Should I Raise My Law Firm’s Prices?
I’ll tell you right up front; I don’t think you’re charging enough money for the services you provide as a law firm.
I’m Charley Mann, the President and Lead Coach of Great Legal Marketing.
And after coaching over 1000 law firm owners during the past decade, I can’t begin to tell you how many owners fail to charge the amount that they can and should for services they provide.
Obviously, this predominantly has to do with flat-fee and hourly billing practices.
But I regularly find that many contingency firms don’t know how to turn away low-cost clients and focus only and exclusively on getting those who are most valuable.
In deciding law firm prices, there’s a tendency to look around the market and triangulate where you think you should be, based on what others are charging.
So, if others are charging $250 to $300 per hour in your practice or region, you’re probably going to end up around $275, right smack down the middle.
However, you’re absolutely leaving money on the table.
And specifically, you’re leaving profit on the table when you make that decision.
I work with law firm owners in areas where the average charge fee is $300. And they are charging up to $550 per hour or more for the services.
So, what’s the difference with law firm prices? Why is one person charging half or a third as much as the other?
First off, people who charge more know one very simple secret; people are willing to pay more than we think is common.
When you are the creator of the service, you tend to have an egalitarian view of it. You want to provide it to as many people as possible with the idea of, “the more clients I have, the more money I will make.” This seems to make perfect logical sense, I can’t deny that.
At the end of the day, getting more clients doesn’t mean more profit. It usually means more hours worked by you to get a little bit of extra money.
The law firm that charges more may not have as many clients. But the clients they do have are at a significantly better profit margin.
Additionally, people who are willing to spend more tend to be easier-going clients.
Now, you may think that the inverse would be true.
But think about your own experiences. Is someone more likely to complain and shout at a low-cost restaurant or at a high-cost restaurant?
At the high-cost restaurant, they may keep to themselves or send something back. But they tend to behave better overall than at the low-cost restaurant.
Even though we think that if someone is paying less, they shouldn’t expect more.
The truth is the person who opts for the lower cost law firm is likely expecting to get more, even by spending less.
In contrast, the person who spends more on a practice wants efficiency, speed, and quality. They feel safer spending more money on an important issue they’re experiencing.
You can increase prices to maximize overall client satisfaction and, at the same time, maximize your profits. Higher paying clients, again, do feel comfortable spending more money on urgent and important issues.
But there are other factors that go into willingness to pay for a provider’s service.
Folks out there aren’t always focused on simply price alone; there are extrinsic and intrinsic elements that go into consumer decision making. There may be other law firms who provide similar, or even cheaper, services than you do; but they can decide to choose your service instead.
That’s why you need to adjust your law firm prices and move up to the next degree of clients.
Additionally, the other advantage to increasing your prices is affording to spend more time on flat-fee practices to get work done to the best of your ability. Or, spending less time on an hourly practice. You don’t need to build the same number of hours to get the same amount of revenue. This actually means you would be able to bring on more clients.
It’s interesting how pricing doesn’t actually relate directly to supply and demand.
It’s not really fixed in place—famous behavioral economics. Economists have proven that price is not subject to simply supply and demand.
There’s an element of perception that exists in there. And perception is one of the most important factors in why someone will pay for a particular product or service.
Just look at the most expensive handbags in the world. Are they made with much better leather? Are they using higher-end materials?
Maybe, but are they using hiring materials that justify them charging as much as 300? Or even 3000 times more than a similar handbag?
No, absolutely not.
But the person who wants to buy at the highest quality level will gladly spend that kind of money.
Even then, people who would go for lower-cost providers may still think that you pay more to get the job done right. When it’s important, people who might perhaps buy the least expensive shirt at Target, or Walmart, would spend plenty of money to make sure the installation of an air conditioning system is absolutely perfect.
Because the t-shirt doesn’t matter, those come and go.
With something as long-lasting as an air conditioning system, people want to make sure that it’s done the right way, the first time. Those types of buyers are exactly the type of clients you want for your law firm. The ones who value the quality of your work and will pay accordingly.
Finally, most of the price stuff just simply exists in your head. You’re afraid of offending a client by quoting a number that’ll make them go, “Well, no one else has given me a number that high.”
You have to remember that most pressure you experienced guarding those numbers has to do with other lawyers in your community. And anytime that you hear another lawyer say, “Oh, how outrageous. How dare you charge that amount?”
You’re making a decision for yourself and your business.
Because never forget, the client will ultimately chose you. You’re not going to force them to pay any amount that they otherwise wouldn’t pay. They are willingly entering into this contract with you.
So as long as they’re willing to pay, and you’re able to provide the high-quality work that they expect, then this is an absolute match made in heaven.
So rather than simply thinking about how to get more clients, and maybe even slightly lower your law firm prices, think about how to raise prices, actually increase total inventory, or even work with slightly fewer clients who are getting you better profit margins. You’ll find that running a law firm that is high profit and low maintenance is a lot more fun than just being able to brag about the number of cases, claims, or files that you had in your practice last year.
Because at the end of the day, it’s what you take home, not just what you bring into the practice that matters.
Most attorneys start their firms assuming that being a really, really good attorney should, in and of itself, be a marketing advantage. Those attorneys believe that joining a whole bunch of committees and putting their name in lawyer directories is “marketing,” and they never bother to ask if there is a better way.
Attorneys are catching on, however, and those who succeed learn to leverage their current resources to create effective (and ethical) marketing. What they discover isn’t a magic pill or silver bullet but a different approach to marketing that your competitors haven’t considered.
by Charley Mann
Charley is the Chief Marketing Officer at Great Legal Marketing and believes in results, Results, RESULTS!