Fixed fees: once bitten, twice shy

I am a massive fan of fixed fees. As the owner of a small business, cost certainty is a massive plus in every purchasing situation. In addition, as a private client of Scottish descent, the need for knowing what I'm going to pay (and that I've got the right price) is a stone-cold essential.

I'm having some minor building work done at the moment. I asked for a quote, checked there would be no hidden costs and went ahead. That's when the fun and games started; that's when we found out my definition of 'fixed' is slightly different to my builder's. I always thought it meant set, immovable, guaranteed, but I am learning that it means 'OK for starting off with but is more than likely going to go up once I come to all the bits I hadn't really thought about'.

And herein lies the opportunity for all private client advisers.

Yes, the fact my builder keeps raising the price as the added extras come to light is irritating. I took him on because I'd heard he was good - exactly the referral/word-of-mouth marketing that's so essential for generating work in the private client arena - which led me to assume that he knew what he was doing and that his quote would include everything required to finish the job.

However, what really concerns me is the fact that it was my wife - neither a builder nor an engineer - who picked up on two of the missing items including drainage, which is fairly major. To make matters worse, he then failed to admit the most important and most easily visible mistake despite the fact that we were stood looking at it.

Own up

Price hikes on the back of a fixed-fee quote are an irritant but they're ultimately surmountable (as long as they're necessary and explainable with the bad news admitted at the first opportunity and delivered with contrition). The fact that it's the client who's picking up on errors and omissions then charged for the privilege is unforgiveable and, most likely, will fracture your relationship irreparably.

I am not suggesting for a minute that you would ever forget anything as fundamental to the work you do as missing out drainage or failing to calculate the exact support required for a new ceiling. However, if you are using fixed fees, you have to stick to them.

In our experience of working with a range of private client advisers, the financial side will even itself out by the end of the year as long as you're creating a steady stream of instructions and your services are priced correctly, which brings us to the second lesson.

Take time out with your colleagues to agree your fixed fees. Consistency is essential (if your colleagues are quoting significantly less than you, it could damage the credibility of your firm and send your clients into the arms of your competitors). You need to be sure that even if some glitches appear and a bit more work is required, you will always collect enough to hit your recovery rates.

This not about the pricing aspect, though. Missing essential components on any job has a far more detrimental effect: it will dent your credibility.

Damage control

If any question marks are raised during a job - particularly a debut - you will damage the two most productive and cost-effective routes to new work, client referral and repeat purchase. Human nature dictates that clients will remember what was missed rather than what was done well. If that is their lasting memory, how can you rely on clients to produce new instructions for you in the future?

Worse still, will the client think you have deliberately tried to hook them with an attractive price with the intention of raising it during the course of the work? I know this will definitely not be the case but look at it from a consumer's viewpoint. If this is the first time you've worked together, they don't yet know you well enough to recognise the expertise and service level you really pride yourself on.

Douglas McPherson is director at Size 10 1/2 Boots 

He writes a regular blog about marketing for Private Client Adviser