Starting or creating a family office
What Financial Assumptions Should a Family Use When Modeling Office Costs?
Short answer. Build the model from the work your family expects the office to handle. Separate one-time setup costs from recurring expenses, estimate in-house and outside support, and test what happens when costs or workload change. Keep assumptions visible so the family can review them with its advisers and revise them as the plan develops.
Model office costs from the services and responsibilities your family expects the office to handle. Start with the work, then estimate the people, systems, and outside support needed to deliver it.
Build From a Defined Scope
List the services the office will provide, such as financial reporting, investment coordination, record keeping, or family governance. For each service, note who will perform the work, how often it is needed, and whether it requires specialized expertise. This gives you a practical basis for estimating staff time and vendor fees. If the scope is still uncertain, compare a lean operating plan with a broader plan instead of hiding the uncertainty in one blended estimate.
Separate setup expenses from recurring costs. Setup may include initial legal work, system configuration, and organizing records. Recurring costs can include salaries, benefits, software, office operations, and continuing professional support. The family office cost calculator can help frame the expense categories, while the readiness score can help you examine whether the proposed operation fits the family's needs.
Make Assumptions Visible
Write down each assumption beside the estimate it supports. For staffing, state whether a role is full-time, part-time, or outsourced. For systems, identify the functions the family needs, such as accounting or consolidated reporting. For outside advisers, record the expected scope of work and how fees are billed. Ask providers for written proposals so the model reflects the work being considered, not a guess.
Compare the cost of internal capacity with outside help. A family may need regular ownership of a task without needing a full-time employee to perform every part of it. The staff compensation estimator can support salary planning, and the single versus multi-family office break-even calculator can help compare operating models.
Test the Plan Before Approving It
Prepare a base case that reflects the work you expect, then test a lower and higher cost case. Consider what happens if a hire takes longer, a provider's scope expands, or the family requests services that were not part of the original plan. Also ask whether the office has enough work to justify each fixed cost. These are operating scenarios, not predictions, and they help the family see which choices create lasting commitments.
Review the assumptions with the people responsible for the budget and with your CPA or attorney where accounting, legal, or tax treatment matters. Set a regular review point and compare actual spending with the approved plan. If the scope changes, record the reason and update the model so the family can understand what changed and why.
Strategic time and money management involves investing resources in ways that promote your business's competitive advantage and helps develop new or existing core competencies.
Sources: The Rainmaker Handbook, The Single Family Office. Informational only, not financial, legal or tax advice.