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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“Please let me do my job”

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Don’t you love clients who want to micro-manage their case? Don’t you love it when they want you to check with them about every little thing?

You don’t? Maybe you should post a sign in your office like this humorous price list posted by a graphic designer:

Design Services Price List

I design everything… $100

I design, you watch… $200

I design, you advise… $300

I design, you help… $500

You design, I help… $800

You design, I advise… $1,300

You design, I watch… $2,100

You design everything… $3,400

Yes, it is their case. Yes, they are entitled to make the big decisions. But you are the attorney and if a client wants to “help you,” they should pay for the privilege.

 

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Another “fee raising” success story

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I spoke to another attorney yesterday who told me that, at my urging, he increased his fees approximately 40% and has received no resistance. His fees were low to begin with, he said, but this has emboldened him to increase his fees even further.

He said the top of the market is still 70% higher than his new fee, and we talked about what he would need to do to justify another increase.

You don’t have to be the top of the market, I told him, but you should at least be in the top one-third to 20%.

But don’t be so quick to dismisss “top of the market” fees. Why couldn’t you be the most expensive guy in town?

You could. The question is how.

Much of marketing is about perception. To some extent, you’re worth more because you say you are. Who’s to say any different?

Your lower-priced competitors, you say? See, that’s where you’re missing the boat. There is no competition at the top of the market. It’s at the lower 80% of the market where everyone does pretty much the same thing and competes on price and good looks.

If you’re mucking about in steerage, you’ll never maximize your potential.

But there is a limit to how much more you can charge simply because you want to charge more. You’ve got to find something you do better or different than other lawyers, and make that a point of differentiation.

One way to do that is to specialize not only in the services you offer but the clients for whom you perform those services. Choose a niche market to target, focus on it, and groom yourself to become the “go to” lawyer in that niche.

There are big advantages to this strategy. Besides being able to charge higher fees, marketing is easier and more effective. Instead of networking with or advertising to “anyone” who might need your services or be able to refer clients, for example, you can concentrate your efforts on marketing exclusively to prospective clients and referral sources in your niche market.

That’s what this attorney said he will do.

He’ll save time, spend less on advertising (if not eliminate it completely), and develop a name for himself in his niche.

Word of mouth travels fast in niche markets. By next year at this time, I wouldn’t be surprised to learn that he has indeed become the “go to” lawyer in his market.

Learn more about niche marketing, with this

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How to increase your income ten-fold

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What would I have to do to increase my income ten-fold? That’s a question you should ask yourself periodically.

Yesterday, I did a consultation with an immigration lawyer and asked him a similar question. We were talking about his fees and I said, “With your experience and reputation, you could probably triple your fees, right now, and get it, no questions asked. Who’s to say you’re not worth three times what you now charge? What you need to do is figure out how you could increase your fees ten-fold. What would you have to do? How would you have to package your services in order to get that?”

Because he could. Because you can, too. The challenge is to figure out how.

Okay, too much to ask? I’ll ask a different question that might make you more comfortable. “What would you have to do to increase your income ten-fold in the next year?” The answer would entail a combination of increasing fees and getting more clients, yes?

Good stuff.

I heard an interview with an author recently who said his goal was to increase his income ten-fold within the next year. His plan calls for a combination of writing more books and selling more of them (marketing).

Will he reach his goal? I don’t know. But I do know that as a result of thinking this way, he’s bound to increase his income, undoubtedly much more than he would if he didn’t ask “how”.

Ten fold is big. But not impossible. You have to ask questions like this. It’s no fun to ask, “How could I increase my income five percent?” Snore.

So, what would you have to do to increase your income ten-fold? What new services would you offer? What new (higher-priced) markets would you target? What would you have to do to increase your fees? What would you have to do to get more traffic to your website, viewers of your ads, or attendees at your seminars? What would you do to get more referrals?

Think. And maybe you’ll grow rich.

