Using Client-Centric Pricing To Grow Your Firm

As all things law, the move to a client-centric approach is now a requirement. Pricing structures are an important, and easy, adjustment when considered carefully. Creating and adjusting your pricing structures simply needs some information as to how you spend your time. You also need to understand your expenses to ensure your practice is financially healthy. The time is right to move to a virtual or hybrid model where you can decrease your monthly spending. But that's a different blog. Here, we consider pricing options and how to create your structure and offerings.

Hourly Rate

Ahhh... the hourly rate. An oldie but a goodie. But currently, it's much-maligned. For many areas of law, this may still be the best option. Cases can ebb and flow in complexity and as a result, the hours required can change. But this is where transparency for the client becomes critical. How is each billed hour spent? Can it be done more efficiently? Can the rate change based on what you are doing? In addition, clients can feel anxious not knowing how much they will spend in total on their case. If you choose to use the hourly rate, clear and consistent communication is key to success. 

Beyond the hours you bill and exactly what you are doing with those hours, is the rate itself. Clearly, the billable hour isn't the same rate in downtown Chicago that it is in say, Dubuque, Iowa. So, how do you calculate your hourly rate? Consider the 'going rate' in your geographic area and type of law. From there, consider experience and education. Lawyerist offers a great tool to help you calculate an hourly rate if you are interested. 

Flat Fee

This is a great option when the process, and case, are standard. Consider a divorce case. If the parties are in agreement as to asset division, there are no children, and it's all fairly pre-agreed, that's a pretty basic case. This is a great example of a flat-fee-friendly case. Again, what you charge depends on your geographic area, expertise, etc. But to add to the complexity there are the DIY legal options, like It's Over Easy and LegalZoom, among many, many other options. So be sure to consider those options as well. 

Flat fee structures are particularly good for clients. They can budget in advance and don't worry about any unknowns. The same level of transparency is generally expected so be sure to use case management software that offers a client portal.

For attorneys, the flat fee is great if you have the process down. To maximize efficiency, and offer a more competitive flat fee, use software that automates much of the process. Look for case management software that offers custom intake forms, document automation, and eSignature.  Increasing your productivity using technology takes these flat fee cases and greatly streamlines the process.

Subscription Pricing

This is relatively new in offerings from law firms. It works great for clients, likely companies or other organizations, who have ongoing legal cases. The firm would offer either a variety of legal topics or perhaps specialize in one area, like immigration, where there are several ongoing requests. Suffice it to say, subscription pricing is not a fit for an individual case. 

For this model, ongoing legal cases are addressed by the firm for an individual entity, whether a person or an organization. An agreed-upon monthly 'rate' is used and charged over a time period, say 3 months or 12 months or more. The benefit for the law firm is a reliable income stream, which takes the pressure off the billable hour model. For the client, it's easier to budget. The trick? Making sure the fees and the work are balanced. Adopting subscription pricing can be a great benefit to all parties if done fairly.

The subscription pricing model can be used to spread out payments for the client. Especially during and after the pandemic, offering some financial flexibility, a payment plan if you will, helps potential clients move forward. As an example, let's say it's a divorce case. The flat fee is set. Rather than paying that amount upfront, the subscription pricing model is used to spread those payments out across a number of months. 

Limited Scope or Unbundling

This approach is certainly gaining attention recently. For clients who are not yet ready to hire an attorney for their whole case, this is a great option. Clients simply want a phone call or letter written before moving forward. Or perhaps clients simply can't afford to hire an attorney for their entire case. This is where the limited scope, or unbundling, option is handy. The ABA offers resources to understand the underlying complexity of offering these services. Consider any ethics implications and clearly delineate responsibility.

Contingency

Commonly used in personal injury cases, and Erin Brockovich, this is the 'if the client wins, I get paid, model. Clearly, this isn't a great option for many cases. But for collections, real estate tax appeals, patent litigation, loan transactions, and others, it's a great fit.

Contingency billing is generally set at a percentage of the total financial award or benefit. In some cases, the rate is negotiated around expenses as well. Suffice it to say, you know if this type of billing is right for your firm. Check around your geographic area and type of law to ensure your rates are competitive. But more importantly, be careful which cases you accept. For this billing type, it's critical to have a good feel for cases that will settle and pay the firm. Otherwise, your firm not only doesn't get paid for the time invested, but costs are also incurred. 

Statutory Fees

For some types of law, like bankruptcy and probate, there can be statutes around what can be billed. Again, if this is your area of law, you are already aware of these statutes. Look for case management software that makes it easier for your firm to manage the process.

Capped Fee and Sliding Scale

These are both options to work with clients who have some financial concerns or simply want to limit the top end of their budget.

Under the capped fee agreement, an upper limit is set for the case. This helps the client better understand and plan for the most they will spend on their case. For the law firm, it's critical to set that upper limit where the firm isn't at risk of losing revenue. With all things law, it's about balance.

For the sliding scale rate, this is all about working with the individual client and their available financial resources. Depending on their income level, the pay scale adjusts. So if your standard rate for a particular type of law is, say $100 per hour but your clients' income is below a certain threshold, the rate scales down a certain percentage. These cases are sometimes referred to as 'low bono'.

And the list goes on for billing types. The key to creating your pricing structure is to put the client at the center of it. With the ongoing availability of DIY legal sites, the emergence of non-attorney-owned law firms, getting your pricing right is the key to law firm financial health. To ensure efficiency, look for the right case management software that is simple to use and understand, offers a client portal, offers automation for document creation, and lets you practice law instead of managing technology. One that puts you in control of your cases, practice, and time.