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Brokers could introduce a mandate fee for SME clients by mastering break-even analysis, according to Accendo Financial.
Ahead of his session at the free SME Bootcamp 2024, co-founder and partner John Sgambelluri has said that while many mortgage brokers do not charge a fee for service, finance brokers can typically charge small- to medium-sized enterprise (SME) clients a mandate fee to remunerate them for their time and prevent hours of unpaid work.
“Brokers do a fair bit of work on loans for their SME clients but worry that it’s all for nothing because they’re either declined or the client decides to stay with their current lender,” Sgambelluri told The Adviser.
“This is why we encourage finance brokers to feel confident enough to charge mandate fees. But to justify their fees, brokers would have to demonstrate their value by becoming well-versed with the break-even analysis process so they can help their clients secure finance.”
According to Sgambelluri, when brokers are required to provide additional information to a lender for an SME client’s loan application, they contact their accountant and request a range of documents, including interim accounts, financials for the past financial year, and financial forecasts for the next 18 months.
This could become a frustrating process for both the accountant and the broker.
Instead, he urged brokers to become more involved in the process and increase their value proposition by understanding their clients’ financials, undertaking break-even analysis, and charging a mandate fee for those services.
The break-even analysis is the most valuable tool for any business owner to have at their disposal and could boost their loan application, Sgambelluri asserted, as it presents lenders with a cost-benefit analysis.
“In a business, every decision we make has a financial consequence, whether that’s pricing, purchases, recruitment, or marketing campaigns,” he said.
“If a business owner wants to employ a new team member, a break-even analysis will tell them how many sales they’ll need to cover the cost of this wage. If they bump up their price for a product, break-even will tell them how much they can afford sales to drop while still making the same amount of money as before.”
Furthermore, business owners seeking a loan to purchase new equipment or commercial premises could use the break-even analysis to determine the number of sales required to cover the cost.
“They’re not going to have to pay rent anymore but they’ll have to make loan repayments on their new premises, and pay rates, taxes, and fees,” Sgambelluri said.
“Break-even will show us how much sales we need to cover the costs. With new equipment, those costs could include the equipment (and its lifespan), insurance, and licensing.
“All of this fits beautifully with the loan proposal.”
Sgambelluri’s comments preceded the SME Bootcamp, where he will unpack how brokers could master break-even analysis (with a focus on balancing price, volume, and costs) and make recommendations on when business owners could proceed with new initiatives.
He will then share tips on how brokers could guide SME clients through key business decisions and strengthen their role as their clients’ business advisers.
Sgambelluri said: “We want brokers to feel confident in approaching as many business owners as possible, while being agnostic to industry and products.
“We want them to be confident that the tools they’ve been given will provide value, while supporting their decision to charge a mandate fee.”
To hear more from John Sgambelluri about how to master break-even analysis for SME clients while mitigating risk, come along to the SME Bootcamp 2024.
It will be held on the following dates:
- Tuesday, 3 September at QT Hotel Gold Coast.
- Thursday, 5 September at Le Montage Sydney.
- Wednesday, 11 September at Grand Hyatt Melbourne.
Click here to register for free and don’t miss out!
For more information, including agenda and speakers, click here.
This bootcamp is produced by Captivate Events. If you need help planning your next event, email director Jim Hall at
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