Not a dirty word
Understanding your services and your place in the market as a firm is key to proper pricing, says Ursula Rice
Price is the decisive factor in many other purchases your clients make but lawyers frequently focus on other aspects of business development. Finding clients and service levels tend to attract attention and pricing can be the poor relation in business. But your pricing strategy deserves careful consideration as getting it right means that your work will be more profitable for the amount of effort you put in.
How you price your services and at what level will depend on the following:
? Your competition '“ what do they charge?
? Your brand '“ try and gain an insight into where you are pegged in people's minds when they see your premises, meet your staff, open a letter from you or look at your website. These feelings are part of your brand and will play a part in the expectations of your customers and set boundaries to your pricing strategy.
? Your breakeven point '“ most firms know what it costs to run their firm, because they have board level management accounts. But understanding the cost per fee-earner. even at a rudimentary level, is a must. Cost per fee earner divided by the amount of work gives you the amount you must charge per 'job', or unit cost, before you start to make a profit.
?Now you know your breakeven point and have an idea of where you sit in the market, it is time to decide what pricing strategy you will use to become profitable.
Complaint cause
If you are selling time of person with a certain level of expertise then it is measured in units under the hourly rate. Known to be incomprehensible to many clients, it is the cause of many complaints to the ombudsman.
The difficulty with time priced work is that it leads to expensive cases. In many high street firms, few clients can really afford to pay the real value of these bills and they are often discounted by the fee earner. Sometimes the bill has a face value discount, more likely, fee earners do not put all their time worked on the matter into the bill or even the time recording system.
Selling time works well where the matter is open ended (eg a Children Act application) or the client wants a full service offered in a traditional manner and crucially, has a genuine understanding of the likely costs.
Reassuring
Are you selling a job well done? ?If you are selling the 'job' then you are willing to bind yourself ?to a price no matter what the work involved is. It can be very reassuring to clients but less so to lawyers. There is also the distinction between the fixed fee (price is fixed before you see the job) or a negotiated fixed price (after meeting the clinet and understanding the extent of the job). Ensure anything advertised on your website is not misleading to clients and if you give the impression of a fixed fee without caveats, then you can be held to it.
Interestingly, where the fixed fee does not depend on the completion of the work, then the money received can go straight to the office account under rule 17.5 of the Solicitors Accounts Rules. This can be very positive for cashflow.
Getting it right
Unbundled services are where the firm separates the work being done on a piecemeal basis. Our firm operates on primarily hourly rate unbundled services.It is a relatively new way of buying legal services and the law society has issued a practise note on it. There are key aspects to making a success of unbundled services.
? Unless it is offered to the ?client, there will be no take up of it. It needs to be discussed as a method of paying for your services along with all the other costs discussed, at the first interview. A leaflet to give to the client helps and we set ?it out very prominently on ?our website.
? We find unbundling provides certainty on costs best when the advice is given face to face, rather than through the telephone or email. This has to be constantly reinforced by the firm to the client.
? Be confident your client can handle the administration side of litigation. Encourage them to be organised so they file letters in a folder, not under the dog basket.
? The lawyer with conduct of an unbundled case needs a relatively high level of experience. Face to face meetings where the advice is delivered will mean that questions are asked and generally the client will expect an answer on the spot. It is no place to put a trainee.
? Record the advice you give and ensure the client records it too.
? Use checklists to ensure that key bits of advice are given to the client for example, about the effect of decree absolute on financial claims or registration of home rights
? Having unbundled services does not let you off the hook with providing estimates to ?the client. Do not forget to record the estimate and other client care matters in a client care letter.
? Draft a template letter to formally explain to the other party solicitors and the court, what the extent of your retainer is.
? Do not hesitate to challenge ?a client who is misusing the service, by constantly contacting you 'just for a quick chat' and receiving advice ?you cannot charge for. We ?use a pro forma letter that ?sets out amended terms ?and conditions.
? Connect up with direct access counsel. We are now creating a template brief to counsel so that the client can properly prepare papers for a direct access barrister.
?Pricing should not be the ?poor relation of business development, or a dirty word no one wants to discuss. It is a key player in profitability and with the right amount of thought, can be part of your business strategy for strength and growth. SJ