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Managing

Make What You’re Worth: Utility of the Fee Schedule

By Jared Correia

Lawyers are very secretive about their fees because, you know … the NSA. Lawyers don’t post their fee structures on their websites, either, because, well, why would clients want to know that?

Lawyers also don’t discuss fees with other lawyers because, you know, antitrust laws and collusion and such — that sort of stuff the government has literally no tolerance for. If I had a penny for every time a lawyer was run up on antitrust charges for sharing fee information with another lawyer, I’d have a wheat pennybecause one was already in my pocket.

I’m painting broad strokes here, of course. Some lawyers do post their fees online, or offer fee calculators, and openly discuss their fees with other lawyers. Still, that’s rare. But the biggest secret of all may be that there is no secret. Many lawyers simply have little to no idea what their fee structures will look like from one day to the next.

Assuming, then, that you’d like to be one of those lawyers who does understand the groundings of her fee structure, you’ll want to avoid these market research strategies, as derived from actual conversations I have had, with actual attorneys.

Most lawyers establish their fees by pulling them from a broad-brimmed hat.

“I’ll charge $150 an hour.” Why? “It seems like the right thing to do. I’m new, you know.” Okay.

“I guess I’ll charge $3,000 for that, on a flat fee.” Why? “Well, then it’s two installments of $1,500.” No, the whole thing. “Well, that’s what my cousin Tiny’s lawyer charged her in 1987 so I figured I’d do the same.” Oh, sure.

Even after gathering enough historical data to make more-educated guesses, without having to rely solely on market research, lawyers often fail to revise their initial fees — ever — even if those fees are totally out of whack with the current value of the firm’s services.

In practice, it gets even worse.

Freebie-Givers, Discount-Extenders and Time-Suckers

Lawyers, afraid of losing any clients, seem to dispense free consultations like Halloween candy. On top of that, they often extend their advertised “one-hour free consultations” to two and three hours, until the potential client has sufficiently learned how little the lawyer values his own services. At that point, the potential client can feel free (see what I did there?) to walk away, find another lawyer whose time they will come to respect, or continue to suck the lifeblood out of the consultation-extender’s practice.

Should this prospect turn into an actual client, the lawyer will usually face the promise of much more wasted time in the future. You didn’t think the three-hour free consultation was an isolated incident, did you? It’s actually probably better that the potential client walk away at that point.

The overlong consultation is just one species of discount (conscious or unconscious) that attorneys lacking a pricing plan apply. Again, when they’re motivated by the fear of losing clients, attorneys do some funny things. For some lawyers, it may be the client hinting at an iota of pushback on a quoted fee that gets the discount train moving out of the station; for others, it’s the client’s sob story (veracious or not). 

Regardless, pretty soon you are dealing with a runaway train. Word gets around that you discount your services — and that you’re kind of a pushover. Maybe you’re getting clients now (though still not enough), but you’re discounting so much that you’re working for 50 cents or 25 cents on the dollar. Before long, you’re essentially making up your rates on the fly, and you’re not examining the time you may or may not be tracking, so you have no idea whether you’re recapturing the appropriate value of your services (though, you’re pretty sure you’re not).

Our Regularly Scheduled Program: The Fee Schedule

So, how do you protect against haphazard fee setting and volume discounting? First, you’ve got to be thoughtful about setting your fees; and then, you’ve got to be consistent about revising them as time passes based on the changes that will affect your business.

But one of the best buffers you can have is to memorialize your fees by creating — and utilizing — a fee schedule. It can be  just a sheet of paper, or a file on your computer that lists all your fees for your various services. You’ve seen NFL quarterbacks wearing wristbands. You’ve seen salesmen with price sheets. Well, this is the same sort of deal. It’s a way to keep yourself in line, and it prevents you from going off-sheet and quoting rates borne of ignorance about the nature of your practice.

If you want to take this to another level, you can include a discounting structure within your fee schedule. That way, if you do decide to give discounts, you can do it in a measured and consistent way. And you can reference the rates (not the discounts) privately or publicly. If you wish to appeal to a higher power when the going gets tough, you can just tell your clients, “Hey, it’s on the price sheet ….”

A fee schedule works well for solo attorneys, who find it difficult to exert a structure when they have ultimate authority over everything related to their business. But it also works well in small firms, where it cuts off rogue discounters at the knees. Really, a fee schedule makes sense anywhere lawyers should be charging at the same rates for the same things, at least most of the time. It’s a go as an internal structure; and it also supplies the backing of a united front for attorneys who become sheepish about the money conversation at client engagement meetings. Once you have a price sheet, that you stick to, you could reference your prices (though, not the discounts) publicly; of course, that’s a personal business marketing decision.

So, if you want to start getting closer to making what you feel you’re worth, write this down: Get yourself set up on a fee schedule, and don’t deviate from it — except for when, following a general review of your fee structure, your review elicits necessary changes. Architectural conceits only last when they’re functional and flexible and are built well from the inside out; the same is true of law firm pricing.

If you’d like to hear more about fee setting, I’ve recently discussed the topic with Susan Cartier Liebel of Solo Practice University.

Jared Correia is CEO of Red Cave Law Firm Consulting, which offers subscription-based law firm business management consulting and technology services for solo and small law firms. Red Cave also works with legal institutions and legal-facing corporations to develop programming and content. A former practicing attorney, Jared is a popular presenter and regular contributor to legal publications (including his “Managing” column for Attorney at Work). He is author of the ABA book “Twitter in One Hour for Lawyers,” hosts the Legal Toolkit podcast, and teaches for Concord Law School and Suffolk University Law School. He loves James Taylor, but respects Ron Swanson.

Illustration ©iStockPhoto.com

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Jared Correia Jared Correia

Jared D. Correia is CEO of Red Cave Law Firm Consulting, which offers subscription-based law firm business management consulting services for law firms, bar associations and corporations. Red Cave also works with legal vendors to develop programming and content. Jared is also COO of Gideon Software, Inc., which offers intelligent messaging and predictive analytics software built exclusively for law firms. A former practicing attorney, Jared has been providing services to lawyers and law firms for over a decade. He is a regular presenter at events and regularly contributes to legal publications, including his Attorney at Work column, Managing, his advice column for Lawyerist and his column for Above the Law focused on legal technology startups. He is host of the Legal Toolkit podcast and teaches for Concord Law School, Suffolk University Law School, Solo Practice University and Becker College. He loves James Taylor, but respects Ron Swanson.

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