side (Grellas Shah reviews our contracts and we're very happy with them), but I would be remiss if I didn't point out that one of Matasano's more-successful competitors was a "just sign everything" company.
Did I mention don't bill hourly? Don't bill hourly.