Four Minute Fixation 3: Rule Number 1 - Get Paid First
Money makes your law firm go ‘round. Without it, you are out of business. The most important conversation you have with your client is the one where you explain how you get paid.
But before we get into the foolish things lawyers do instead of getting money in advance, let me say: I love contingency fees and success fees (where permissible and advantageous). They align your interests with the interests of your client. You can make more money by leveraging your expertise, skill and knowledge. That’s not what this article and video are about.
So contingency lawyers can move on to the next video. There’s nothing for you here.
There is one topic I repeatedly have trouble convincing lawyers to adopt. That topic:
Get Paid in Advance
Here is the video:
Some lawyers are actually resistant to this pragmatic business strategy.
Can you believe it?
If you twist logic, you can make a case for doing the work and chasing clients down later. Here are the three most common reasons lawyers give when they say they cannot get paid before rendering legal services:
Getting Paid in Advance is a Competitive Disadvantage
The twisted logic goes like this: Everyone else bills in arrears. I have to do it too or nobody will work with me.
That’s just crazy.
If you provide better value, have a distinct competitive advantage, and offer your clients and prospective clients a better experience, your billing practices are irrelevant. People will follow any reasonable procedures you have in place.
Create a law firm that is better than the rest and do business on your own terms.
I Will Not Know How Much to Bill
If you bill by the hour you set yourself up for this objection. You are not certain how many hours you will work on any particular matter. That means you can’t bill in advance, right?
You simply estimate how many hours you will bill (after an initial interview with the client) and multiply that number by your hourly rate. Then you add 10-20% to that number as a “buffer” and ask the client for a deposit in that amount.
When the matter is concluded, you refund any unused funds to the client. Get that part. You hand him a check at the end (not the other way around).
My Clients Do Not Have the Money
I love this one.
Some attorneys actually say: “I can’t bill in advance because my clients don’t have enough money to pay me. They need a payment plan.”
This is not Wal-Mart. You don’t buy legal services on layaway. If someone does not have enough money, they are a horrible client. Move on.
If you consistently come across people who do not have money to work with you, you should immediately implement an aggressive marketing plan to attract better clients.
I’m sure you can come up with a few other reasons why you cannot get paid in advance. No matter what you conjure up, it is simply bad business to do the work and wait for your money. This philosophy puts your business in constant jeopardy.
It’s foolish. Don’t do it.
Here are the most recent videos in the Four Minute Fixation Series:
Do you go to lots of networking events and have trouble converting your new contacts into referral sources? Here is a video to help change that.
I’m sure this has happened to you. You give a great speech and you get no business. This video will fix that situation for you. Watch it now and you’ll be amazed at how productive your next speaking engagement will be.
Direct Domain for Videos: http://FourMinuteFixation.com
I’m pleased to announce that we have set up a domain that will take you directly to section of the website where all the videos are cataloged. Simply spell out FourMinuteFixation.com and you will be transported through cyberspace to a page with a cadre of close-ups of my ever-expanding face.
Building Valuable Client Relationships: Part 3: Do You Have Guts?
It’s 4AM and a corporate executive cannot sleep. The issues facing his business are threatening his company and his livelihood. His career is on the line.
He reaches for the telephone and places a call to the one person he knows will help him evaluate the situation in a rational and sober manner.
Are you on the receiving end of that telephone call?
If the answer is “no” or “not often” you will probably never make the kind of income you deserve.
In that moment, the corporate executive (or affluent client, professional, public figure) calls someone he trusts. Someone he knows he can count on. Someone who, regardless of field of professional accomplishment or avocation, will give him sound guidance even when that means delivering unwelcome news.
Most lawyers never become trusted advisors. They are simply content being experts in a specific area of the law. An expert can command a significant fee premium. An expert takes some risk but ultimately, can only be evaluated or compared to another expert. An expert also gets to sleep through the night without ever taking the desperate telephone call from a powerful client.
But the expert is only used sparingly. He rarely gets to give guidance and counsel on matters outside of his purview. The expert never has a permanent “seat at the table” let alone at the right hand of the person in charge.
Making the transition from expert to trusted advisor is not complicated but it is risky. That’s why few lawyers do it.
The risk lies in emotionally engaging people in a place where emotions are seldom spoken of, and never on display. The boardroom.
Experts can get into the boardroom but they seldom have what it takes to stay there.