How to increase your income ten-fold: Go here

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It’s all about keeping your clients happy

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Nobody would argue that keeping your clients happy isn’t vital. Clearly, it is the genesis for repeat business, referrals, and getting paid on time. But is keeping your clients happy paramount?

No. Keeping your employees happy is more important.

If you don’t keep your employees happy, you can forget about keeping your clients happy.

By the same logic, keeping yourself happy is more important than keeping clients happy. If you’re not happy, you won’t be much good to anyone else.

In response to yesterday’s post about not negotiating fees, a personal injury lawyer wrote and said he disagreed. “It’s all about keeping your clients happy, so they will return and refer,” he said.

Yes, smother your clients with love and attention. Remind them often about how much you appreciate them and want to help them. But just as a parent doesn’t need to buy his kid a pair of $300 sneakers when he asks for them, lawyers don’t need to buy our clients’ love by agreeing to cut our fees.

I showed my clients I cared about them by taking cases with questionable liability and negligible damages. I showed them that I was on their side and would fight for them when they asked for my help, even when I thought we would probably lose the case, and even if we won, I knew I wouldn’t earn much of a fee.

I also waived my fee on many cases, or cut it voluntarily. When it’s your idea, you are a hero. When the client asks (or insists), you’re just a commodity.

So be generous with your clients. But do it because you choose to do it, not because you might lose them if you don’t.

The writer also said he doesn’t think his other clients know when he cuts his fee for a client who asks him to.

Question: What happens when client A (who got a discount) refers client B? Does he offer the same discount to client B? If he doesn’t, what happens when the new client finds out that you charged his friend less?

And what happens when client A returns with another case? Does he get the discount on that, too?

Cutting fees is a slippery slope. I know. I once had an office in a market where all of the PI lawyers ran dueling ads promising increasingly lower contingency fees. You charge one-third, the next guy says he’ll take the case for 25%, three more lawyers advertise 20%.

When it got down into the 8-10% range, I’d had enough and closed that office.

With low overhead and high volume, I was still making a profit. But I wasn’t happy.

For more, see The Attorney Marketing Formula and Getting the Check

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Should I ever cut my fees for a client who wants to haggle?

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A Mr. Richard Feder of Ft. Lee, New Jersey, writes. . .

Sorry, I’m stuck in the 70’s.

A lawyer emailed and says he has a client who is questioning his fees and wants him to reduce it. “Should I cut my fees,” he asks. He’s afraid it would open the door for her to ask again and again. Not to mention what might happen if word gets out and other clients and prospects get wind of it.

The short answer to this question is “no”. Don’t do it.

Don’t negotiate fees or cut them for an individual client. Doing so assails the integrity of your fee structure. “You will? Oh, so that means all of the other times I’ve paid $X, you were overcharging me?”

Explain that even if you were willing to lower your fee, this would be unfair to all of your other clients who pay your regular rates. It would also be unfair to you, since you would be working for less than the fair market value of your services.

If she owns a business, ask what she would do if her clients or customers asked her to cut her fees or prices. If she has a job and her employer asked her to work for less pay, would she do it?

Ask her to explain why she is asking you to cut your fee. If she says you charge more than other attorneys charge, explain to her how you are different or how you are worth more, e.g., you have more experience, you have a better track record, you get the work done faster, you offer other benefits they don’t offer, and so on.

Show her that you charge more because you are worth more.

If she says she just doesn’t want to pay it, that’s a different story and it’s easy to handle.

Let’s say she’s asking you to cut your fee from $7500 to $5500. After you explain why you cannot do this, tell her that you would be happy to provide her with $5500 worth of work if that is more in line with her budget. At her option, she can get the rest of the work done later.

Or, you might suggest different terms, where the work is done in phases, over an extended period of time.

If this is not acceptable, graciously offer to provide referrals to other attorneys you know who might help her at a fee that is in line with her needs and her budget.

Be strong. Don’t negotiate your fees. If a client leaves because of it, they weren’t worth having as a client.

For more, see The Attorney Marketing Formula and Getting the Check

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