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Don’t be a busy fool

Let’s imagine you’ve got the stage where you’ve got two or three clients. You’ve got a basic Portfolio Executive workstyle, but you want to scale this.  Of course, it would be nice to have another couple of clients to move to four or five, maybe even six.   It would be attractive to perhaps be a little bit busier with some of your existing clients.  But my advice to people at this stage, when they’re trying to scale their Portfolio Executive business is to focus on pitching at a higher fee rate for your next client.

There’s a big temptation to become a busy fool.  There’s a big temptation to do work at a rate that means that your client is getting you to do activities that are better suited by somebody with less skill, knowledge and experience.  The risk is that you become more operational than you should be.  You start to devalue what you bring to your client.

If you just need the money…

I know that for some of you, as you start out on the Portfolio Executive journey, the immediate priority is to get some money in.  A good way to address this is for you to do a day a week with a client for the first three months or so.  If you’ve got three clients, you’re doing four days a month for, now you’ve got twelve days a month of work.  You have hit the twelve fee earning days per month threshold.

But what you want to do is to find your next client at a higher rate so that you can start to reduce the number of days you do for your previous clients.

But how can you justify a higher rate?

Establishing your Value

There are three things that I think will enable you to increase your fees.

  • Price at the diagnostic phase

The first thing is to make sure you do a thorough job in the diagnostic phase.  When you do the diagnostic phase for the client, you set the expectation as to what your normal fee rate is.  Take the opportunity to quote a higher rate than you did last time.  You can offer to discount the amount they pay for the diagnostic because you’re really trying to find a sum of money that they can say ‘yes’ to with without getting approval from anyone else.  It needs to be an easy buy for them.

But if you say when you’re doing the diagnostic something like ‘this is three days’ work, I normally charge £1,500 day which will make it a £4,500 fee, but I’ll do it for you for £2000 – £3,000 that’s probably still money they can commit to without referring to anyone else. Now you have anchored your day rate at £1,500.  When you come back to them with a proposal for on-going work after the diagnostic, this is the rate they should have in mind.  Always make any discount explicit in any correspondence relating to the diagnostic and on the face of the invoice for the diagnostic.

  • Build more value

When you do the diagnostic, you need to work harder to build the business case for the difference you’re going to make with the work you do for them.

You need to move the conversation more and more away from cost towards value.

If you are doing three days a week for a client at £1,500 a day, that’s £4,500 a month, in round numbers, it’s about £55,000 a year.  Who could they hire on a permanent basis for £55,000 a year?  That’s a cost conversation. It’s not a value conversation. Yes, they could probably get somebody whose salary is between £35,000- £40,000 a year then with all the on-costs, it’s quickly adding up to £55,000 a year.  You’re providing a substitute for an individual working full time on a salary of  £35,000 to £40,000 a year.

But this is a cost comparison.  What you need to do is focus on the value.

There’s a rule of thumb value that you can provide 80% of the value of a full-time person costing £150,000 – £180,000 for 20% of the cost. You can talk about how in corporate life too much of your time was spent doing stuff that didn’t need the 20 or 30 years of the skill, knowledge and experience you can bring to bear.  The true power of the diagnostics is that it should be bringing you a roadmap for building capability in the short term, medium term and long term.  This must show how it will transform shareholder value.  You will identify how you’re going to increase revenue, reduce cost and better manage risk. This will increase profits but, more importantly for a business that is planning an exit in the next 3 to 5 years it will increase the multiplier applied to profits to determine shareholder value.

Let me give you a concrete example from a Portfolio Executive I’m have been working with.  He has a client that has an EBITDA (a measure of profit) of about $3 million and the multiple for a business like this would value it at 6-8 times i.e., $18m-24m.  At present they are a manufacturer selling in one territory to a particular marketplace direct.  The Portfolio Executive I am working with is proposing is that he takes responsibility for building an international channel network in Europe and across the world with key channel partners serving Europe, The Far East, or the Pacific.  In effect everywhere outside the USA.  In 3 years, he believes this strategy of building a global channel capability will increase the multiple to between 12 and 15.

For an investment of $1m per a year the business that today is valued at the most $24 million, even if the EBITDA doesn’t change, would be worth $45 million in three years.

The $1m costs cover his fees and the channel development managers that he is going to recruit into the territories that he wants to serve.

Either the business owner can borrow $3m to achieve this $45m valuation in three years or re-invest the increased profit year by year over five years to achieve the same result at less risk.

In the context of delivering a valuation increase of $21m then whether the your day rate is a $1000 or $1500 a day is immaterial in the context both the $3m investment and the $21m increase in shareholder value.

  • Identify Value Add

The other thing is to identify value add.  Can you through your relationships help your clients to access advisors, connections, professional groups, marketplaces or people that they would struggle otherwise to engage?

This is how you’re positioning yourself most strongly as the trusted advisor, which is ultimately priceless.


Once you’ve got the basic portfolio that you need, the first way to grow your Portfolio Executive business is to increase your fees.  Now, as you’ve increased your fees, you can start to pay for some of the low-value activities that you’re doing to build your business.  The bookkeeper, the social media person, the appointment setter, the virtual assistant.  Some of those things which will mean you’re spending more time doing fee-earning work and less of your spare time doing non-fee-earning, non-business development activity.

You are not going to be a busy fool.  You will make every hour count both for your self and your clients.