Understanding Fee-for-Service Models

When your organization is implementing a fee-for-service model, it’s critical to concretely define and describe your core area of expertise, or one service or product.  What are you offering to the people or groups you service?

Next, identify an appropriate fee-for-service model.  Determine which model or models will work best in gathering fees for the core expertise, service, or product.  

Consider what policies and procedures will need to be in place. Determine what the operational policies and procedures for the new venture will be; how you will ensure that your selected strategy conforms to these operating procedures; and any government regulations, laws, and other guidelines you need to keep in mind.  Additionally, consider:

• How you will communicate changes to key stakeholders
• The standards that need to be introduced to staff, and the training that may be required

The bottom line:  Think through every area that makes you pause, and create a policy and procedure around it.

Carefully consider the duties your group will need to undertake and the appropriate person to handle each job. What staff or volunteers do you already have on board to help you implement your new model? Who will handle communications and marketing management, oversight of financial and legal implications, and the business plan review? If this is a major change for your organization, make sure you involve the right people in strategic and meaningful ways. Will they be board members, staff, or stakeholders from the community (constituents, donor representatives, community representatives)? Will it be some of these, but not all? Answering these questions will help build support and ensure your strategy is successfully and carefully executed.

Determine what human and other resources you need. Consider what resources you need to implement this strategy. Do the resources come from within or without the organization? Are you going to have strategic partners? Consider the cost associated with the venture.

Develop your business plan, which is the blueprint of your business venture and the most important document when engaging stakeholders. It encompasses a focused and systematic approach to the planning and implementation of the business. Even though it is a labor-intensive task, it will help you avoid potentially costly pitfalls.

Get a clear sense of your budget. All revenue development strategies have an initial and operational cost. Make sure that your organization has the necessary financial systems and resources in place prior to starting the initiative. In addition, recognize that the venture will cause a financial drain to your organization for some time before it starts generating revenue.

Create a work breakdown structure or planning method that works for you to outline each component of work.

Keep risk management in mind. Brainstorm, ideally with a group, the possible risks associated with your proposed strategy. Determine the likelihood and potential impact of each risk. Put a plan in place for managing the risks—particularly those with high likelihood and high impact, and those with low likelihood and high impact.

Make plans for evaluating the success of the venture. You might consider developing a logic model complete with activities, outputs and outcomes, and guidelines for measuring achievement of the desired outcomes. Ensure that your plan includes when and how you plan to evaluate.

As a review, here are all ten steps for implementing a fee-for-service structure.  You may want to save, print, or consult this list in the future.

1. Identify a core area of expertise, service, or product.
2. Identify an appropriate fee-for-service model.
3. Consider what policies and procedures will need to be in place.
4. Determine roles and responsibilities.
5. Determine what human and other resources you need.
6. Develop your business plan.
7. Get a clear sense of your budget.
8. Create a work breakdown structure.
9. Keep risk management in mind.
10. Make plans for evaluation.