Who says you have to charge all clients the same fees?

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I’ve had penthouse offices on Wilshire Blvd. in Beverly Hills. I’ve also had storefront offices in not-so-nice parts of town. I charged different fees at each office for the same services.

And why not? Why not charge more at the office with higher overhead and nicer furniture? Why not charge what the market will bear?

What about clients in the same office? Can you charge some clients more than others?

Of course.

If a client gives you a ton of work, why shouldn’t you give them a break? If you provide elite services to some clients who are willing to pay a higher fee, why shouldn’t you?

Insurance defense firms and firms that handle subrogation and collection charge less per matter because of the volume of business they get, less than they would charge if you walked in with a single case.

Living trust mills hire outside lawyers to do the legal work. The lawyers earn less per client than they charge their regular “retail” clients.

By the way, you could do something similar no matter what your practice area. Joint venture with an attorney in a lower-end part of town who doesn’t provide the services you do. He brings in the clients, you do the work, and maintain your other office where you charge higher fees.

(Verily, make sure your bar is okay with this, yada, yada.)

Anyway, people pay different fees for the same goods and services every day. Ever buy a hot dog at the ball park?

Clients will pay different fees, too, because they’re willing to pay for convenience or prestige, or because they like and trust you and don’t want to go anywhere else.

How could you charge more (or less) for your services?

More ideas for joint ventures with other lawyers

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You get what you pay for and so do your clients

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I buy a lot of books. I also download a lot of free Kindle books. Many free books are excellent. Most are not. And since you “pay” for books not just with money but with the time it takes to read them, paid books are usually a better value.

There are exceptions. Some great books are free because they are on a promotion. Some paid books are over-priced because you’re paying a premium for the author’s celebrity or the higher costs associated with being published by a major publisher.

But when it comes to books, you generally get what you pay for.

How about when it comes to hiring a lawyer?

Many clients believe that better lawyers charge higher fees because they’re better lawyers. They have more experience, greater skills, and deliver better results. Clients are willing to pay more for that experience and those results, and fear they won’t get them if they hire a lawyer who charges (a lot) less.

Sure, many clients don’t appreciate this distinction and will opt for the lowest fees. But unless you operate a “discount” law firm (and you shouldn’t), you should avoid these kinds of clients.

Some lawyers take advantage of the “perceived value” concept and charge more than they’re worth. But I find that more lawyers charge less than they’re worth, less than the market will bear.

Most lawyers don’t raise their fees, or raise them high enough or often enough, fearing they won’t be able to compete. When most of your competition does the same thing, it drags down everyone’s fees.

Most lawyers charge what other lawyers charge because they’re doing what everyone else does. They offer the same services and do nothing to give clients a reason to choose them instead of their competition.

Show prospective clients that you are better or different and you won’t have any competition. You’ll be able to charge what you’re worth.

It’s called differentiation and it’s the key to marketing your services.

Here’s how to differentiate yourself

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How to double your income in five years or less

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There is a very good chance that you’re not charging enough for your services. By enough, I mean the amount your services are worth and what good clients would be willing and able to pay.

Why do I make this assumption? Because when I consult with lawyers and we talk about their fees, almost all of them are on the low side. That, plus recent surveys which show that two-thirds of solo lawyers earn a gross income of less than $200,000 per year and 28% earn less than $100,000 (again, gross income), tell me I’m right.

If you have been following me for awhile and have moved away from offering the same basic, “commodity” services most lawyers offer, in favor of higher-level, better-paying work, you’re offering more value and you should be paid for it.

How much more? Perhaps double or triple.

It’s exciting to think about doubling your income without doing anything more than increasing your fees. But you might be afraid to do it, thinking that most of your clients would leave.

Don’t let that fear stop you.

You can minimize the risk of a wholesale exodus by doing it over a period of years.

If you increased your fees 20% starting next year, yes, you might lose some clients. My guess is that it would far fewer than you imagine, perhaps very few or none at all, but if you do lose some clients, two things would happen:

  1. No matter how many clients you lose, if the rest of your clients pay you 20% more than they had been paying, your net revenue for the year would increase, and
  2. Any clients who leave would make room for new clients who will pay your higher rate.

