Fee Discounts and Your Income
If you have been reading my articles for any length of time, you have heard me rail against fee discounts.
Why? Because, by discounting your fee, you are essentially cutting your income.
For those of you who may be new readers, and for those who need a refresher, let me provide you with the economics of fee setting. Here are three primary factors to consider when setting fees for your legal services:
Factor One: The Value You Are Providing to the Client
If you are a transactional attorney and you negotiate a deal for your client that saves him one million dollars, is your $20,000 fee a good deal?
If you are a criminal attorney and your client, a corporate executive, is facing a public indecency charge that will most certainly get him fired; is your $30,000 fee for negotiating pretrial diversion and expungement worth it?
You can probably see where I’m going with this. You must present your fees in the context of the value you provide.
The resistance I get when I introduce this concept to new clients is the: “everyone else charges…” argument. That is to say: People always fall back on what their peers/competitors are charging as a justification for charging low fees. The argument assumes that you are exactly the same as everyone who does what you do. You are a commodity.
If you ARE the same as everyone else, if you ARE a commodity, shame on you.
The first rule of marketing is to differentiate your business from every other business that provides similar services. Differentiation is the key to value demonstration.
Factor Two: The Demand for Your Services
If you have enough clients to cover your fixed costs, and pay yourself a reasonable salary, why would you ever discount your fee?
Think about it.
You don’t NEED the business. You are already close to capacity. Yet you take the new client who requires a fee discount in order to do business with you.
Put another way: Others recognize your value and are willing to pay full fee to work with you. Why not just find someone else who will pay full value and take a pass on the discount shopper?
Supply and demand. It’s basic economics. When demand is high and supply is limited, fees are high.
There is only one of you. Supply certainly is limited.
Factor Three: Your Personal Desire
You are not an indentured servant. You set your own fees. These fees should include your personal desire for: 1). Income, 2). Confidence, 3). Lifestyle
If you have specific income goals, you should adjust your fees to help facilitate achieving those goals. If you don’t have income goals I can guarantee you will almost always be unhappy with your income.
There is nothing that provides a lawyer with confidence like clients investing their cash in him. The two go hand in hand. People are emotional about money. If you want someone to be confident in you, convince them to invest in you. Once they put their money on the line they will be a big, big fan.
How do you want to live your life? Do you want to control your own destiny? Do you want to provide your family with the best life has to offer? Do you want to eliminate financial worries forever?
If you answered “yes” to any of these questions you need to charge significant fees. You cannot nickel and dime your way to wealth…not as a solo practitioner or owner of a small law firm.
But don’t believe my words. Use me as a case study. I only select twelve private clients to work with me each year. I charge $30,000 per year for this privilege. I have a waiting list.
Now there are other ways to get involved with me (my $97 per month Rainmaker Society Membership for example). But there are only twelve new private clients selected every year. Only twelve people who get unlimited access to me. Only twelve people with my private telephone number.
What makes me different? What is my secret?
Re-read this article. It gives you all the information you need to take control of your financial future.
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EmailEarn the Privilege of Being Selective
Last week I selected 100 people from my list of Rainmaker Minute subscribers and I made them an irresistible offer.
You see, I’ve developed a new self paced coaching program and I need 10 new lawyers to test it each month. So last Thursday I sent an email to 100 people on my subscriber list and offered them the opportunity to be Pioneers in this program.
This means the lawyers selected will receive one video DVD, audio CD and workbook/transcript from me with three recommendations each month. As Pioneers they agree to evaluate the information and if appropriate, implement the recommendations in their law firm. They also agree to provide feedback.
These 10 lawyers get to participate in this new program for a fraction of what the investment will be in the future. (The people who get in this month are only paying $97).
Within 6 hours of sending the initial offering email, I received 17 applications (yes, I make people apply and I evaluate them before accepting them). Within 12 hours I had 22 applications and I am still receiving a few here and there.
But even with that virtual stampede to sign up for this great deal, there were still a few skeptics. And there is a lesson we can learn from a couple of them.
Two people who received the email offer said they would be interested if I sent them some references of people who had already been through the program. This proves two things:
1).These folks do not read carefully. The reason I am looking for “Pioneers” is because nobody has been through this program yet. That’s why I am taking 10 new people each month and adding them to the client roster. As I add new recommendations I am adjusting based upon the feedback of other clients.
