Whats Your Hourly Rate? Heres How To Increase It
Many Million Dollar Round Table members would estimate their hourly rate to be anywhere from $100 to $200 per hour, some even higher.
Take a few moments and try to calculate your hourly rate. Simply use your annual production, either historical (last year) or this years target. For example, lets use an annual production of $80,000–comfortably qualifying for MDRT.
Next, think about the hours per day you work. For our example well use 8 hours, although MDRT records show many advisors work much longer days.
Finally, think about the number of days per year you work. For our example, well use 200, or putting it another way, about 40 weeks. That is probably about right for someone who never works weekends, never works on public holidays, attends MDRT and one other convention, takes seven weeks holidays and is never ill.
Now multiply your hours per day by your number of days worked to determine the total number of hours you will work in a year. Now, divide the annual production by the number of hours–that is your hourly chargeable rate.
In the example that is $50 per hour–quite a bit lower than the estimated $100-$200 per hour.
And you can see that the example was pretty generous. Anyone doing production of $80,000 a year but working longer hours, or taking less vacation, or being ill once in a while, or working the odd weekend would have a lower figure than $50 per hour.
For many advisors, doing this exercise is very scary. I am sure there are a few people who dont even know how many days they work each year. And there may even be a few who struggle to remember the last time they worked an 8-hour day, or had more than one week off.
And this was a pretty generous example, lets consider something a little more realistic: someone who works a 14 hour day, one day every other weekend, works on a few public holidays and takes just 2 weeks holiday per year. Or in other words 275 days or 3850 hours per year.
If we relate these hours back to our example of $80,000 per year we can see the hourly rate has been reduced from $50 per hour to just over $20 per hour.
If you are working that hard and considering your worth is $100 per hour you should be Top of the Table. But instead, you see that you have been working as a financial services professional yet earning the hourly rate of an administrative clerk.
If you have this problem, and you want to increase your hourly rate, you need to analyze exactly what you are doing every single day. The key to success is having daily goals and targets and meeting them. Break down your goals and targets into small pieces.
Lets work on a figure of $100,000. With $100,000 as an annual target and working 48 weeks per year, this leaves a weekly target of $2,083. If we have an average case size of $500, this means 4 sales. Assume we have 8 client meetings to close the 4 required cases at 1 hour per meeting. This equals just 8 hours from the 40 available in the week in front of clients.
When face-to-face with clients we are worth $260 per hour–that is $2,083 weekly production divided by 8 hours with clients.
The rest of the time we are doing $26, $16 or even $6 per hour work. Someone else could do this work for a lot less than we charge. Stop doing these types of tasks–delegate them to an assistant. If you dont have one, you need to get one.
To determine when we are doing $260 per hour tasks and when we are doing $26 per hour tasks we must track our time carefully.
First, split your diary into months, then weeks, then days, then hours, then 15 minute segments. Break every hour into 15-minute segments, from 8:00 a.m. to 6:00 p.m. This is crucial to your success. Go out and buy 5 new pens: one red, one blue, one green, one yellow, and one black.
As each 15-minute segment of the day passes, color in a segment on your daily planner:
- Red–if you were face to face with clients;
- Blue–if you were prospecting;
- Green–if it was personal or family time;
- Yellow–if you were travelling; and,
- Black–if you were involved in administrative tasks.
At the end of each day, spend 5 minutes calculating the percentage of time you spent in each color.
Most producers, having completed the planner for at least 4 weeks will find more than 50% of their diary is colored black, no more than 20% is red and that there is little green and too much yellow.
How do we increase the red ($260/hour) and the green (personal time) and decrease the blue, yellow and, most importantly, black?
First and most important is how to increase the red time. To increase the amount of time you spend with clients you need to highlight the times when you will be meeting with clients, those should be 11 a.m. and 1 p.m.
What this does for you is goal-set your diary. This means a few things happen.
First we trigger the goal-setting mechanism in our heads to start filling the gaps. All of a sudden you will find the capacity for an extraordinary amount of meetings.
When you call a client to book a meeting, suddenly you are in control, not them. No more meeting at 8:00 p.m. There is no slot available. No more meeting at 12 noon. The slots are 11 a.m. or 1 p.m. You may be thinking surely it cant be that easy, or that wont work for me, I have to be flexible for my clients or some of my clients can only see me in the evening.
Yes, it is that easy. However, I would say that if you are going to drastically change your working habits you should let your clients know.
For example, when my wife and I discovered she was pregnant I decided that I would only work evenings one night a week. Up until that point I was working nearly every evening. I wrote to my clients, explaining what I would be doing and why I would be doing it and asking that if they did need an evening appointment, to book it well in advance. The response from clients was overwhelmingly positive.
