This week we look at two other exceptions that come up from time to time in your work; the technical advice job (which is quite common), and the success fee (which you may never come across in your entire career, but if you do at least you’ll know what to do!).
Technical advice jobs
Another exception to your normal pricing approach is what I’ll call technical advice jobs, where the client has a difficult technical issue they need resolved in order to make an important decision.
Pension transfer calculations might fall into this category.
The challenge with these jobs is that they may not lead to more business or a lifetime relationship. It would, therefore, be perfectly acceptable to simply decline a technical advice job if it doesn’t float your boat. However, many advisers want (or are tempted) to take some of these jobs because:
- They enjoy doing them (and that’s good enough for me!).
- They want to help out a client, and worry that due to the technical nature of the job the client may not receive good advice elsewhere.
- It generates some income, and right now the firm could use some (i.e. they’re not fully occupied).
How do you charge?
You can still follow the charging in three places formula but with some provisos:
You can charge a planning fee for the initial technical work, which may, in this case be all the work there is (depending on the outcome). Therefore, an hourly rate charge might be best, especially if you’re unsure of how much work is involved. Hourly rate charging also gives you some maneuverability should things get more complex as the job unfolds.
Alternatively, a flat fee might work but be sure to charge enough to cover any unexpected issues that may (and often do) arise from these jobs.
If for any reason the client isn’t keen to pay what you ask, my suggestion is to just let it go. This isn’t great quality work for you, and without sounding too mercenary, the client is in a bit of a pickle; they need a genuine expert to provide their answer and won’t have too many options as to where they get it. You are in the box seat on this type of job, so when it comes to pricing hold a firm line.
If something does eventuate from the technical work, you can simply charge an implementation fee using your normal percentage based charging scale.
If, for any reason, it falls outside a typical situation for you, a flat fee for implementation might be more appropriate. It’s best to look at these jobs on a case-by-case basis.
Once again, a flat fee or asset based fee might be appropriate, depending on what you are being asked to do. If you’ve got to this stage of the process, your more usual 1% of assets is likely to apply.
Some jobs just lend themselves to charging a success fee; that is a fee based on achieving a successful outcome and delivery of some tangible value. These truly are exceptions to the norm and most advisers will go through their whole career without ever charging one of these fees, so if this doesn’t apply to you, don’t worry about it.
Often these are technical cases where there is a big win riding on the outcome (usually a tax win).
How do you charge?
In these instances there is likely to be some sort of basic planning fee for any technical work, with a success fee based on a percentage of the win generated. How much you charge for these jobs is up to you and is often by negotiation with the client. 10% or 20% of the win generated isn’t unusual.
The reason success fees don’t always come up in your career is mostly down to you and your approach. Some advisers just feel this is over the top and too aggressive as a way to charge, so even in a case where there will be huge savings or wins, they charge their usual planning fee. Clearly this is a personal choice for you without a right or wrong answer.
I hope this has given you some food for thought when it comes to pricing different jobs you may encounter in your business.
As I said earlier, you may never encounter a success fee scenario, but thinking through the various possibilities and exceptions you could face before they arise gives you a chance to examine your own views or beliefs when it comes to charging.
It will also help dramatically when it comes to confidence in front of clients.
Next week I’ll be looking at the differences in pricing services, and how you might vary your pricing periodically to reflect the variability of your workload in a service based business.
My next BrightTALK webinar:
Why Marketing & Communications Matter…Big Time
Wednesday 5th March at 12pm.
“Everyone says they know that marketing and communications matter, but their focus on this business critical area suggests otherwise. Perhaps they get too busy, or no one person is responsible for the output, but whatever the reason it is a huge mistake. In this webinar I’ll explain just how important this aspect of running your business is, the costs of not addressing it and how to get some of the basics up and running without a great deal of fuss.”
By Brett DavidsonGoogle