Determining value: 7 questions to ask your clients
Long decried as a holdover from a bygone era, the billable hour has become a wedge between law firms and clients looking for a clear declaration of value from legal services pricing. Driven by client desire for change and increasing competition in the legal sector, more firms are moving away from the arbitrary billable hour and towards different pricing models that better reflect the value of services being offered.
So how is a solicitor able to define something as arbitrary as ‘value’ for each individual client? It should start with a conversation and seven simple questions:
- Do you have a specific deadline for the work?
- Do you require cost certainty?
- Do you require a service guarantee?
- What results are you expecting?
- Do you require unlimited access to our firm’s solicitors and staff?
- Do you require special payment terms?
- What are your strategic objectives? How can we help you attain these?
The beauty of this conversation is that each client will value each of these benefits differently depending on their needs - allowing you to determine how to tailor your services pricing. Some clients are interested only in price, whereas others are interested in the value your firm can provide. Many clients, once they think about it, are more interested in hiring the law firm that provides them with the highest net value rather than the lowest fees. These clients offer the highest realisation, profitability, and ultimately retain the highest satisfaction for services rendered.
Many solicitors assume that alternative billing arrangements are only for basic legal matters such as will writing, business entity organisation, or an uncontested court case. But these types of arrangements can actually benefit solicitors who specialise in many different areas of law, and the payoff can be satisfied clients as well as healthy law firm realisation rates. Before law firms consider pricing options and alternative billing, they ensure that their prices reflect the value they are providing.
Today’s law firms face many challenges, including shrinking profit margins and tight budgets. Hourly fees will likely never disappear and there’s a learning curve when it comes to putting a price on value and adapting to alternative billing structures, but creative fee arrangements will continue to grow and become a larger part of the legal landscape as solicitors and clients become more comfortable with them. Strive to put your clients’ success first, and when your clients reach their strategic or profit goals, law firm profitability is sure to follow.