Determining Value: 7 Questions for your Client
Long decried as a holdover from a bygone era, the billable hour has become a wedge between law firms and clients looking for a clear declaration of value from legal services pricing. Driven by client desire for change and increasing competition in the legal sector, more firms are moving away from the arbitrary billable hour and towards different pricing models that better reflect the value of services being offered.
So how is a lawyer able to define something as arbitrary as ‘value’ for each individual client? It should start with a conversation and seven simple questions:
● Do you have a specific deadline for the work?
● Do you require cost certainty?
● Do you require a service guarantee?
● What results are you expecting?
● Do you require unlimited access to our firm’s lawyers and staff?
● Do you require special payment terms?
● What are your strategic objectives? How can we help you attain these?
The beauty of this conversation is that each client will value each of these benefits differently depending on their needs–allowing you to determine how to tailor your services pricing. Some clients are interested only in price, whereas others are interested in the value your firm can provide. Many clients, once they think about it, are more interested in hiring the law firm that provides them with the highest net value rather than the lowest fees. These clients offer the highest realization, profitability, and ultimately retain the highest satisfaction for services rendered.
Many attorneys assume that alternative billing arrangements are only for basic legal matters such as estate planning, business entity organization, or an uncontested court case. But these types of arrangements can actually benefit lawyers who specialize in many different areas of law, and the payoff can be satisfied clients as well as healthy law firm realization rates. Before law firms consider pricing options and alternative billing, they ensure that their prices reflect the value they are providing.
Today’s law firms face many challenges, including shrinking profit margins and tight budgets. Hourly fees will likely never disappear and there’s a learning curve when it comes to putting a price on value and adapting to alternative billing structures, but creative fee arrangements will continue to grow and become a larger part of the legal landscape as lawyers and clients become more comfortable with them. Strive to put your clients’ success first, and when your clients reach their strategic or profit goals, law firm profitability is sure to follow.
Want to learn more about making your law firm profitable? Download Clio’s free whitepapers on Realization Rates and Alternative Billing Methods, and join them for their ‘Understanding Law Firm Financials: Making the Numbers Work’ webinar on May 28th.
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