Creating Your Client-Centered Pricing Philosophy
Law Firm Pricing
3 min read
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One of the perks (or perils) of owning a business is having the ability to set the price for your services. Pricing is tricky because there is no precise formula that guarantees you get it right. If you price too high, you may price yourself out of your target market and not have enough work to sustain you. If you go too low, you may not make a sufficient amount of profit or may sacrifice the quality of your work to keep up with the demand. Setting your price is a mix of art and science.
In this Complete Guide to Law Firm Pricing, we’ll start by exploring how to create a pricing philosophy and how your philosophy ties to your brand and marketing strategy. In Chapter 2, we’ll review the different types of law firm pricing models. Chapter 3 will provide you with the steps you can take to think through your prices. In Chapter 4, we’ll cover how to address costs and client expenses. Chapter 5 explores how and when to reevaluate your pricing and Chapter 6 will explore whether it is time for lawyers to kill the billable hour.
Your pricing philosophy is a statement explaining how you will approach pricing your services. In our Complete Guide to Marketing, we discuss the importance of building your firm’s brand or firm’s reputation in the market. Your pricing and the way you offer services tell an important piece of that story.
For example, do you want to offer a bespoke product to fewer clients with highly specialized and customized offerings? If so, you will likely price your services at a higher price.
Or are you trying to offer something more moderate? Maybe your philosophy is to be in the middle ground—where you charge enough to make a decent profit but not so much that your clientele consists only of clients with high incomes and wealth. In this case, your price may be in line with many of the other firms in your market.
Another option may be to serve a larger market. You may define a product or service that you can offer to more people at a lower price.
So, start by visiting your firm’s vision and values and capture a statement that will guide your pricing decisions.
In the past, firms that billed by the hour offered a single price for every client and every matter. Except for an occasional discount or special arrangement, if a client wanted to hire Attorney X to represent her, she would be expected to pay Attorney X’s hourly rate multiplied by the time spent on her case.
This leaves few options for the client. It also isn’t necessarily the way most people purchase things in the world.
For example, if you want to buy a refrigerator, you understand different models come with different price tags. If you want crushed ice out of a dispenser on the door, you expect to pay more than the basic model. Even further, if you want to tap the door to illuminate a beverage tray, you know the price continues to increase. Maybe you even want WiFi. It’s easy to equate the value of these features and make a decision that justifies why you are (or aren’t) willing to pay more.
Law firms are served by employing a similar philosophy. Instead of just offering one price, law firms could have different offerings at different prices. If the client isn’t ready for the bespoke, top-end representation, you could offer them a limited-scope offering (more on that in Chapter 2) at a lower price. Or it could be that after seeing the limited-scope offering at the lower price, they better understand and appreciate the value in the higher-priced option. Either way, you also have a better chance of having the client hire you instead of going to your competitor.
As you read through the various pricing models discussed in this Guide, keep in mind that you could offer more than one.
Finally, no matter what you ultimately charge, you must be comfortable talking to clients about money. Too many lawyers quickly spout out their hourly rate and retainer amount without helping the client understand the scope of the future representation and the total amount they are potentially signing up for. This is a mistake.
There is no good selling a client a Ferrari if they have a Ford budget. This creates problems for everyone. Your clients will be upset when they get in over their heads and can’t pay you. You will damage your relationship with your client and your business will suffer financially.
Instead, be willing to discuss real dollars with your clients on day one.