Money changes everything:
How lawyers can discuss fees with their clients
Janet Ellen Raasch
Janet Ellen Raasch is a writer/ghostwriter who works closely with lawyers and other professional services providers – helping them promote themselves as thought leaders within their target markets through publication of articles, books, white papers and content for the Internet. She can be reached at (303) 399-5041 or email@example.com.
Very few attorneys really understand what their hourly rates mean to a client. It is not a number, according to Peter Darling, a former litigator and current California-based business development consultant (www.peterdarling.com). Fee clients select their lawyers based on fees. Rather, the decision is usually driven by emotion.
“How can two attorneys with identical resumes and records command dramatically different hourly rates?” asked Darling. “It happens all the time, although there is no rational or scientific reason for it. But there is a human one.
“The $300-per-hour attorney appeals to the client’s logical wants – the client wants an attorney to solve a problem – at the lowest cost,” said Darling. “The $600-per-hour attorney appeals to the client’s emotional needs – the client needs to feel defended, protected and in control. Cost becomes irrelevant. The emotional need for safety overrides the rational need to minimize fees.”
Darling spoke on the subject of lawyers and legal fees at the monthly program of the Rocky Mountain Chapter of the Legal Marketing Association, held Jan. 10, 2006, at the Denver Press Club.
Raising your fee before you meet with a potential new client is easier than raising your fees in an ongoing client relationship – as long as you have a good sense of the needs of the client, the going rate for services like yours in the marketplace and your own worth.
Much of the potential client’s decision will be based on how the client bonds with you emotionally. Any attorney who is pitching a prospective client should think through and plan an initial experience that the client will not want to resist.
Darling referred to a Harvard Business Review article, “Welcome to the Experience Economy,” which states that goods (the industrial economy) and services (the service economy) have become commoditized to the point that prices and fees have flattened. “Today,” said Darling, “we are doing business in the experience economy. Those who want to command higher fees must provide clients with a unique and compelling experience.”
In professional services, experiences can be constructed through the use of four devices: symbols, stories, support and sincerity. Darling illustrated this concept by exploring two very different examples – a prominent Dallas divorce attorney and a well-known San Francisco escort – both of whom have all the clients they can handle at rates in the neighborhood of $700 an hour.
The attorney uses sartorial and physical symbols to make potential clients feel confident about his expertise and authority. These include a pinstripe suit, for example, that matches his well-cut silver-grey hair. Other symbols might include your office layout, the briefcase you carry, the stationery you use, the watch you wear or the car you drive.
“If you are going after high-end clients, it can be well worth your while to engage the services of an image consultant,” said Darling. “If your practice focuses on a particular industry segment, your symbols should reflect that specialty.”
The second device, the story, can effectively frame and interpret the nature of a professional service. The escort, for example, presents herself as a “courtesan.” By framing her occupation within the context of the historical role of a courtesan – a companion to successful, powerful men – she conveys the idea that she is not simply a prostitute.
“She asks, and gets, $10,000 for a weekend of companionship – which includes ‘the usual,’ but also includes simply watching old movies or going for walks,” said Darling. “Prostitutes sell sex, which is a commodity. Courtesans sell intimacy, which is the exact opposite.
“What is your story?” asked Darling. “What is your 30-second elevator speech, your 30-minute presentation to the Chamber of Commerce? What do you tell new clients about who you are, how you got where you are, and how it all fits together?”
The support component of an emotional/safety experience includes providing select tangible evidence in support of your story – diplomas, legal and industry awards, news profiles and statements of appreciation from satisfied clients. “You want to show, not tell, how good you are,” said Darling.
Finally, a lawyer demonstrates sincerity to a potential client by listening much more than talking. “Symbols, stories, support and sincerity are all silent,” said Darling. “They work in the background to make a potential client trust you emotionally.
“In order to carry this off this kind of emotional/safety bonding with a potential client,” said Darling, “you must absolutely believe you are worth the rates you want to charge. If you don’t believe it, the client will know it – always. You cannot bluff. You must also be extraordinarily empathetic. If you don’t or you aren’t, you may want to look into working on these skills with a professional coach.”
Darling also recommends having an objective third party evaluate the emotional/safety “experience” you offer to potential clients. “At the same time,” said Darling, “observe the experience offered by your most successful competitors – and learn from them.”
It is much more difficult to raise rates with an ongoing client. “An ongoing client has been trained to value your work at your current rates,” said Darling. “It is usually possible to raise rates slightly, citing business conditions, without getting any ‘pushback.’ However, if you want to raise your rates significantly, you must develop and implement a plan.
“Of course, you should have the same symbols, story, support and sincerity working for you as you would with a potential client,” said Darling.
“Plus, you must be willing to go into a pricing discussion willing to say ‘no’ if the client refuses to accept your new rates. You must be ready to refer the client to someone else who you know will do a good job of representing them in the future,” said Darling. “The willingness to say ‘no’ gives you the emotional power that you need to succeed. If the client is able to beat you down, it’s not likely it will be a client for long.”
Avoid raising rates for all of your clients at once. “Do not start with your biggest and best clients,” said Darling. “Pick out a few that are good clients – but that you could theoretically live without. You have to want them, not need them, in order to be able to run the risk of saying ‘no’ if they refuse your new rates.”
As part of your plan, view the situation from the client’s perspective. Conduct a client survey ahead of time. “How much legal work do they have?” asked Darling. “What do they think of your firm and its work? What other firms do they use? Who else can do the work? How well are they doing financially?”
Then, consider how much you can realistically raise your rates. “What is the market rate for your service in your segment?” asked Darling. “How much of an increase seems fair? What are your competitors charging? Why are you worth more (what is your value)? What are alternative pricing methods that might get you to a win/win understanding?”
Do not enter into a rate discussion without rehearsing. “Practice the conversation with someone until you are completely comfortable,” said Darling. “Anticipate each objection, and practice your responses in a way that presents your value clearly and persuasively – supported by concrete examples. As much as you can, make the client justify his or her position, rather than justifying your own. ‘Unpack’ each client assumption by asking, ‘why do you think that?’
“For example,” said Darling, “if a client believes you are not worth an increased rate, find out if they believe someone else can provide the same work for less. Who is it? What exactly do they do? Once you know this, you can often distinguish your work, expertise or experience from the competitor’s – and thereby justify your new rates.”
Once you have successfully raised your rates with these clients, you can turn your attention to your biggest and most important clients. With the confidence you have gained, you stand a good chance of getting the rates you want – and deserve.
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