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The art of setting fees that suit prospective clients

There’s an art to presenting fees to clients.

It’s not just a matter of quoting an amount. It’s a matter of finding out what result the client wants to see and what value the client attaches to that result.

It calls for a lot of fishing tempered by a lot of tact, says Brian Kennel of Performance Management Consulting, a law firm practice management consulting group in New Orleans.

Mostly, a satisfied client is one who hasn’t been told what the cost is going to be but who has been given options along the way and has chosen what it will be.

Is it price or is it value

The artistry starts when the client asks “how much is this going to cost?”

Don’t just throw an hourly rate or a dollar figure on the table, Kennel says. In fact, don’t give any quote at all. Come back instead with a question to find out what value the client attaches to the service and also what’s more important – price or value. The question is “how important is this service to you (or to your organization)?”

Hiring an attorney “may be a necessary evil” for that prospect. The answer might be “I’ve been sued and I’ve got to defend it, and I need to take care of it with the least amount of cost.” Or the prospect may only want the firm to mitigate a loss instead of achieving some specific result.

In situations like that, the firm can talk all day about the value of its services and the client won’t care, he says. What’s important is whether the firm can give a competitive cost without hurting the outcome of the matter.

Focus on the money.

Offer a discount in exchange for payment up front. Or offer to do the work at a reduced rate in exchange for the prospect’s organizing the files a certain way or letting the firm send monthly instead of weekly reports.

On the other hand, the outcome of the matter “could be of value far beyond what the firm charges.” It could affect the client’s lifestyle or business survival. If so, the client is willing to pay what it takes, and the discussion needs to center not on the money but on how the firm can achieve and desired result.

When value supersedes cost, do a good job of illustrating it. “The list of people that person can hire starts to expand. And there’s plenty of good competition out there trying to get that work.”

Tell me about the sore points

Don’t quote a price just yet.

Instead, find out the sore spots in the client’s previous experience in legal matters and show how the firm will make sure they aren’t repeated.

Ask “what did you not like about your last firm?” And then bring the point home, walk the prospect “through the pain” of whatever that experience was.

If the answer is “my attorney did a poor job of getting reports back to me,” come back with “Tell me more about that. What happened when the reports were late?”

Listening to the hardships shows the attorney “appreciates and understands” the situation. It also opens up an opportunity to talk about the superior service the firm will provide and how that earlier disappointment will never happen again. The firm can show “the value it will bring to that client.”

Is there flexibility to be had?

Now is also the time to find out how flexible the prospect is on the fee arrangement, because with flexibility, the firm can quote a more competitive price.

There’s psychology to the conversation, he says. Phrase everything as a question instead of as a statement. Then it’s not the attorney saying “it’s going to be this way” but the client making a choice on how it will be.

Ask “do you have one rate for every firm, or do you have different rates for different firms?” If the latter is the case, price negotiation is in order.

Ask if the client will object to the associates and non-attorney staff doing some of the work: “If we have a five-year associate doing the work, is that going to be acceptable?

If the answer is “I only what you to do my work,” a good response is “I’m flattered by that, but for me to do the work, the rate will be higher.”

Explain that if it’s done by associates under close supervision, “you get three hours of their time and one hour of mine, and that’s less expensive for you. Is that something you would like to do?”

A blended rate is a good billing option to push, Kennel says, because it allows the firm to control costs and see more profit.

And now for the fee

Now it’s time for the money.

And once again, psychology is in order, Kennel says. Don’t just quote a rate or an amount and stop there. Follow it with an estimate of what the total cost will be.

And give a range for the total cost, from least costly most expensive, for example, “we usually are able to get this type of matter done for between $15,000 and $20,000.”

It’s essential to quote the high with the low, he says. That gives the client the best scenario and at the same time prevents sticker shock should the cost turn out to be on the high end.

Three more calls for psychology

Beyond the initial fee setting are three more types of fee discussions that often come up in the middle of a matter. And those too require lots of tact.

1 Pricing the unknown

One is the fee discussion when a client requests work that the firm wants to do but traditionally hasn’t provided and doesn’t know how to price.  In that situation, Knell’s advice is simply to ask the client what the fee expectations are: “Help me out here. What are your expectations on price? What do these cases typically cost you?”

2 Changing the fees midstream

A second fee discussion to be prepared for comes when a matter takes an unexpected turn that hikes the price. Or maybe firm misquoted the price or misunderstood what the client wanted.

The key there, he says, is to admit to it immediately so the client can decide what to do. Don’t let the issue drift along until the client doesn’t have options.

Be frank: “Mr. Client, the case has taken off in a direction we hadn’t planned for. The reasons are A and B. As a result, what we thought was going to take 10 hours is now going to take 20. We want to know how you’d like for us to handle that.”

Then lay out some options, perhaps that an associate can do part fo the work and thereby lower the cost. By giving options, the firm isn’t telling the client “we’re going to charge you more” but “what do you want us to do?”

The response may be no more than “Oh, that happens all the time. Go ahead and do the work.”

On the other hand, the client may not want to pay the extra amount, in which case the firm has to devise a strategy to stay within the budget.

But no matter how difficult the conversation it’s far preferable to going ahead with the more expensive work and then slipping the extra fee into the bill without telling the client. If the firm does that, “hold on because you are going to get beaten up.” No client wants to hear “we have $25,000 more in time than we thought and we’d like you to pay it.”

3 Breaking up is hard to do

The third difficult fee conversation hits when the work reaches a point that it’s no longer profitable and the firm wants to get out.

Professional responsibility aside, it’s dreadful PR to leave a client with the matter unfinished, Kennel says. The conversation calls for psychology, not “we can’t do this work anymore. Come get your files.”

Be kind and honest. Give the client time to find new representation and also help locate it.

A good approach is “Client, we are moving away from this kind of work and are going to stop doing these kinds of cases. But we don’t want to leave you in the lurch. What’s the best way for us to unbuckle?”

Or if it’s been an ongoing matter, fess up: “to be honest with you, we’re struggling to do this work profitably. Our cost structure just doesn’t allow us to do it anymore.”

Then give the names of the other firms the client can contact. And again, do it with tact: “I can tell you that Firm X does a good job with that.”


Related reading:

The ethics of refusing business and parting company with a client


How to raise fees without upsetting or alienating clients


Use weekly financial reporting to keep partners aware of cash flow


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