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David Shelton: A quick route to working out hourly rates

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A majority of firms do not use hourly rates unless they are costing a specific project. However, working out hourly rates is extremely useful because it provides a benchmark for what should be charged.

A quick route is to take the number of chargeable hours available and divide into your target revenue.

    Assume 1,800 total hours available (45 weeks at 40 hours)

    Reduce this by the time needed for personal development, holidays, training, etc.

    For many advisers this reduction would range from 40 per cent to 80 per cent depending upon business model, client base and working methods.

    Take the remaining hours and divide them into the revenue target.

If you have 50 per cent of your time available and your revenue target is £175,000 then you need to charge £195 per hour. 

In practice you may decide this rate would be acceptable to clients and that it could be used more extensively as your adviser charging policy is developed. 

However, if it is out of line with your local market and client base it can be used to compare against the revenues received if you charged on the alternative basis of percentage of monies invested.  

David Shelton is the author of The Business of Advice book and website www.businessofadvice.co.uk

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