As a way to compensate for a lack of track record in this program I do not require any commitment. If you want out, just say so and you do not need to pay for future months. Just send an email and you’re out. It’s easier and quicker than a Las Vegas Divorce.
2). These folks have a distorted sense of value. Think about all the things you spend $97 or more on with no guarantee of success:
- Dinner for two in a chain restaurant (without wine)
- A trip to the movies for a family of 4, with popcorn, soda and candy
- The gym membership you have not used in 6 months
- A Craftsman Drill at Sears
- A tie, on sale, at Saks
- Your cell phone bill without a data plan
- A box of crappy cigars
None of those things or any of the hundred other things you could “invest” your $97 in will have a significant return on investment.
The coaching program I offered to these lawyers will certainly have a return on investment. Quite a few people were astute enough to recognize this fact and they applied immediately.
Could I have done more to demonstrate the value of my service to the skeptics?
Absolutely.
I could have given them the names and phone numbers of my clients who graciously serve as volunteers for references. Some of these folks appear on my website with full name and law firm affiliation available for the world to see.
But in this case I chose not to “sell” anyone on working with me.
Why?
Because I have earned the right to be selective. Demand for my service is high. People see the value of working with me at $3,000 per month. Dozens of people see the value of being involved with me at $97. I like working with clients who recognize value.
So what does this mean for you and your law firm?
It means you should price your service fairly based upon the value you provide. It also means you should understand the demand for your service and not worry about the few people who do not recognize your value. They were not meant to be your clients…especially when dozens or even hundreds are out there waiting to work with you.
If you have an interest in this exclusive program, call me and I will interview you. If you are accepted, you will fill the next opening on my client roster. 888.692.5531.
Your Fee Is Too Low
I was totally embarrassed when I heard that statement. I’ll admit it was the first time I had ever heard it after being in business of providing professional services for nearly 20 years.
Here’s the story:
A few years ago I was working with an attorney who had a solid book of business. The guy was doing just north of a half million dollars a year and it was coming from about 21 different clients.
He was a person of high integrity and he built his practice one relationship at a time. The big problem facing this forty-something attorney was that all the income was completely dependent upon him. He acquired the clients. He did the work and he answered every phone call.
And he was sick of working so hard.
My job was to help him figure out how to grow his law firm enough so that he could make the same (or more) money and not have to work so hard – while keeping his client relationships intact.
The solution we created transformed his business.
We decided to hire three new associates into his firm. Each one was assigned seven of the firm’s clients. They were each dedicated to taking care of their seven clients – no more and no less. Each associate received a base salary and a bonus based upon the growth of their relationships. So if one of their clients grew by $10,000 in any given year, the attorney who worked with that client received a $2,000 bonus.
This solution forced each of the attorneys to deepen their relationship with their clients and, in one year, they doubled the firm’s revenue.
At year end, when my client took me to lunch during the holidays, he uttered those magic words: “Your fee is too low”. He went on to say: “That one strategy – dedicating lawyers to a set number of clients and compensating them for deepening the relationship – has transformed my law firm”. As he finished uttering those words he slid an envelope across the table. In it was a sizable “bonus” for me.
Keep in mind that I did not perform any magic in my work with this client. All I did was get him to look at the situation from a different perspective.
Within 12 months, this lawyer went from running a one attorney practice that produced slightly over $500,000 in revenue to running a 4 lawyer law firm that produced $1.3 million.
Take a few minutes this week and look at your law firm from a different perspective. What could you be doing differently to make the practice of law easier for you and more valuable for your clients?
Law Firm Marketing and The Prestige Pricing Strategy™
The strategy I am going to outline for you in this article is not for wimps. If you are not the kind of person who can stare adversity in the face and laugh, then you should stop reading immediately.
Today I am going to share something with you that less than two percent of all lawyers have the guts to implement. I call it The Prestige Pricing Strategy™. This is a strategy that can help you grow your revenue without increasing your workload.
There are two steps to implementing The Prestige Pricing Strategy™.
Step One: Build a Solid Value Proposition
Your clients cannot think of working with you as hiring a lawyer. They must view working with you as a good investment. This means: If you are a transactional lawyer, you make the transaction more valuable. If you are a criminal lawyer, you give the client their best opportunity to fulfill their earning potential by remaining free. If you are a divorce lawyer you give the client the best opportunity to keep his dignity and the assets he really wants.