If you increase your fees by 20% per year, in five years your income will double, not including compounding.

Too much? Too soon? Okay, start by charging new clients the higher rate. Once you’re comfortable with this, once you see clients are still signing up, you can begin phasing in higher rates for existing clients.

(For contingency fees, you can “raise your fees” by increasing the minimum size of the cases you accept.)

Look, I’ve seen lawyers (and accountants) who haven’t increased their fees in ten years. That’s not a professional practice, that’s a charity. You are entitled to charge what you’re worth and what the market will bear. You don’t have to settle for less.

How to ask for, and get higher fees

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Is it okay to charge some clients less than others?

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Is it okay to charge some clients less than others? Why yes it is, thanks for asking. Here are some situations where you might want to do that:

  • New clients, to encourage them to sign up with you instead of another lawyer
  • Returning clients, to encourage them to come back or to hire you for something else
  • Old clients who have been with you a long time, to reward them for their loyalty
  • Bigger clients, who give you more work or bigger matters
  • Clients who are easier to work with, pay on time, never complain
  • Clients who send you lots of referrals or who go out of their way to promote you
  • Clients who do something you support, as a way to help their cause
  • Clients who give you a big retainer up front, especially if it is non-refundable
  • Clients referred to you by some of your better clients or referral sources
  • Clients who are family or friends (yeah, sometimes you gotta)

In fact, sometimes it makes sense to give some clients free services, but that’s a subject for another day.

Be careful, though. You don’t want your other clients to find out that some clients pay less than they do. Unless you do want them to know. If you want all of your clients to know they’ll pay less if they always pay on time, for example, then spread the word.

Another way to look at this subject is to charge more for clients who aren’t on this list. If they are slow-payers, for example, they pay a higher rate.

The point is, you don’t have to charge every client the same amount for the same work (unless there’s a law or a bar rule that says you do, in which case you should think about moving).

Go through your billing records and client list and see who might warrant a lower or higher fee.

The lawyer’s guide to stress-free billing and collection

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Too hot, too cold, or just right?

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If you give prospective clients too many options for hiring you, you risk confusing them, and a confused mind usually says no.

If you only give them one option, however–hire you or don’t–you may lose them for other reasons.

The objective is to find a balance between too many  options and not enough.

Take a look at each of the services you offer. Are there too many choices? Are you confusing them with variables, add-ons, upgrades, and optional services that make it difficult to choose?

If so, look for ways to simply those options. Aim for clarity. Make it easier for them to decide.

If you don’t offer any options, however, if you give them a choice between “A” or “nothing,” look for ways to provide them with a second option. Something that adds value without adding confusion.

Let them choose “A” or “B” because whichever one they choose allows them to get the benefits they seek, and allows you to get a new client.

Sometimes, a third option is warranted. Should you offer it as option “C” along with the first two options? Should you hold back and offer it later? Or should you include it as a free bonus for choosing your higher priced package?

The answer is: I don’t know. And neither do you.

You could look at what other lawyers offer. You could conduct surveys and see which option prospective clients say is the most attractive. You could “go with your gut”. But the only way you’ll know for sure is to offer different options it to prospective clients and see how many sign up.

If you’re still not sure, start with two options. Price the second option higher than the first, but not a multiple of the first. $3,000 and $4,000, but not $3,000 and $10,000.

If you charge by the hour and you don’t offer any flat fees or packages, look for ways that you could do that because more clients will sign up when they know in advance how much it’s going to cost.

Master the art of successful billing and Get the Check

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How to protect your referral fee when you refer cases to other attorneys

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I heard from a PI lawyer who had referred a case to another lawyer and was supposed to get one-third of the fee. When the case settled, the referring lawyer heard about it not from the lawyer who settled the case but from a friend of the plaintiff.

Not good.

Even worse, the plaintiff had another accident 4 months later. The same firm handled that case, which settled for $200,000, and they never told the referring attorney about it.

