myShingle has a great post today called “Make More With Flat Fees.
I use flat fees a lot in my own practice. In both my family law cases and my criminal law cases. Clients do like it better as they know what a matter will cost. For the more complex matters, I still bill by the hour. But for uncontested divorces and those cases that are pretty much document preparation, flat fees works well.
From a recent e-zine article I sent to all my subscribers. . .
So many lawyers have written to me for coaching regarding the same problem about what went wrong in their sales calls with prospective clients that I just decided to convert my answers into an article for everyone’s benefit. The questions all revolve around what went wrong and how to best quote or estimate the price of legal services to prospective clients.
The conversation goes something like this:
Prospective client: “How much do you think this will cost?”
Lawyer: “It’s hard to tell. We’ll work hard to be as efficient as we can.”
P.C.: “That’s great, but how much do you think we’re looking at?”
Lawyer: “My rate is $250 and hour, but for you, I’ll cut that to $200.”
P.C.: “I appreciate that, but how much do you think we should be budgeting?”
Lawyer (knowing that if every single thing goes right, and nothing goes wrong, the case can probably be handled for $15,000): “Well, you should figure between ten and fifteen thousand dollars.”
I generally prefer to focus on what went right, instead of the negatives. But in this case, it’s instructive to focus on what went wrong in the all-too-common example above
IT’S A FACT THAT MANY LAWYERS ARE UNCOMFORTABLE CHARGING FOR THEIR SERVICES
In the first part of the exchange we see an example of a lawyer who may be uncomfortable charging for his or her services, perhaps out of a misguided (and common) misconception that lawyers should be above such pettiness as money.
Click HERE for a fuller discussion on why you deserve to be happy and should feel no reluctance to charge for your services.
It’s also possible however that the lawyer in this example is oblivious to the budgetary process of the client who simply needs a number to put into the budget for the upcoming period(s) and/or to conduct a cost/benefit analysis.
Not to suggest that any client looks forward to paying for legal services, but I hope you’ll take comfort knowing that an overwhelming amount of anectdotal evidence gathered from thousands of lawyers supports the proposition that most clients, are much more comfortable talking about the price of the services they buy, than are the lawyers.
DON’T NEGOTIATE AGAINST YOURSELF
In the second part of the exchange we see how 20% of many lawyers’ revenue disappears when they fail to listen to the question about fees and so they negotiate against themselves. Note that the client didn’t ask for a lower rate, only what the price would be.
Too many lawyers substitute their own assumptions and hear what they are afraid a prospective client might ask, instead of what is actually being said. Be aware that, especially when it comes to “bet the ranch” type cases, most clients are not nearly as price-sensitive as many lawyers fear or assume.
And for those who are, there are many safe and predictable ways to give them better value, while earning a premium fee for yourself over & above what you’d otherwise earn strictly by-the-hour.
“It Will Probably Cost Between. . .” Sows The Seeds Of Discontent!
In the third part of the exchange the lawyer sets him or herself up for ultimate failure. No matter what price range a lawyer gives. No matter how many different disclaimers accompany the estimated price range. Every single time, with no exception in the history of the world, the client will always leave the meeting with hopes that they’ll end-up only having to pay “around ten thousand”, while the lawyer will leave with hopes that they can “bring it in under twenty.” And if by some miracle everything does go right and the final bill ends up being $15,000, the lawyer will expect a hero’s welcome for saving the client $5,000, but the client will inevitably feel they paid 50% more than expected.
SIMPLE SOLUTION: If you can’t figure-out how much a case is likely to cost on-the-spot, ask for time to analyze the facts and get back to the client the next day with a real number that builds-in a margin of error. It’s also a good idea to estimate the price in terms of controllable steps for which you can charge a series of flat fees, and then keep the client informed as to which step you’re on and how close to budget the case is.
I realize this is a rather long post, but it’s an important topic. If anyone’s interested in learning more, send me an e-mail from my blog and I’ll either reply to you directly or else let you know when the topic is more fully discussed in my e-zine or on my blog.
Respectfully,
RJON ROBINS
http://www.HowToMakeItRain.com/blog
Helping Lawyers In Small Firms Make ALOT More Money.
Make Money No Fees
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