In The Prestige Pricing Strategy™ you never, ever, quote your fee before you make certain the client understands the value they are receiving. Contrary to the belief of most lawyers, it is YOUR responsibility to make sure the client understands the value. Do not expect them to walk through the door, give you a hug and say “Boy am I glad I found you.” You have to HELP THEM feel that way by presenting the value your legal service will bring to their life.
Step Two: Charge Premium Prices
This is the easy part. If you have done a great job explaining the value of the service you provide, you can charge a significantly higher fee than anyone else in the market. You read that correctly. If you show the client your value, you owe it to yourself to be the highest priced lawyer in town.
Look at it this way: You can be Walmart or you can be Bergdorf Goodman. You can be Motel 6 or you can be The Ritz Carlton. You can be Jet Blue or you can be NetJets. Not everyone can afford the latter choice in these examples but, not everyone is their ideal client either.
Benefits of The Prestige Pricing Strategy™
Attracts the Best Clients
If you are seeing a great deal of crappy clients come through your doors, chances are good you are not charging enough money. Many lawyers believe that clients who pay high prices are more demanding. Nothing could be farther from the truth. The worst clients on the planet are the cheapskates who squeeze you for every nickel and dime. Let those folks work with another lawyer.
This is a mistake I made early on in my career. I never turned away anyone. I thought any business was good business. Boy was I wrong. This is the main reason I am making a HUGE change to my business in 2011. I will only be accepting 12 new one-on-one coaching clients. This forces me to be selective and quote a fair value-based fee with NO NEGOTIATION. This self imposed limit has already changed my own perception of my value. There are some clients who will not be able to work with me. I cannot be everything to everyone.
Allows You to Focus Your Business Development Time
This strategy is not about working less. This is about spending more time on marketing. Think about it: If you raise your fees and you work with fewer clients you will have more time available to concentrate on attracting the RIGHT TYPE of client. This time invested in marketing will help you keep the pipeline of prospective clients full at all times. It may even allow you to hire an associate to take on the overflow work.
In my firm I set up a waiting list for my Strategic Advisory Groups. Earlier this year an Immigration Attorney dropped out of one of my Miami groups. I replaced him with one phone call to someone from the waiting list. That waiting list is stocked with people who come from my marketing.
The Fee Commands Respect
Do you ever have trouble getting clients to do what you want them to do? Charging a fee that grabs the client’s attention will increase their compliance with your requests. In fact, a study conducted by Stanford University shows a strong correlation between price paid and happiness with the experience. The higher the price, the better the experience for the client. Why? Because compliance increases and compliance leads to better results.
My personal experience with this phenomenon has proven it to be accurate. In the past I have made barter arrangements with attorneys, exchanging my services for theirs. This has almost always resulted in the attorney devaluing my service and taking it for granted.
Drives a Wedge Between You and Your Competition
You want to be perceived as a better lawyer than your competitors. Yet you charge the same price as they charge (or less). What does that say about you? Are you worse or just foolish?
There are a few other people in the United States who do what I do. None of them is Ivy League Educated with two master’s degrees and 20 years of practical experience in business strategy. I have earned the right to charge high fees and I’m sure you have too.
Help your clients understand why you provide a better value and then charge accordingly.
Pride in Spending Effect
People want to work with the best. When they decide to hire the best lawyer, they want everyone to know about it. If you want more referrals, charging a high fee will help you achieve that goal.
Two Caveats:
One: You must provide an outstanding value. If you do not provide great service, a terrific experience and make an emotional connection with your clients. If you do not, you have not earned the right to charge high fees. Fix your service, your experience and your relationships first. Then raise your fees.
Two: This is very difficult to do with hourly billing. Hourly billing is the longest running scam in the world (perpetrated by many professions but is especially nefarious when used by a lawyer). Since hourly billing creates an inherent conflict with the client, the Prestige Pricing Strategy will not work. If you are a lawyer who is not creative enough to come up with a billing model that works in the client’s interest, you will never be able to command a high fee premium and my clients will routinely kick your ass when it comes to revenue.
So there you have it. The Prestige Pricing Strategy™ has helped more of my clients make more money and live better than anything they learned in law school.
In Marketing for Lawyers Free is Bad
Most attorneys think offering a free consultation is mandatory. Free consultations are no bargain. Not for the lawyer and not for the client. Here’s why:
A Free Consultation Immediately Positions You Poorly
People believe they get what they pay for. Affluent people and business owners keep this ideal present in their minds at all times. Most people have this permanently ingrained in their psyche. Charging nothing means you are worth nothing.