How Do You Make the Transition?
Let’s say you are brought in to advise a board of directors on a merger. This is a fairly straightforward process. Typically you deliver your commentary and findings to the chief counsel of the company. You are thanked. Paid well. Dismissed.
This happens because you did not take the next step.
If you went the extra mile and evaluated the merger and it’s implications on the business landscape 5, 10 and 15 years down the road, and you provided strategies for handling the legal pitfalls you know would arise at each interval, you would have a seat at the table.
Again, most lawyers won’t do this. It involves risk. In fact, chief counsel of the company won’t do this because of the risk it involves.
That’s why YOU will need to give the presentation to the board of directors.
Once You Are in the Room
When the time comes to report your findings you stress their implications on the leadership of the company. You highlight the pain each of those executives will feel if certain action is not taken. You support your assertions with facts and case studies (stories) of huge colossal errors made by not following the guidance you have set forth.
You challenge the most powerful people in this company to take action or face disaster.
Then you sit down and wait.
Either you will be a hero or you will be fired.
Now it is slightly more complicated than that. There is significant relationship development work that precedes this dramatic moment.
But the question I have for you is:
Do you have the guts to lay it all on the line, every day, just like this?
Because if you don’t; If you just want to analyze and report; You can be a successful lawyer.
But you can never be a trusted advisor.
This article is the third in a series on developing business as a Trusted Advisor. Links to the other parts are included below for your review.
This article highlights the relationships that form during your representation of a client. It is a roadmap to higher fees and a better life.
The qualities of a Trusted Advisor are outlined in sharp detail. You can evaluate your emotional make-up against them and determine if you have what it takes.
How Valuable Are You?
Your fee says a great deal about you.
Like it or not, people use money as a criteria for passing judgment on everything from homes, to cars to people.
When you develop a fee for providing value to your clients, you (and they) typically view that fee as a reflection upon you.
And you leave them no choice.
When you charge for work completed, or time you spend, it’s hard for people to grasp the value you provide.
Think about that for a moment.
How much is reviewing a contract worth?
How much is a conversation with opposing counsel worth?
In that context, most people would view the value you place on your time as unacceptable (even arrogant).
But if you set the value of your services in the world of the client, if you help him see how you can provide value to him, your fee is almost irrelevant.
So instead of an hour reviewing a contract, you provide the client with a title to a home free of liens and encumbrances.
You replace the conversation with opposing counsel with a purchase agreement for a business that will deliver $2 million per year in new revenue.
When you adjust the lens through which you view your work, you immediately change the dynamic of the relationship. You are no longer viewed as someone punching a time clock. You are viewed as a valuable confidant.
Price your services by the hour and you set yourself up for commoditization.
Develop a fee based upon the value you provide and you are a trusted advisor who has aligned his interests with the interests of the client.
Incidentally, I have several business structures that help attorneys make a great living and live a great life ®. How much is making more money and getting home for dinner, on time, every night, worth to you?
Here are some other resources you need to review:
If you bill by the hour, you are not going to like this article very much. Few good relationships are built on a foundation of hourly bills. You can move to an alternative billing structure. Here are the reasons why you should.
If you want to move away from the traditional law firm billing model, this is an article that can get you off to a good start. Here we outline a quick and easy way to bill your clients and increase the trust they have in you.
In this article I take another shot at convincing you to look at the value you provide. The analogy I use is a bit “far out” but it makes the point well.
The Truth About Hourly Billing: A Ridiculous Tradition that Must End
If you are wondering how lawyers get clients you would probably never think about billing as a competitive advantage. It’s time to think again.
The majority of my time is spent working with lawyers. Every one of the lawyers who come to me wants to provide great service to their clients at a fair fee. They want to make a great living and live a great life®.
Yet so many of these well-intentioned professionals embrace a fee model that is antithetical to building a great relationship with their clients and antithetical to allowing professional practitioners to make a great living and live a great life®.
I’m talking about hourly billing.
I know all the reasons you feel you need to bill by the hour. At the top of the list is the fact that everyone else is doing it. Also on the list is the tacit acceptance of this methodology by clients. Finally, on the list is your ability to invest your time in thoroughly educating yourself on the facts and background of the matter and be compensated for doing so.
None of those reasons is good enough to continue this practice.
I teach my clients (lawyers and other professionals) a value based billing methodology that is today, a competitive advantage.
