6/26/13

Dan and Jane: Ep. 5 - Legal Pricing


Dan: You may not know this Jane, but I've been moving into more of a Pricing role at my firm.

Jane: I'm impressed.  And a little frightened for the well being of your firm.

Dan:  Every firm needs to have at least one person focused on determining the right price and fee structure for every matter.

Jane: I completely agree.

Dan: ... But...?

Jane: No but. For once I think you're right, Dan.

Dan: ...really? I'm may need to reconsider my position.

Jane:  No, I think this is may be one issue where the reality of the situation is so clear that we can't help but agree.

Dan: Wow! That's kind of strange.  I guess it had to happen some time.  And this is so obvious.  Someone has to calculate revenue and expenses to determine profitability and most attorneys aren't capable or interested in economics. Without someone in that role, how would you ever determine the lowest possible bid to get more work?

Jane:  I'm sorry?

Dan:  I mean, with so many clients issuing RFPs for new matters now, someone has to have an idea of how  low they can go?  Otherwise, attorneys will just make up a number. And you don't want them to do th...

Jane: That's how you're doing pricing?

Dan: That IS pricing.

Jane: That's dumb. Pricing isn't about determining the lowest price you can possibly charge.  That's a shortcut to bankruptcy.  Pricing is about building a relationship with the client and understanding their needs. Often clients aren't looking for the lowest price, they're looking for a firm that is flexible enough to build fee arrangements around their needs.

Dan: I don't follow. If you bid the lowest, then you get more work.  More work is more revenue.  Which means everyone makes more money!

Jane: And they're paying you for this brilliant financial insight?  Pricing Legal services is not like selling used cars. You can't just put out an ad that says, "Will not be under bid! Lowest Price Lawyers in Town!"

Dan: How did you...?  Do you have....?  That ad doesn't go out until next week.

Jane: You're an idiot and apparently you have one in marketing too.  Pricing is an offensive strategic business development tool.  The way you do it is entirely defensive and reactionary.  Suppose I was a client and I came to you with an RFP, what is your first move?

Dan: Offer 10 percent off our standard rates.

Jane: And if the client balks?

Dan: 20 percent. We don't tell them, but 35 is absolutely our lowest offer.  Although, for big clients, we might go to 40.

Jane: And you're doing this with all of your clients?

Dan: No, of course not.  Just the ones we think might be considering hiring other firms. The rest we just bill at our standard hourly rates.

Jane: What's the written equivalent of a face palm?  Has it occurred to you to be proactive with your pricing?  Take the time to get to know and understand the client.  Ask them about their concerns.  Where are they getting pressure to reduce legal spending? What headaches are their outside counsel causing them?  Take that information and offer the client an alternative fee structure tailored to meet THEIR needs BEFORE they even ask you for a discount!  Pricing legal matters is not strictly about getting more business, it's about making clients happier, which WILL ultimately get you more business!  You are an incompetent imbecile, a danger to your firm, and should be fired immediately!  Why are you smiling?

Dan: We're disagreeing again.

Jane:  Feel better?

Dan:  Much.

Jane:  Me too.


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