You Welcome Shoppers
There are a handful of people out there who would shop for a bargain in parachute repair. If you want to meet with all of these people, do not charge for a consultation. Free consultations welcome shoppers to your law firm. You can be certain that if you do not charge people for an initial consultation, people will meet with you just to get a number out of you.
You Devalue Your Time
What is your time worth? If you charge nothing it is worth nothing. Not to you and not to your client. It is that simple.
The Quality of Your Clients/Matters Decreases
If you want crappy matters, a free consultation is definitely the way to go. Money tends to be an indication of how seriously someone is taking an issue. If you are willing to spend $250 on something are you more likely to pay attention to the outcome?
You Take on Liability with No Upside
In a free consultation you will often dispense advice. When you do, you expose yourself to liability. If the person sitting across from you implements your advice and things go badly, they will find you. You do this with no compensation in return.
One of the arguments I hear all the time is: “It is customary in my practice area to offer free consultations. Everyone does it.” Following a majority does not always mean you are acting in your own best interest. In fact, it probably means you are doing what the average industry professional will do. Do you want to be average?
This decision should be easy. When someone comes to your office to discuss a legal matter, they should pay you something. That is one of the reasons you do what you do. This is a business as well as a profession. Treat it like a business.
Attorney Marketing: Three Ways to Get a Yes
The client walks into you office, sits down and asks you questions for an hour. At the end of that conversation he says he will “let you know” if he is interested in hiring you.
Has that ever happened to you?
It is not unusual for this to happen to attorneys. In fact, it happens all the time. You can eliminate this terrible experience by making simple minor changes. They may seem strange and unnatural at first but believe me, after you implement them, you will be amazed at the results.
Charge a Consultation Fee for the Initial Meeting
This is an underutilized strategy. It works like this: The client pays a consultation fee via credit card when they make the appointment. This means they will keep the appointment and they will value your time. If they engage you to work on their matter, you apply the consultation fee to your engagement fee.
This works because people value (and respect) things they pay for. A client who pays a consultation fee to meet with you is going place a premium on your time. He is going to hold you in higher regard than someone who does not charge a fee.
You will feel better about scheduling appointments with people who are “shopping around”. Even if they do not hire you, you didn’t waste your time meeting with them. You got paid for it.
This translates into you being more relaxed and confident. That means you will be more likely to be hired.
Interview the Client Before Accepting Him
Every client is not right for your law firm. You must interview the client before you decide to take him on. That should be your mindset.
If you conduct interviews to find the right clients for your practice, you will not only wind up with more clients, you will wind up with better clients. You must control the business development process. If you interview the client, you are in control.
Let the Client Close Himself
Lawyers are always rushing to close the deal with a prospective client. You are far better off if you wait for the client to ask you a question like: “What is the next step?”
You get to that point by simply asking them: “How do you think I can help you?” Or “What were you hoping I could do for you?”
These two questions acknowledge the clients need for assistance.
These three changes do some amazing things for you.
First: They position you as an expert and not as a commodity. You immediately become more valuable.
Next: They position you as selective. You become more desirable.
Finally: Don’t beg or ask for the business. This immediately makes people throw themselves at you.
This three step process works like a charm. The question is: Do you have the guts to make them work for you?
Doctors Don’t Bill By The Hour: Why Do Lawyers?
How many hours did It take to do your heart bypass?
Imagine if doctors charged by the hour.
Would you want the fast version or the slow version of bypass surgery? Would the doctor drag your surgery out to make more money? Would the doctor have an incentive to keep you sick so he would see you more often and spend more time with you each time he saw you? If the doctor wanted to see you weekly for the six weeks following the surgery would you be suspicious of his motivation? What if the doctor wanted two of his colleagues to scrub in and help him with the operation, would you be suspicious of his motivations?
Give those questions some serious thought.
Now think about how billing works in your law firm.
When a client comes to you with a problem, a serious problem, what do your billing practices say about the way you address that problem?
Now I have just one more question for you:
If you felt the least bit uncomfortable with the doctor analogy above, how do you think your clients feel when they come to you with a serious issue and you start punching a time clock?
Marketing for Lawyers: Diversity is Critical
Diversity is important in all aspects of life. For the purposes of this discussion, we are not going to get into racial diversity (although that is extremely important). In this article we will discuss diversity as it relates specifically to marketing for lawyers. There are three aspects of marketing diversity that are critical to the success of a law firm. These are: Diversity in case selection, client industry and pricing. Let’s explore each of these three areas.