This methodology begins with a demonstration of the value you provide to the client. This allows you to frame the discussion around improving the client’s situation and away from the work it takes to achieve that outcome.
Think about that for a moment.
Would you pay the manufacturer of an airplane for the hours it took to assemble it? This would mean the first flight on a 747 would cost $14 million per passenger. And then after the first group of people paid the plane off in full, the next group of people would be asked to pay for the hours involved in manufacturing the airplane again. And then the next group. And so on.
This is a ridiculous scenario.
When you board a 747, you are paying to get from point A to point B. That’s why you are paying the fee charged by the airline.
As a professional services provider, people are coming to you to improve their situation. Hopefully, you have helped other people improve similar situations. Your experience, your skill, your talent, have value beyond the number of hours you invest in a client’s matter.
Why not bill a fair fee (fair to you and to the client) based upon a number of factors the client considers critically important?
If you want to learn more about these factors, listen to the podcast I recorded this past week. You can find it by following the link below.
You don’t have to agree with me on this issue. Not everybody will.
The truth is, enough people agree with me on this issue that we have lawyers in just about every practice area using value based billing right now.
This is one of the reasons these lawyers get clients.
So if you’re not a client, I hope you don’t agree with us. Because right now, in your neighborhood, in your practice area, there IS someone who gets this. There is someone who has a value based methodology for setting fees.
That person is competing with you right now. And he is probably eating your lunch.
Understanding Perception of Value
A big part of lawyer marketing is demonstrating the value you provide to your client.
If you want to differentiate your law firm from every other firm in your area, you should consider value based billing as an option.
The first thing to keep in mind is that value resides in the mind of the client. It is his perception that matters most in this process. You believe your law firm offers exceptional service at a fair fee. But we must always remember our role in crafting a fee agreement is to offer a valuable service to the client at a fee that is valuable to us.
Previously we discussed the three step process of value based billing. Now let’s take a step back and look at the factors that influence the perception of value in the mind of the client.
Here are the eight factors that contribute to a value based fee and the initial questions to ask to begin a discussion about each of them:
The Problem and The Symptoms:
What is the client facing? How bad is it? Does he understand how bad it REALLY is?
When a client initially comes to you he usually brings you the symptoms. It is up to you to help him understand the actual problem. It is also incumbent upon you to relieve the symptoms and the problem, or at least improve his condition.
If the client does NOTHING what is likely to happen?
When it comes to lawyer marketing, you have to motivate the client to take action. Clients rarely do something unless they have to. Paint a picture for the client and help him see the worst case scenario and the likelihood of that unfolding. Use case studies and actual scenarios to make your point.
The more risk the client faces, the more value you provide in mitigating the risk.
Notice I mention “mitigation” and not “solution.” You can never promise a specific outcome. There are too many variables. You can only promise to do your best to improve the situation.
Probability of a favorable outcome:
How likely is it that you can significantly improve the client’s condition?
If you have seen similar (or even identical) scenarios before, you should have confidence in your ability to have some sort of positive impact on the client’s situation. This confidence should be reflected in your pricing.
Again, do not promise any type of outcome. Simply present case studies similar to the client’s scenario and discuss what you would do to make things better.
Speed of resolution:
How quickly can you make the client feel better?
Clients pay for quick certainty. Even if the outcome is less than ideal, the client will accept it and begin to move on with life if it happens quickly.
If you can provide speedy certainty, you can command a fee premium.
Is this situation keeping the client awake at night?
All decisions are made with emotion first and supported by logic. Help the client FEEL better and you can name your price.
How much is this situation costing the client?
Money makes the world go ‘round. If you can stop the financial bleeding you can charge more.
Who else does what you do?
If you have no competition, you can name your price. If your competitors advertise every 2 minutes on TV and radio, you will need to clearly differentiate yourself and your law firm in order to charge more.
Your differentiating factor:
What makes you different compared to everyone else who does what you do?
You have to make the case that there is nobody like you. You’re one-of-a-kind. If you cannot be compared to everyone else, you can set your fees as you see fit. This is probably the most basic element of lawyer marketing. Differentiate yourself from everyone else who does what you do.
Each of these factors plays a role in the client’s perception of the value you provide. Your job is to help the client view his predicament (and you as the remedy) through the lens of all of these factors.
Given the totality of his dilemma, and your value as demonstrated through each of these elements, you should be the obvious choice – regardless of price.