It is widely known that clients prefer fixed fee agreements for instructions but, in general, Private Investigators still prefer an hourly rate on the basis of charging a fair day’s fee for a fair days work. Moreover, there is always the question of mileage costs (bearing in mind the cost of fuel these days) and out of pocket expenses (which on most occasions are not easy to estimate in an on-going assignment). With these considerations in mind can PIs address their client’s demands and offer fixed fees for work carried out and still remain in profit?
It is not only the PI industry that questions the efficacy of carrying out business on the basis of a fixed fee arrangement. Law firms too are faced with a similar dilemma. Many law firms are going down the road of satisfying client demands by offering some of their services on a fixed fee. Many others are considering the matter as a way to remain competitive in the market place.
Mike Ames, an expert business development coach (and owner of Flair Business Coaching) has worked in the fixed fee world for more than 20 years. Mike maintains that most services, regardless to which industry they are affiliated, can offer fees on a fixed basis and still remain profitable so long as they pay careful attention to how they implement the fee structure. Mike offers the following advice to lawyers who are contemplating making a move into the fixed fee billing world:
- Start to keep records of how long it takes you to carry out certain legal tasks. Over time these will regress to the mean and will form the basis for future estimates.
- Always be very specific in the contract as to what is included in the deal.
- Always include a change control section in the contract which describes what will happen when the client varies what they want (which ALWAYS happens). Include the authorisation process and how changes will be costed.
- Accept aggregated profits – even in the best of circumstances you don’t make a profit on every fixed price deal. Not nice but so long as you win overall this is ok.
- Learn about project management. If you can’t manage the time spent versus the time left and handle problems as they arrive do not take on fixed price deals.
- Always train your people to escalate any changes to the project manager and not just put them through on the nod – the road to doom and losses I am afraid.
Mike Ames has also produced a white paper for solicitors and law firms that gives an in-depth explanation of the concept of project management as applicable to lawyers. There appears to be no reason why the concept cannot also be adopted within the Private Investigation industry.