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How do I price my services
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One question we often hear from financial advisers is, “What exactly should my fees be? How do I price my services in a way that is both profitable to me and fair to my clients?”
The fee-for-service model is generally seen as a solution for all clients. Many advice businesses are having success in implementing this structure with younger clients, pre-retirees and retirees.
The first step in this pricing exercise is to determine your target remuneration and convert that into an hourly earnings rate. For this reason you need to determine how much your labour, resources, and overhead will cost you:
1. Salaries: these include all the salaries as per your payroll
2. Operating Costs: These are indirect costs related to running your business, such as your office rent, software subscriptions, advertising, etc. You include a portion of these costs in the fee you charge each of your clients.
3. Profit Margin: You should base your mark-up on your desired profit margin. If your pricing strategy is too high in comparison to competitors you may need to adjust your formula. (this can be done in the Pricing Report)
Once you have determined the above you need to work through all the activities involved in onboarding a new client as well as to provide an ongoing service and progress meeting for your existing clients. The activities you and your team do consumes your time, effort and money. It goes without saying that the more activities you and your staff do, the more resources your services consume at different rates.
By comparing your cost per service offered with your hourly rate you will be able to begin packaging your services and pricing them far more appropriately. With this structure, you can set predetermined measures of how "complex" a client's situation is and charge accordingly.
We will also help you determine which of the above activities are either direct or indirect. Direct activities are those that you need to do, and indirect activities are those that can be delegated to your staff or outsourced. Who does what in your business is an important part of building process efficiencies and value for money services. |
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By packaging your services more appropriately you begin analysing what needs and solutions your clients require. Those needs and services which are extensively used can be packaged and priced and those that are less frequently used may be priced separately as transactional services.
How you price your services comes down to the needs of your clients and the value you bring them. The "right" fee is the one that is right for you and the clients you serve.
When doing this important exercise, you need to bear in mind that your costs will be specific to your business model and the process you follow. |
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