Moving on from last week’s tricky issue of pricing your services, this week I look at the value for clients and share a simple formula for charging.
Last week I looked at how clients think about you, your services and your value. I also covered the importance of diagnosing their pain with some great questions. Once that has been done you can prescribe some of your excellent remedies to soothe their pain.
So, what are the parts of what you do that add value to clients?
The value for clients
The value that each client attributes to your service will vary from client to client, but here are some common issues that will be considered valuable:
- Saving them time.
- Cutting through the jargon.
- Giving them a clearer understanding of their choices.
- Calculating a figure or target they can work towards.
- Validating a figure or target they have come up with.
- Providing a second opinion on their own decision making.
- Working alongside them as a trusted strategist and helping them set their future course.
- Keeping them on track and in alignment with their real goals in life.
- Removing emotional pain or fear about a major financial decision.
- Helping them manage their emotional baggage around money.
You could certainly add investment management and tax savings to that list, but don’t think that the only value you add is in relation to these technical areas. By asking some of the great questions outlined in last week’s article, you will find clients have almost told you precisely how bad things are for them and where they perceive the value added to be.
“If you get the questioning right you have some great information to let you know how you can price this particular job.”
There seems to be a view in some quarters that the FCA want you to charge all clients the same, but this is not my view. Remember, you charge for the value you add, not the time it takes you to do a job. Therefore, on some jobs it will be possible to push the boat out a bit within the bounds of your pricing approach, while on other jobs or at quiet times you may elect to price more conservatively to pick up the work.
There are many ways to calculate the supposedly ‘correct’ fee level for your business, but if you are just getting started on this I recommend you keep things very simple.
The simplest formula sees you charging in three places:
- For the initial work you do in analysing the clients current position and developing some recommendations.
- Then for putting everything into action (if they wish to have you do that).
- For providing ongoing reviews, regular informational content and updated advice whenever required (if they wish to have you do that).
Let’s make it even simpler and call them:
- Planning (or Strategy) fees.
- Implementation fees.
- Ongoing review (or service) fees.
You can make up your own names but these will do for starters.
For most people you deal with (over 90% I’m guessing), what I’ve outlined above will work as a basic structure. So, come back to this article whenever it all gets murky in your mind and keep it simple.
Why charge in three places?
The simple reason for charging in these three places is that it matches up with where the value is added in the clients mind.
Secondly, it allows you to commence charging immediately after the first meeting with the client, so you keep your free work to about an hour or two up-front. You don’t have to do the fact finding for free, or the initial analysis and recommendations for free in the hope that they will buy something so you can get paid.
It almost goes without saying that your first meeting will have to be good. If it is average or poor why would anyone want to pay you to do the initial work? If charging earlier in the advice process feels like its putting some pressure on your first meeting skills (or those of the other advisers that work for you) my advice would be to step up and try to improve those skills. It is one of the most important aspects of your job and you need to be strong at it.
Yes, yes, yes…I know you are thinking “this is all well and good, but how much should I charge?“
I promise I’ll cover that in detail in next week!
I’d love to know your thoughts on this newsletter, or any questions it raises for you. Let me know by leaving a comment below.
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