Getting your pricing right is usually the fastest way to transform the profitability of any law firm. Richard Allen, a senior consultant with Burcher Jennings, lists 14 pricing steps that can make a huge difference. (Updated 28 March 2023)
- Listen to your client fully, to understand the client and the context surrounding the work in question – so you understand what value means to this client, on this specific matter.
- Work out what it will take to get the job done (scope, assumptions and exclusions).
- Document the arrangement fully, with accurate (yet concise) scope, assumptions and exclusions. Assumptions in particular provide you with a yardstick against which to measure any mission creep, enabling a renegotiation of the price further down the line.
- Consider how various factors should affect the pricing (in line with the costs regulations):
- the complexity of the matter, or the difficulty of the questions raised
- the skill, knowledge and responsibility involved
- the time spent
- the place and circumstances in which the business is transacted
- the amount of money, or value of property involved
- the importance of the matter to the client
- Offer your client at least two pricing options. Having a choice will reduce the tension the client feels around pricing and will assist you in achieving ‘value alignment’.
- Discuss the pricing with your client. Pricing should be a collaborative process, to get the all-important value alignment right.
- Avoid diluting your brand by offering discounts when a client shows displeasure at your price.
- Only discount on fees for upfront payment, which can greatly assist cash flow. A discount of 5-10% is usually about right, depending on the client and your own cash flow needs.
- Proactively manage the matter, since every matter is a project requiring active management – especially foresight around mission creep.
- Review progress at regular intervals to ensure work-in-progress and disbursements are in line with your initial scope, assumptions and exclusions.
- Make your client aware of any areas where costs and disbursements might increase and engage with them immediately if mission creep and increases do occur – then immediately re-frame the price and re-document the retainer.
- Use case management, finance and reporting software to track actual costs against proposals – and produce actionable insights from your pricing successes and failures.
- Set up and then consistently follow a pricing policy, setting out the steps you take each and every time a price is set for a client of the firm.
- Automate the production of sophisticated pricing proposals, avoiding the need for ‘heavy lifting’ by fee-earners – freeing up their time and ensuring consistency.
Why do law firms choose Virtual Pricing Director?
It’s because of the unrivalled international reputation of Richard Burcher, the pricing expert behind this new legal pricing platform.