Opinion Sur Joven

Adam Smith was a pioneer of political economy. His most important discovery was that the only thing which adds value to goods and services is labor. Labor is the factor of production which adds value to goods and services and whose price is not easy to calculate. This problem most often affects young graduates, those willing to work freelance, as well as maturing professionals. How to calculate fees? What is the price of services rendered by doctors, architects, attorneys, accountants, psychologists or designers? What should be taken into account?

“The first thing you must take into account is the difference between price and cost. Here we are discussing how to price my services for the client. Costs are something else”, explain Bernardo Hidalgo, owner of the Human Resources Consulting Company “Hidalgo & Co”. “Price is defined by the three Cs: cost, client and competition. This applies for every good and service” he says.

The price per hour should be included in the “cost” variable. Hidalgo recommends a simple calculation: “If you are an attorney who was on someone’s payroll, you can’t earn less than being an employee. The first thing to define is how much you need to get by.” The idea is to continue earning at least the same income without considering the studio’s or company’s income. “All the expenses, the rent –even though you are the owner- should be estimated in an attempt to know how many hours you need to work to pay them all, including the Manager’s wages.

In this calculation, you have to include consumable goods as well as a portion of all capital goods.

The second C is client. Price can change depending of the specifics of the service, deadlines and requirements.

And finally, the third C stands for competition, taking into account how much competitors are charging.

If you are a young professional at the beginning of your career, the best is to charge less than the rest.

A piece of advice by the Board

The Professional Council on Economic Sciences of the City of Buenos Aires wrote a guide to help graduates calculate their fees. Because this activity is not regulated, they only suggest minimum fees, which apply to any kind of activity.

What do they take into account to calculate fees? “The type and complexity of work, the time required to complete the task, deadlines, the client’s profile and interests at stake, the level of expertise required, infrastructure costs and professional experience”

But not every professional has the same experience. That is why the Professional Council recommends updating fees once you gain experience and become known in the market.

How do you know when to upgrade fees? “When you start being sure about your work”, says Marcelo Biscione, in charge of orientation services for SMEs (Small and Medium Enterprises, PYMEs, in Spanish) for the Professional Council on Economic Sciences. “In the beginning you need an advisor, but once you have experience, you learn to have confidence,” he says.

The Professional Council on Economic Sciences is not the only group offering guidance about fees. Professional organizations for attorneys, notaries, translators, architects and others provide such guidance for their members.

At first, a professional’s fee will be lower because he will be responsible for administrative tasks that were performed by lower-paid staff at a more traditional organization. “Gradually, one becomes more experienced and leaves administrative tasks to pay more attention to commercial work, especially developing business contacts. If you spend the whole day doing administrative work, then you won’t have more clients”, says Biscione.

The importance of calculations

One frequent problem independent professionals have is pricing their services. Additionally, they find it difficult to maintain a separation between their business and personal funds.

Enrique De Michelle is an Argentinian doctor with a Masters in Health Administration working in Medical Audit. He says that doctors are reluctant to price their services. “They price their services by comparing them with those of their colleagues and don’t consider costs. This can lead to loss of patients and opportunities on the one hand, and loss of profits on the other”, says De Michelle.

He developed a software to address this problem by helping professionals calculate their fees; it can be found on his website. De Michelle takes into account two main components: profit and expenses. Duration of the medical appointment, experience and fee per hour (considering market fees, how much a full-time doctor earns in a private or public institution, how much a part-time doctor earns, secretaries wages, other professional with the same specialization in the city or town and how much other professionals are charging their clients). The length of the appointment, the medical professional’s experience and specialization, overhead expenses such as secretarial services, and fees within the local market are all taken into account.

He also says that to calculate fees, you need to take expenses into account, which include fixed annual costs (utilities, rent, taxes, and so on) as well as variable costs such as medical material. De Michelle’s “Laspiur Formula” processes all this information. “This might sound primitive to economists, but doctors are not used to this kind of calculations.” This is only useful as a reference and you only apply it if you consider it correct.

Josefina Zehnder and Cynthia Oñate, both 27 years old, are the owners of the public and designing agency “Imagina” in the city of Rafaela, Santa Fe Province of Argentina. “We started working freelance gathering clients we had separately, and pricing our services was a problem, because we didn’t want to miss clients or because they were friends and we felt embarrassed if we charged them more,” they told us.

How do they price their work now? They have asked other agencies how much they charge for different kinds of works. They first consider their competitors’ fees and then take into account the interests of their clients. “It is not the same as a leaflet, which takes us a couple of hours. An institutional presentation may take us a year or more,” they explain.

What they have also learned, which applies to other professionals as well, is to be firm with estimates by giving a detail of what is included and what is not. “That is why now we give an estimate that can be modified according to the working-hours and any changes clients may ask for. If a client needs a leaflet, we give an estimate that includes the design and two changes, if he needs more changes, the price is increased.”

Published by “Revista Pymes – Clarin”