If you still think this wont work for you, take a moment to look to other professionals, such as those in the legal or medical professions.
If you want to see a lawyer, you call up and make an appointment. If the lawyer you want cant see you for three days, do you just forget about it? Of course not, you see him as soon as he is able to fit you in. If you need an operation, the same rules apply. You need a specialist surgeon so you get a slot in his diary.
We are no different. We are financial specialists, we are professionals. If someone wants to see us enough theyll find a slot. If they dont want to see us, they probably werent a very good client or prospect in the first place.
If they are serious, they will find time during the day. No matter how busy they are, I am sure they take time out to go to the dentist, to take the dog to the vet or the car to the mechanic. I would ask clients, “How important are your finances? I have 20 slots in my diary next week, 80 over the month, I am sure we can find one that is mutually convenient.”
Another way to increase to the red time is to decrease the time spent face-to-face with clients doing mundane tasks, such as introducing ourselves and our credentials and “hard” fact finding.
Now, you cannot conduct business without seeing someone–there will always be a requirement to meet. But think how much time you would save if you didnt have to spend the first meeting chit-chatting and gathering details on their existing situation. If all that were already done you could spend the first meeting building rapport and doing what you get paid most for–solving financial problems.
To do this you can do two things. First have a document prepared that introduces you and your company. On one side it could contain details about your home office or agency, such as when it was established, funds under management, product specialization, and so on. On the other side can be a picture of you, your credentials, and testimonials from existing clients.
Independent testimonials from a third party are incredibly powerful and should not be underestimated or underused. If you have none, make it your number one task–ask your clients for favorable quotations that you can use.
Second, send your fact finding document, or a smaller version of it, in advance of the meeting. Explain in a cover letter that you need this completed in advance so that the time spent together is valuable for the client. Also ask for any documentation you require, such as copies of wage slips, company benefits, or existing policies.
Then, when you meet the client, you can use the meeting time far more effectively and efficiently.
Now, lets move on to reducing travel time (yellow). Number one is to work “in-house.” Get the clients to come to you. It really is that simple, just ask.
But what if they ask why should they visit you now when you were always happy to visit them in the past? Explain that financial services grows ever more complex and you need your research materials, computer systems, and reference books at hand.
After all, what would you think of a dentist who came to your house at 7:30 p.m. with a bag full of drills and asked us to lean back in our easy chair. As with our earlier comparison–if we want to be seen as professionals we must act as professionals.
Stop commuting and work closer to home. I used to work in the heart of London. I dont live that far outside of the city, but public transportation is not very good these days and traffic congestion is everywhere. It usually took 3 hours travel per day. Instead I took on an office 10 minutes from my house. Clients are happy to visit and it saves me time, money, and commuter frustration. For the same reasons, clients love to visit me!
If we have just 8 meetings a week, with 30 minutes travel time to and from each one, we gain an extra 8 hours per week by not travelling. You just freed up 20% of your workweek.
But sometimes it is just not possible to see everyone in our office, for example if we are in the corporate market it is hard to get a team of three business owners out together. If you do have to go out, use the diary goal setting principle–split your diary into 3 sections.
For example, here is how I split up my diary: Tuesdays are for clients based in central London, Wednesdays are for west London and Thursdays are for the city or docklands areas. If I have to travel outside London I go on a Monday. Fridays are always spent in the office. My clients know this. So if someone from the city calls, they can have their pick of the times on a Thursday. By grouping clients together like this I cut down on travel. I never have to go all the way across town and back again in one day. My meetings are localized.
Continuing with the goal- setting diary principle brings us to green time, the personal or family time. Take exactly the same approach as before. Book it in your diary and treat it just like any other appointment. In fact, you should treat it even more importantly than client time. If scheduling more green time will have a dramatic affect on your current working patterns, let your clients know.
The key to increasing your amount of green time comes down to delegating those tasks that do not need to be done by you.
The only color left is blue. Many would say that increasing blue–prospecting time–would be a good thing. I used to agree, but I have come to the conclusion that blue time is also best delegated to someone else–your clients. You should obtain referrals and let your clients do the prospecting for you. The referral obtaining process should be automatic.
So to recap on the colors. red is face-to-face, blue is prospecting, green is personal, yellow is travel, and black is administrative. At the end of each day, spend 5 minutes totaling how long, as a percentage of our day, you spent in each of the colors. On a Friday spend 10 minutes totaling the week and at the end of every 4 weeks spend 30 minutes reviewing the month.
Ian James Green of Green Individual Asset Management, Ltd., London, England is a four-year member of the Round Table with two COT honors. He may be reached via e-mail at email@example.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, July 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.