When he finally spoke with someone at the firm about the second case, the referring attorney was told that they don’t pay referral fees on “second generation cases/referrals”.

He asked if I think he’s entitled to a referral fee on the second case.

My take? In equity, maybe. In law, probably not. In the world of commerce, where screwing your referral sources is a great way to kill referrals (and your reputation), I think they should take care of you.

But they’re PI attorneys so I won’t hold my breath.

The bigger question is what to do to protect your referral fee in the future.

Two things. First, you need to have a written agreement that specifies what you get, not only on the original referral but on subsequent cases with the same client. Get this signed before you make the referral.

To be enforceable, it probably has to have reasonable limits (like a non-compete agreement), something like subsequent claims within two years of the original injury. (I’d also ask for a fee on any referrals from that client during the same period.) Ask around, find out the standard in your community. And be prepared to negotiate.

Second, your agreement should specify that you have a lien interest in these cases, and you should so notify the insurance carrier and/or opposing counsel on the first case. That way, when the case settles, your name will be on the check and they have to come to you to get your endorsement.

Your agreement can also specify a lien interest (and attorneys fees if not paid) on subsequent cases, but if you don’t know about those, it’s not as easy to protect your referral fee because you have nobody to notify of that interest until after the fact. Still, better than nothing.

And without an agreement, nothing is what you’ve got.

Hey, I’ve been there. I’ve referred cases to other lawyers and was screwed out of a fee when they settled. You live and learn.

My last piece of advice? Stay in touch with the client. Because you want him to tell you when he has another case, or he has a referral.

Be his “personal attorney” for life. His advisor. The conduit of all of his legal matters.

Think “clients, not cases”. And think about the referral as, “bringing in another lawyer,” not “referring out” to another lawyer.

I’d love to hear how other lawyers handle this subject. Please post in the comments.

Get more referrals from lawyers and other professionals: click here

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Cheap legal services are too expensive

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I don’t buy a lot of clothing but when I do I favor quality over quantity. One reasonably expensive suit not only looks better than its cheap counterpart, it lasts longer, too. The same goes for dress shirts and shoes.

An article I read this morning agrees with me. It says that cheap clothes ultimately cost more and recommends buying quality instead.

The same can be said for cheap legal services.

You don’t want people to hire you because you’re cheaper than the other guys. You want them to say, “He costs a bit more but he’s worth every penny.” And you want them to know why.

You want people to understand the risks of hiring an attorney solely because they charge less and the benefits of hiring a high quality albeit more expensive alternative.

Like you.

Most people have a difficult time discerning this difference so it is important that you educate them. Help them to understand that cheap legal services are usually too expensive.

On the other hand, the smart play in marketing your services isn’t to target the masses and educate them about this difference. It is to target that segment of the market who already know this and are willing to pay more to get more.

Target the top 20% of your market and show them a lawyer who costs more and is “worth every penny”. Most attorneys don’t do that. They target the bottom 80% of the market and while they might not overtly compete on “price,” it’s obvious that being competitive on fees is baked into their essence.

You don’t need to be the most expensive lawyer in town, but you should at least be in the top one-third. And make sure you’re worth it.

How to write an invoice clients want to pay: click here

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How to quote your fee and get more clients to say yes

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Here’s an interesting tidbit about how to quote your fee.

According to an article on pricing strategies, researchers have found that “prices” that contained more syllables were perceived by consumers as drastically higher than their fewer-syllable counterparts. Their findings were published in the Journal of Consumer Psychology:

When these pricing structures were shown to subjects:

* $1,499.00
* $1,499
* $1499

… the top two prices seemed far higher to consumers than the third price. This effect occurs because of the way one would express the number verbally: “One thousand four hundred and ninety-nine,” for the comma versions versus “fourteen ninety-nine” for the unpunctuated version. This effect even occurs when the number is evaluated internally, or not spoken aloud.

I know that when I hear prices or fees quoted verbally in a commercial or presentation, I listen to how that fee sounds and think about whether there’s a better way to say it. “Two-hundred and ninety-nine dollars” sounds like a lot more than “two ninety nine”.

