If you are operating the fees, billing, and collections component of your practice as you did twenty years ago, chances are you are missing opportunities for work. Today we will focus on tips for setting fees.
How do you determine whether your fees are competitive? There are a variety of ways. A Google search is an easy place to start. For instance, when I use the search term, “how much for a divorce lawyer”, an ad pops up about a specific family law firm. Clicking on the ad provides insight into how other lawyers are promoting their services.
Continuing through the Google search provides an average of fees from the lawyers.com website which appears to be from the results of a consumer survey they conducted:
On average, North Carolina divorce lawyers charge between $230 and $280 per hour. Average total costs for North Carolina divorce lawyers are $9,700 to $11,700 but are typically significantly lower in cases with no contested issues. Jul 22, 2020
This search revealed other frequently asked questions and answers such as average retainer fee and the average cost of a divorce.
Clio is a cloud-based legal practice management solution designed for solo and small law firms. Clio serves 150,000 customers spanning 90 countries. An important part of their work is gathering data for the Legal Trends Report and new in 2020, the Covid-19 Impact Report.
The Clio Legal Trends Report shows fees reported by state and region of the country. You can go back and view past reports, as well as the 2020 Legal Trends Report on the Clio website.
Recruiting firms often publish online Salary Guides that include regional billing rates. Look at Special Counsel, Robert Half, and Apple One.
Ask Trusted Advisors
Ask trusted clients and referral sources what they think about legal pricing, pricing options, various fee and payment options.
You can also experiment with alternative fees and then tweak them if they don’t work. Consider alternative service offerings such as unbundled services, packaged services, subscription services, offering educational programs where you charge fees to share knowledge, as well as consulting services.
Break projects down into multiple parts so that clients have payment flexibility by buying in phases. Of course, it is always important to carefully outline the scope of the project and to make sure that your engagement letter with clients reflects the scope of your services and your fee arrangement.
Advice from Lawyers
I know of law firms that have “mystery shopper” programs. In these firms, employees from marketing, intake or call centers, call other firms to inquire about rates.
Lawyers also ask judges what rates they typically award for lawyers in their area of expertise. Or view fee affidavits in other cases as a helpful gauge.
One lawyer I talked with had this to say, “Given my experience, you probably aren’t the highest paid and in fact, you may be the lowest paid.”
Another lawyer said, “Solos and small firms do not seem to change their pricing at the pace of mid to larger firms due to client pushback or perceived client pushback. Based on your expertise and length of time with no increase in fees, there may be room for an increase. Often you need to increase your fees to get the kind of client you want.”
Know how much it costs to do the work and calculate that into the fee setting process. I talk with many solo and small firms who don’t actually know what their costs are per case or per matter. These are not new lawyers. These are experienced lawyers who know the firm is making money, but they can’t tell which cases had a negative cash flow for the firm. A lawyer should know if a case will contribute a sufficient amount to overhead, staff support and their own salary.
An important point noted in the 2020 Clio Legal Trends Report is that firms who experimented with small adjustments made over time, and practiced with consistency, saw improvements year-over-year to their law practices.
As an example, firms noted as “agile” invested in technology over time. These firms added online payment options, client portals, and Client Relationship Management (CRM) tools. Firms who used all three forms of technology outperformed their peer firms by $40,000 a year.
Setting fees is a work in process. As with other aspects of your business, setting fees is an evergreen practice, meaning that there is always work to be done in this area. Continually update your knowledge to make sure you are on top of trends and communicate with clients in response to your fees.
Camille Stell is the President of Lawyers Mutual
Consulting & Services and the author of Designing a Succession Plan for Your Law Practice. Continue this conversation by contacting Camille at [email protected] or 919.677.8900.