Matter/Case Diversity
One of the first things we teach our clients is that they must focus on a specific market niche in order to command fee premiums and differentiate their law firm from their competitors. You can imagine the strange looks I get when I raise the subject of case or matter diversity with those same attorneys. Although niche marketing is a critical component of marketing for lawyers, it is wise to have two or three areas of expertise within your niche.
For example: A Transactional Immigration attorney can specialize in obtaining visas for people with extraordinary ability and in obtaining visas for temporary foreign workers. Artists, athletes and scientists will be attracted to this attorney because of the first specialty, while international hotel chains will be interested in working with him because of the second.
The diversity of this approach helps hedge against a limit (natural or imposed) being placed upon either of these programs. There are dozens of examples of this in just about every practice area.
Diversity of Client Industry
If you work with clients in only one industry you will eventually get burned. This is particularly true of lawyers in business-to-business transactional practices. I have come across several lawyers who worked only with auto companies for their entire career. Those lawyers are struggling now.
In some of the consumer law practices (criminal defense, family law, probate law) you may think there is an immunity from falling victim to “more of the same”. This is true to a certain extent – unless you live in a company town and the company moves or closes up. Bethlehem, Pennsylvania, Detroit, Michigan and Hartford, Connecticut are all serious examples of this situation.
Pricing Diversity
No discussion of marketing for lawyers can ever be complete without bring up the subject of fees. Fee diversity (pricing diversity) is another critical element of law firm success. A good rule of thumb is: No one client should make up more than 10% of your revenue. The reason for this is to avoid waking up one day to find out that a huge portion of your law practice just fired you. Big revenue clients, clients that allow you to pile up the billable hours, should always be part of a marketing plan for lawyers. But careful attention must be paid to the mix of clients. A good law firm always has its ranks stocked with clients at all pricing levels.
Diversity in this context is critical to the success of any law firm. If you are developing a marketing plan make sure you take into account the mix of clients by industry, case type and price. If you don’t you may wake up one day to find out you need to start from scratch.
Degree of Difficulty is Directly Related to Pricing
Some clients are tough to represent.
It’s not because their case is tough or because they are in the wrong. It’s not because they are morally bankrupt or they just don’t fit in with our expectations for what an ideal client should look like. These situations pose challenges but they are challenges that most attorneys with a little experience have learned to handle.
The clients that are particularly difficult – the ones attorneys hate to represent – are the folks who call fifteen times a day to double check on work you were contracted to handle.
Let me give you an example:
One of my clients (call him Mitch) recently handled a real estate closing for one of these difficult individuals. The closing was straightforward. Mitch gave his client an hourly rate for processing the documents related to the closing and title work. He also provided an estimate for the amount of time he thought it would take to complete the deal. The client shopped around and eventually chose Mitch (after beating him up over price to the tune of a 15% reduction in his hourly rate). While he wasn’t thrilled with this deal, Mitch took it.
This client called Mitch literally everyday during the three months it took for the transaction to close. She also stopped by his office on several occasions. Most of the meetings with the client consisted of her questioning Mitch’s expertise at every opportunity. And these weren’t deal-related smart questions. They were questions related to Mitch’s work style, knowledge and choice of staff.
The aggravation this client caused Mitch and his team was certainly not worth the fee he charged. In fact he wound up reducing his final bill because the client was unhappy with .2 and .3 showing up on various places on the invoice.
How could this be avoided?
Over the years, we’ve found that “price buyers” – people who are looking for discounts on the services of a capable attorney – are always the most difficult clients to work with. They tend to focus their time and attention on the minutia of the legal work and not on the deal points that are critical. This is because they have conditioned themselves to beat people up to get better deals.
The best way to avoid having this happen to you is to avoid these clients altogether. When it comes to clients YOU get what THEY pay for. That means that if they pay for your expertise- and they pay handsomely – they will respect your opinion and take it to heart. They will focus on the outcome and not the means to an end.
You can reinforce this by setting a fair but firm price upfront. Base the price on the value for the client. Help them understand that the value they receive will exceed what they pay for your services by a wide margin. If they don’t agree, or they just don’t get it, don’t work with them.
Price buyers are not nice buyers. Stay away from bargain shoppers. People should be wary of discounts in legal work and parachute sales. Too much is riding on the outcome to go with a cheap solution.
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