Category: Pricing

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$185 Million Reasons Why You Might Not Want To Use The Billable Hour

While accepting that I’m not smart enough to understand how this all works, I also question why this is even material:

“The $185 million legal fee represents a multiplier of 18 times the firm’s average hourly rates (around $1,000) and the 10,000 hours it said it spent on the matter—which would amount to more than $18,000 an hour.”

‘Quinn Emanuel’s $185 Million Fee Award Poised for More Scrutiny‘

A lesson to be learnt here? Maybe it’s not about the inputs but rather the results/outputs? Even at the #BigEndOfTown?

As usual, comments are my own.

rws_01

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Survey: ‘Seven in ten law firms say they lack confidence in negotiating fees [with clients]’

Interesting quote in a post on the Legal Futures website by Nick Hilborne ‘Law firms “lack confidence in negotiating fees”‘:

Seven in ten law firms say they lack confidence in negotiating fees while 40% “do not know with any certainty” what proportion of their client relationships are profitable, a study has found.

And while I found that interesting (if not a little depressing), this quote made me laugh out loud:

Researchers also found that ‘more training in value pricing’, rather than hourly rates or fixed fees, was the most popular option for increasing profitability.

But unsurprisingly, given the winds of downturn we are all now feeling:

Fixed fees (39%) were more popular than hourly rates (35%)

Anyhow, interesting post that I thought I would share. Can I recommend you go take a look.

As usual, comments are my own.

rws_01

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The Two Biggest Reasons Lawyers Are Afraid to Raise Legal Fees

Interesting article on abovethelaw.com on why lawyers should not be afraid to raise their rates even in times of potential recession (‘Don’t Be Afraid to Raise Your Legal Fees‘) by Roy S. Ginsburg.

In the article Roy sets out the following two reasons for why lawyers may be reluctant to increase their rates:

  • Reason No. 1: Fear of Losing Business to Competitors
  • Reason No. 2: Fear of Missing Out on New Clients

I’m going to put it out there and say Roy is right here, lawyers are scared/fearful of both those issues.

But, and there is always a but, only if they adopt competitor pricing – where they are always looking over their shoulder to see what their competitors in the market are charging.

My own thoughts on this issue though are this: Know your product; Understand your value; and Don’t give a damn about anyone else – you don’t have competitors, you have customers; always show them the value of your service and they will remain loyal to you. Period.

Which, to be fair, is kind of what Roy is also saying. So go over and read it – it’ll take you all of 10 minutes and it’s certainly worth it.

rws_01

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The £600 an hour baby gorilla

According to a post in the Law Society Gazette, which in turn quotes from Jim Diamond’s new book ‘The Legal Extortion Racket‘, partners at Magic Circle firms in 2007 charged clients, on average, between £625-£700 an hour.

If that’s not scary, then it is impressive.

An hour of that partner’s time today would set you back somewhere between  £1,000 and £1,500.

We could probably call it and say that’s law’s version of ‘Moore’s Law‘.

But while we all might agree that’s an impressive, if not scary, number – if that’s your want or need you are, after all, getting an hour of a partner’s time. You’d have to imagine said partner would know a thing or two (otherwise how did they get to be a partner in a Magic Circle firm?) and get you the result you want. You may, at a stretch, even be able to argue that said partner works more efficiently than partners in other [non-Magic Circle] firms because they have done the rounds on big ticket matters and know a little about what they are talking about.

All of which could be perfectly true and fair.

So you let it go and turn your attention to another stat in the article quoting Diamond’s book:

Newly qualified lawyers at magic circle firms and US firms in London charge up to £600 an hour

To be clear, what we are talking about here is a ‘newly qualified lawyer‘ who most likely has a rudimentary understanding of the law at best, no idea what ‘utilisation‘ and ‘realisation‘ are, but by now will certainly know very well what a time-sheet is and how important that is to getting his/her/their bonus, charging clients £600 an hour!

That gives me a nose-bled just thinking about it.

For those who follow the hourly rate discussion, Diamond’s table makes for fascinating reading…

Photo credit  Dixon Newman on Unsplash

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Quote of the Week – ‘Sell premium’

Thailand’s hotels, businesses and private hospitals should refrain from offering big discounts to lure tourists and focus instead on raising the country’s value as a premium travel destination

Deputy Prime Minister Anutin Charnvirakul

A lot law firms can take-away from this – especially if we are heading into a recession.

source

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“Why is profit a bad word?”

If you are struggling to find an answer to that question, then can I suggest you read Mark Ritson’s column in Marketing Week from 16 Sep 2021, paying particular attention to:

The discount death spiral

And then there is the long, often fatal death spiral that follows the over-reliance on discounting that comes with time. You do it. Your competitors do it. You do it some more. Your customer starts expecting it. And then, only then, do you start to glimpse the reason why price setting is so important to marketing and business.

Enjoy the day!