If you’ve followed this blog any length of time, or if you subscribe to my e-zine, The Profitable Practice (you can do so in the side bar), then you know I advocate that lawyers follow a fixed fee, value pricing model.  I believe that model to be superior to an hourly billing model.  If you haven’t already done so, I invite you to read my white paper on the subject, titled Pricing for Maximum Profit.  It is available under the resources section of this blog.  In it I discuss ways to command premium fees and how I use the fixed fee value pricing model in my own divorce practice.

In this article, however, I want to emphasize the importance of setting fees in your law practice on the high side of your market.    I believe that your goal should be to charge premium fees for premium service.

As a new lawyer, I had difficulty quoting higher fees.  I was afraid that my prospective clients would not pay me unless I was right in line with what others with similar experience were charging.  As it turns out, the problem was not with my clients, it was with me.  The problem was a self image problem.

I have since learned that you will never get paid more than you think you are worth.  That may sound like psycho-babble.  Perhaps it is.  But, it is still the truth.

If you are doing the things in your practice that you should be doing (e.g. choosing a niche, being the expert in that niche, providing exceptional client service, etc.) then you’ve earned the right to charge more for your services.  But, unless you believe that, your prospective clients never will.

And, here is one more reason for you to believe it: you never want to compete on price.  There is no doubt that you can build a business entirely by offering the lowest price.  But, why would you want to?  Would you rather have 4 clients paying you $25,000 each, 100 clients paying you $1,000 each, or 1000 clients paying you $100 each?

Of course, the question is rhetorical.  But the answer is instructive.

Additionally, when you compete only on price, all someone has to do to take a client is to offer a lower price.  When you compete on EXCELLENCE, VALUE, GUARANTEED SERVICE, etc. it is much more difficult, if not impossible for a competitor to steal your clients.

Of course, there is another point about price.  Your prospect believes “you get what you pay for.”  If that is the case, do you want to hold yourself out as the “low price lawyer”?  Put another way, do you want to be the Mercedes of law firms or the Hyundai of law firms?  The Nordstrom’s or the Dollar Store?

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I was thinking today about the traits or behaviors that a solo lawyer trying to transition his firm from a startup to a growth stage should focus on.  I came up with a list of certain things which I think such a lawyer should do more, and certain things they should do less.

Do these more:

• Focus
• Manage proactively
• Delegate and outsource
• Establish systems and structures
• Trust your team members and hold them accountable
• Strategic planning
• Share credit
• Market the practice
• Spend a designated portion of every day or every week on the “big picture” not just the day to day operations

Do these less:

• Solve all of the problems
• Answer all of the questions
• Manage reactively
• Make all of the decisions
• Shoot from the hip
• Do all of the technical legal work in the firm
• Think short term

What have I left out?

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I was having a discussion with a private consulting client the other day.  He is a very competent lawyer, but his law practice is not what he would like it to be.  He had paid me for a consulting day for us to discuss some marketing and practice management strategies for his practice.

As we started talking about his law firm and the challenges that he was having, I could not help but notice how frequently he took on a sort of “victim mentality.”  Everything was someone else’s fault.  He talked about how some other lawyer in his town was lucky because thus and so had happened in his practice, or how the staff would not implement his ideas (who works for whom anyway), or his clients just wouldn’t pay premium fees, etc.

This was a very accomplished and experienced lawyer.  But, he was not taking responsibility for his own law practice.  We had to spend a couple of hours just getting him to move beyond being the owner of his solo practice, to taking ownership (i.e. ultimate responsibility) for it.

Here are some of the questions that he and I worked through:

• How have you been responsible for your firm’s lack of performance in the past year?
• How committed are you to creating your perfect law practice?
• What must you change in order to create your perfect law practice?
• What in your law practice have you been pretending not to notice?
• What about your work habits do you know you need to change?

As you can imagine, this was not easy work for him.  But, it was both necessary and worthwhile.  I find that too frequently solo and small firm lawyers do not take any time to undergo this type of introspective process (it alone is a good reason to talk periodically with an outside consultant, mentor, or accountability partner about your firm).

As solo and small firm lawyers, I suggest we could all benefit form asking these types of questions of ourselves on a recurring basis.

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The ubiquitous Seth Godin recently posted an article to his blog that is relevant to the recent discussions we’ve had on this blog related to Premium Pricing.  You can view his post in its entirety here.  His point is essentially that it’s easier to make a million dollars selling a $10,000 service to 100 people than it is to make a one dollar profit selling to a million people.  The point is exaggerated for emphasis, but nonetheless it is still a valid point.

As lawyers running our own law firms the question we should ask ourselves is whether the pricing strategy in our law practices more closely resemble Wal Mart or Neiman Marcus?  There is an entire discussion that can be had on exactly how to command premium fees in your law practice, and I plan on addressing that very issue in the free e-book on that subject that I’m publishing the next couple of weeks.  But, first you have to understand it is a superior model.

I know a divorce lawyer who has been practicing 30 years (twice as long as I have) and whose technical skills are very well respected in his community.  However, he takes the Wal Mart approach - low fees, high volume.  I have often been opposite him in cases where, despite my having half his experience, I made literally two to three times the fee he did in the case.  When he and I talk about this he essentially admits he is afraid to raise his fees.  He thinks he will lose business.  He doesn’t realize that would be a good thing (despite my repeatedly telling him so).  He could double his fees and even if he lost half the volume (which he wouldn’t because of his reputation) he’d make more money, work less and be able to deliver a higher level of service to his clients.  That’s a win all around.

