The table below shows a law firm and a client perspective when pricing a piece of work
Too often, we talk about 'cost' without distinguishing the cost of the service to the client (middle right) from the 'cost' of delivering the service to the law firm (bottom left)
This is largely borne out of the hourly rate which (in most cases) is a cost-plus-margin approach to pricing. It also has its roots in litigation where 'costs' are assessed by the court (not 'price')
This distinction may not matter much when billing on a time and materials basis, but if you're offering fixed fees, or other alternative fee arrangements (AFAs), it's important to tease out the difference
𝐓𝐡𝐞 𝐜𝐨𝐬𝐭 𝐭𝐨 𝐭𝐡𝐞 𝐜𝐥𝐢𝐞𝐧𝐭 𝐨𝐟 𝐲𝐨𝐮𝐫 𝐬𝐞𝐫𝐯𝐢𝐜𝐞𝐬 𝐢𝐬 𝐲𝐨𝐮𝐫 𝐩𝐫𝐢𝐜𝐞
In a sustainable practice, your price must be greater than your costs deliver the service (otherwise your loss-making) and less than the value of the service to the client (otherwise they won't buy)
Talking about 'price' in terms of 'cost' anchors the law firm partner and fee conversation in the bottom left of the table, which has a lower £ value attached
Instead, talking about 'price' in terms of the value of the legal service to the client anchors the fee conversation in the top right of the table, which has a higher £ value associated with it
The challenge?
Internal delivery costs are known to the partner, whereas the external value created is typically known better to the client.
Try not to fall into the comfort zone of how much the matter will cost to deliver; how long, what fee earners etc
Instead, ask questions of the client to understand the value of the service to them.
Shift the fee conversation to the top right.
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