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 catching up on some reading today.  I came across a  survey in the October ABA Journal which indicated that only 55% of lawyers answered that they were satisfied with their career.  And, that number is actually skewed up because of the respondents that had been practicing for 10 years or more, 60% of those reported career satisfaction.  If you analyze the remaining respondents (those practicing under 10 years) then about 47% reported career satisfaction. Less than half!  Is that not an alarming statistic?  Furthermore, only 44% of all respondents stated that they would recommend a legal career to a young person.

So, what is that cause of all of this dissatisfaction in the profession?  I don’t have the answer, but it is a question that intrigues me.  The general subject of this blog is marketing and practice management for solo and small firm lawyers.  But, if you’ve read the About page, then you know that the original impetus for this blog was to answer the specific questions of What is the perfect law practice?, and How do you create it?

We can obviously conclude from the aforementioned survey that the vast majority of lawyers have not created what they consider to be “perfect practices.”  I can’t help but think that some of that dissatisfaction demonstrated in the survey results is attributable to two of my personal pet peeves:

1. The billable hour, and all of the pressures, imbalance, and general stress and unhappiness it causes, and
2. the failure of law schools to teach lawyers how to run their practices as a successful business.

The  latter may be more prevalent for the solo and small firm lawyers with whom I am accustomed to interacting, but I think it has to be a contributing factor to the general dissatisfaction expressed in these statistics.

So, I’ve got three questions for you: Are you satisfied with your career?  Would you recommend a legal career to a young person?  And, if you answer either question in the negative, WHY?

I invite you to share your own answers in the comments section - do so anonymously, if you prefer.  And, for the record, my answers are Yes and Yes.

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Chuck Newton recently posted an article title Price Competition is a Fool’s Game.  And, he is right.  Although Wal Mart may successfully compete as the low price leader, it is a losing strategy for law firms.

Subscribers to my e-zine received a an article I posted on the same subject back in early August.  For those that don’t subscribe (you can rectify that in the side bar of my blog today!), I will set out a redacted copy of the article here:

Your goal should be to charge premium fees for premium service.

As a young 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 from you 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 or the Hyundai of law firms?  The Nordstrom’s or the Dollar Store?

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Susan Cartier Liebel at Build a Solo Practice recently posted an article to her blog describing the billable hour as the cockroach of the legal profession. It is a good analogy - a pest that won’t die. Her broader point, though, is more important. She concludes her post by discussing how the internet as a communication tool may lead to broader acceptance (and demand) for alternative fee arrangements. I definitely believe that is the case.

In my recent white paper on Pricing for Maximum Profit I stated that I feel that the market will increasingly demand alternatives to the billable hour from professionals. You guys may tire of me writing on this subject. But, I will continue to beat this drum. Death to the cockroach!

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In recent weeks there has been much discussion on the blogs and listserves about the relative merits of the hourly billing model, and the fixed fee/value pricing model. I’ve made it clear on this blog (and most recently in this free article on pricing) that I advocate a fixed fee model (and use it exclusively in my own law practice and in my consulting company).

I recently came across this wise post by the wise Carolyn Elefant (one of my favorite bloggers). In it she discusses the often overlooked fact that when it comes down to the conflicting interests between client and lawyer, often the individual lawyer’s character may trump the billing model they choose to employ in deciding how that conflict is resolved. For all the benefits of the fixed fee model, in the end you can’t “scheme away” these potential conflicting interests. We are, after all, individual lawyers making individual choices about how we conduct ourselves and represent our clients. No pricing model can change that.

Thanks for the reminder Carolyn.

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Well, I’m a bit later getting this eBook completed than I had intended, but it is now complete. You can download a free pdf copy of Pricing for Maximum Profit from the Resources section of this blog. The eBook discusses value pricing as I do it in my own family law practice, as well as practical steps you can take to command premium fees in your own solo or small firm law practice.

I hope you profit from it. And, I’d love to have your feedback either in the comments section of this post or directly by e-mail at msherman @ lawforprofit. com.

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The most recent edition of Law Practice magazine contains an article entitled “Hours Expectations for New Partners.”  That article contains this quote, “Available information indicates that an average partner in an average firm should plan to log at least 2,500 hours per year (or 50 to 60 hours per week) in pursuit of the aims of his or her firm.”  Are you kidding me?  And, if that is the average, presumably there are firms that require more than that.  So, the average lawyer is working 50-60 hours per week?  No wonder they are so unhappy.

And, of course the most telling part of the quote is the last phrase which points out that these hours are logged “in pursuit of the aims of his or her firm.”  In other words, it’s not about the client.  Those hours need to be logged for the firm.  What if you removed any billable hour requirement?  What if the focus was on getting the job done for the client as efficiently and effectively as possible and doing so at a profit to the firm?

There’s a novel idea.

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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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