I understand that times are getting very tough. This is especially true for attorneys that represent consumers. And, when times get tough, depending on the practice area, business sometimes falls off (or at least that is the impression). When business falls off (or your fear that it might) there is a strong tendency to discount your legal services to get businesses coming through the door.
By discount, I do not necessarily mean that you start advertising lower prices like some retailers. That would be really bad for reasons beyond this post. You discount in the initial interview or consultation either in the overall amount of the funds you want, or in the amount the client needs to pay down to get legal representation started.
You do it for one simple reason, really. You think you need numbers. In your mind you need a certain number of clients or cases or transactions or referrals to keep things running smoothly, and you are fearful you might lose a prospect if you ask for more money, or ask for your normal and customary fee, or the fee you prefer. So you quote a lower fixed fee, a lower hourly fee, a cap of some kind, or a lower down payment.
Now you might say that this is not the reason you are quoting a lower amount. I agree the rational might center around some other thinking. I am new to the practice area. I am new to the geographic area. I recently graduated from law school and passed the bar and cannot charge what others do. I work at home and do not need to charge as much. There is a lot of competition out there and I need a way to distinguish myself. Or, somebody else is doing the same thing. It does not really matter for it all comes down to the fact you are chasing numbers. Just fess up to that fact.
I know a number of lawyers, for example, that advertise zero down bankruptcies. I understand that it is typical to take some amount of you fees through the reorganization plan in a Chapter 13 bankruptcy. But, Chapter 13s also have a high failure rate. To not mitigate your losses by getting a good sum up front is just crazy. I asked one lawyer not long ago whether the zero down apply to Chapter 7 liquidation bankruptcies. He said yes. They arrange payments after the debtor files. The problem with this is many clients will not pay and you cannot now make them or send them statements to them as that would be a violation of the law itself. How wonderful is it to discharge your own fees.
It is easy to rationalize the discounting of your fees. The rational for you is that it helps drive business. The rational you attribute to your clients is that they are struggling and need help. Just do not fall for it. You discount at your own risk. Remember, if you are doing what you should be doing the clients you take are going to refer you business. What kind of future business do you want? You are training those that market for you to send you business, or cases or referrals that do not want to pay full price. Also, you are creating a margin problem. You now need to find more clients and more cases in order to be profitable. If you are having trouble getting in the discount client, how hard is it going to be to get more clients? Also, the need for more clients requires more work, more hours, more staff, more office space, more office equipment, more computers, and on and on. Even if the strategy works it creates a snowball effect that can do you in.
I know it is scary to let someone walk out the door who did not have the $500 or $1,000.00 or whatever on them that you wanted to help. Will they come back? Can they raise the money? Will they go to another attorney? As a result, will I bring in enough business this month?
However, it is important to keep in mind that price or fees is an indicator of value. It is hard to imagine in my small country brain, but it is true that quality clients, those that make you a living, do not gravitate away from the most expensive option. They are looking for talent, a personal touch, a solution to a problem, and although they ultimately have to work within a budget, they view discounting and cheap lawyers as exactly that - cheap. They are comfortable paying the full fee if they believe they are getting the talent, the personal touch and their solution ultimately solved. They tend to believe that cheap attorneys cannot provide these things. So, for long-term success you want to charge full prices that provide comfortably for you and your family. This might lead to smaller client and case numbers in the short term, but it also provides you the margins you need to invest in brand building. And, not being overworked to make a decent living is really priceless in and of itself.
Once you believe, for example, that the lawyer down the street is taking nothing down on a Chapter 13 and therefore I cannot charge $500.00 down, then you have relegated yourself into believing that you are doing nothing more than selling a commodity, and that your name and your good efforts do not matter. The problem is if you are selling a readily available staple, you are always going to lose the pricing war because there will always be someone that will bid under you for the work.
So, do not discount. In doing so you are cutting your nose off to spite your face.