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In my prior post on Premium Pricing I discussed the benefits of premium pricing in the law practice and I promised to revisit the specific strategies involved in actually doing it.

I was recently contacted by Stephen Gustitis of The Defense Perspective blog regarding that very issue.  I promised him I would move that article up my list of writing project priorities.  So, I sat down to start writing on the subject of Price in the law practice.  Specifically, I wanted to address how to command premium fees (i.e. how to get them and how to deserve them).

As I started writing, I realized I had much to say on the subject (my wife says that’s too frequently the case for a growing number of subjects!).  But, this is such a critical issue.  And, so many lawyers completely miss the boat here.  There is the whole value pricing vs. hourly billing issue on which entire books have been written (my favorite are the ones by my friend, Ron Baker - that guy gets it).  But, there is also the subject of presenting the price to the prospective client, how to desensitize the client about high fees, how to pre-screen prospects that can’t or won’t pay premium fees, and the list goes on.

So, I decided I can’t do the subject justice in a single blog post, and I don’t want to start another series (I’m currently posting a weekly series called Lawyer Marketing 101 et seq.)  So, I decided to write a free e-book on the subject.  I am going to do a brain dump of everything I know and do on the subject of pricing for the law practice.  The plan is to offer it in the resources section of this blog.  I am working on it now and will have it ready in 14-21 days.

Stephen, I guess I have you to thank for this new project - I hope you find it profitable!

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In this post at Build A Solo Practice, Susan does a good job of setting out the factors that lawyers should consider in deciding whether and how much to charge for the initial consultation.

Personally I do charge for consults and recommend other lawyers do the same. There are several reasons. Here are a few:

1. I do it for positioning in the mind of my prospective clients. I charge premium fees for premium service in my divorce practice. If I gave the consult away for free, it undermines that position.
2. People value what they pay for more than what they get for free.
3. You avoid the “tire kickers” who can’t afford you and are shopping for the low cost provider (which, even setting the fee aside, generally make the most difficult clients).
4. It makes it more difficult (though not impossible) for someone to get a consult for the sole purpose of conflicting you out.
5. It pre-qualifies the prospect. If someone is not able to pay my $300 per hour consult fee (which I apply to their flat fee if they hire me) then they will not be able to pay the fee to hire me. If that’s the case, it wastes there time and mine for us to talk for an hour.

In Susan’s post she makes a compelling case for new lawyers just getting started to give free consults. And, certainly you can make the argument that an hour spent for free with a prospective client is better than an hour spent twiddling your thumbs in your office. But, in my book, the sooner you can get to the point of charging for the consult, the better.

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I have spent the past several posts outlining how I define the Perfect Practice. To summarize my view:

The perfect law practice…

1. is a practice that serves your life.

2. is systems driven.

3. is timeless (i.e. operates on a value pricing model).

4. is focused on extraordinary client service.

5. charges premium fees for premium service.

6. is comprised of a winning team.

7. is the the deliberate and natural result of an effective leader.

Now, that I’ve demonstrated my bias and beliefs about what makes the perfect law practice, we will turns to more practical matters - like how to make your solo or small law practice perfect. The next posts will begin exploring very practical steps you can take to make your law practice perfect. We will discuss operational strategies, staffing issues, leadership, financial models, client satisfaction, lots of marketing (and even sales) and more! Stay tuned.

And, I’d love to hear your feedback - questions, comments, what you agree with or disagree with - please give me your feedback in the comments section of the blog.

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The Perfect Practice is the the deliberate and natural result of an effective leader.

A perfect law practice is not found.  It is intentionally designed and created.  Like any complex and wonderful creation, it is the deliberate result and reflection of its creator.

The leader of the perfect practice has many attributes and skills.  Here is my short list of them:

• Vision
• Focus
• Passion
• Self confidence
• Self discipline
• Optimism
• Persistence
• Well defined goals
• Communication skills (including listening, speaking and presenting skills)
• Negotiating skills
• An understanding of human behavior

The importance of the above traits and how to cultivate them will be the subject of future posts.

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The Perfect Practice is comprised of a winning team.

In Good to Great, Jim Collins identifies the fact that one of the key traits of companies that went from good to great was their emphasis on their people.

The Perfect Practice must focus on recruiting, hiring, training, and compensating competent and caring staff.  As mentioned in another post, systems should be in place to make sure this happens as a matter of course.

All members of the team must have an understanding of the firms purpose, mission and goals.  These are the key people that will deliver your client experience. 

One critical component is a compensation system that encourages and rewards results and leads to the overall performance and growth of the firm.

All of these issues will be covered in more detail in subsequent posts.

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The Perfect Practice charges premium fees for premium service.

Because of their dedication to extraordinary client service and value, lawyers at the Perfect Practice are able to charge premium fees.

This does a number of things:

• it drives off low paying business that you should not want anyway;
• it allows you to focus on quality instead of quantity (think Nordstrom’s not Wal Mart; Mercedes not Yugo); and
• by reducing the number of cases it allows the staff and lawyers to deliver better service (a self perpetuating model of excellence).

The keys to being able to charge premium fees are as follows:

1. specialization
2. differentiation
3. extraordinary client service

These will be discussed in more detail in subsequent posts.

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