I do my best to use this in my marketing, but there was this one time when it caused a bit of confusion.

My secretary was on the phone with an attorney who wanted to know the cost for a product we were offering. Per my counsel, she told him “one-ninety-five” based on a price of $195.  Sure enough, a week later, we got a check in the mail in the amount of $1.95.

So be careful. Especially with lawyers.

The least you need to know about fees, billing, and collection

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Tell clients why you’re worth more than other lawyers

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You’re not the cheapest lawyer in town. That’s good. You don’t want clients who want the cheapest lawyer in town, you want clients who understand that they get what they pay for and who are willing to pay more to get more.

Have you explained this to your clients and prospects? If not, you should.

On your website, in your marketing materials, when you are speaking to a prospective client, tell them that you’re not lowest guy or gal in town. Tell them you cost more than other lawyers and then tell them why you are worth it.

First, tell them why low-cost legal fees aren’t always what they seem. Tell them that some lawyers hold down costs by

  • Using lower paid staff to do much of the work, increasing the chances of errors or poor results
  • Advertising only part of the work the client will need, when they often need more
  • Billing separately for costs and other things that drive up the overall cost
  • Cutting corners in terms of customer service

Of course you’ll also mention that most lawyer who charge lower fees do so because they have less experience.

Then tell them why you are the better choice:

  • You have more experience (years practicing, number of clients, prestige clients)
  • Your staff has been with you for X years and are smart, efficient, and your clients love them
  • You get better results (verdicts, settlements, notable wins, endorsements, testimonials, awards)
  • You are top dog (you teach CLE, Judge Pro Tem, arbitrator, mediator, articles by you, articles about you, books you’ve written, speaking)
  • You specialize (so you are better at what you do, and more efficient)
  • You specialize in your client types (so you know their business, their issues, their problems, etc.)
  • You offer something others don’t (your unique selling proposition)
  • You offer flat fees or other alternatives to hourly billing, so your clients know in advance what they will pay

Also tell them what you do to keep your expenses down: you aren’t on Rodeo Drive, you don’t advertise, you have systems in place that allow you to do your work more quickly and efficiently, and so on.

If you want clients who willingly pay higher fees, tell clients why you’re worth more than other lawyers.

How to write a bill clients WANT to pay

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Are you too good at your job?

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Your clients want you to solve their problems. The quicker you can do that, the better, right?

Maybe not.

If you’re too good at your work, if you finish too quickly and display an apparent lack of effort, your clients may not appreciate your superior ability and may object to the amount you charge.

Psychologist Dan Ariely tells a story about a locksmith who told him that as he got better at his job, his customers didn’t value what he was able to do.

“He was tipped better when he was an apprentice and it took him longer to pick a lock,” he said. “Now that it takes him only a moment, his customers complain that he is overcharging and they don’t tip him.”

“What this reveals is that consumers don’t value goods and services solely by their utility, benefit from the service, but also a sense of fairness relating to how much effort was exerted,” Ariely explains.

So what should you do if you’re too good at your job?

Perform some magic. A little slight of hand.

Don’t let clients know that you did the work without breaking a sweat. If you can prepare a document in 30 minutes, because you have the forms and because you’ve done it 100 times before, consider holding onto it for a few days before sending it to the client. Let them think that you worked and re-worked the document to get it just right.

Caveat number one: Don’t lie. It’s okay if they think you took three days to do it, but don’t tell them you did. Also, if you bill by the hour, obviously you shouldn’t bill for more time than you actually took. (Yet another argument in favor of jettisoning the billable hour.)

Caveat number two: Don’t overdo it. Many clients do see a benefit to your ability to get the work done quickly. In fact, quick turnaround might be a marketing point of differentiation for you. So don’t drag things out.

The best course of action is to manage your clients’ expectations. Under-promise so you can over-deliver. If you can do it in 30 minutes, promise to deliver it in a week. Then, deliver it in three or four days.

Marketing legal services is easier when you have a plan

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