One of my life rules is: If you hear it once, it might be interesting. If you hear something twice, it’s a good idea to check it out. If you hear it three times, it’s time to pay attention.So what triggered my rule? People recently suggesting the data is out there on what clients are paying for legal services. Or inversely, the fees law firms are charging.
The general thinking is there is a database that has the information; it might be a law firm’s or group of law firms, or better yet, one of the e-billing companies. All you need to do is push the magic search and retrieve button and the data will tell you the price of things.
First off – I completely understand the strong desire for wanting to know the price of things. After two or three beers with Greg, I will occasionally suggest I would give one of my children to have that kind of data on legal offerings. Although in my defense, I am somewhat vague as to which child.
So applying my life rule – where should I apply my attention? Answer: Not on a Magic Button. I suppose the real take-away on this issue is evidence of the growing hunger for a market pricing mechanism. I recall one client going to great efforts in its bidding process, with the stated goal of finding “fair market value’” for any legal work it procured.
But here’s the rub – this market information doesn’t exist. And for many types of legal work, it may never come in to existence. For a will or a patent filing - probably. For a run-of-the-mill corporate acquisition - we might see a price range. For commercial litigation – not very likely since each case will have different value drivers.
After ruminating on this challenge for a while, I had one of my mini-epiphanies. This is a classic case of imperfect market information. ‘Imperfect’ meaning the market does not have enough information to produce fair market pricing. Technically, most markets are imperfect but some are more imperfect than others. The legal market is nearly perfectly imperfect (I just made that phrase up - copyright time!). And in imperfect markets, some people have better information than others. Those are the people who usually do the best.
Which brings us back to the magic button (which still doesn’t exist).
In my experience, those who succeed under imperfect markets are those that take the time to build good pricing knowledge. True – some of it comes from looking at your own data. But most of it comes via participation in the market. Practically speaking, this means firms should be more proactive with AFAs and develop pricing expertise such that they are constantly building this knowledge.
So for those with pricing hunger, I suggest spending more time in the market and less time hoping for a magic button. Although billing data has some value, it does not come with The Button.