Christopher Marston has a great post on his Inside The Firm Of The Future blog in which he concludes:
...if you believe you can add value, most attorneys are TERRIBLE pricers. First of all, I have sat in a room with hundreds of attorneys in the past 2 years and watched them try to price a hypothetical case. They always go back to time and effort, or they discount their own value and try to argue why the client would never pay more than a certain amount. If that is what you think, you certainly will never command a premium for your services. Again, the profitability problem is not in the model, IT'S IN YOUR HEAD! At Exemplar, we get together and talk about how many different ways we can add value to the client and make great things happen that no one else can! After that, we realize just how much better and unique our value added services are compared to everyone else. Then, we think of all of the reasons why the customer would be crazy to chooses anyone but us . . . because we are that confident in the value we deliver. We back it up with a guarantee, and then ask for a tip if we do a great job! (Keep in mind, we select our clients. . .and we are prepared to walk away from clients who are satisfied with "average" legal counsel. We let them know up front that Exemplar is not for clients who want to shop at Wal-Mart for legal counsel. This is the Ritz. It's not cheap, but people love it here!)
The real problem here with attorneys and fixed pricing is that most of them suck at it. You see, inventory in a store does not feel unappreciated if it sits on a shelf for a year. Attorneys, on the other hand, have fragile egos. There is nothing worse for those egos than to be sitting in your office with no clients who want you. The way that most of them deal with this problem is lower the price so that they can feel "wanted." Then, they very carefully raise prices as they get busy, but never very far. Why? Because lawyers hate being rejected. It is much easier to charge a price that no one will argue with than to have to explain yourself and actually justify the value of their services to a customer. All other businesses have to make this value proposition to clients, but lawyers HATE explaining their value. They think they are too good for that, or that it is somehow beneath them to do so. Consequently, most attorneys who try fixed pricing are more interested in protecting their delicate psychology than actually being profitable. If you cannot GET OVER IT you certainly cannot be profitable on this model. A great family law attorney I know who uses fixed pricing put it right: Be confident and be expensive. The best things in life are expensive. Exemplar wants to be on of the best things in your life. We are not a cheap firm, but we are good, we can provide services that you cannot find anywhere else, and we can each customer attention and a true experience that cannot be acquired at any price at an "average" firm. Average prices are for average lawyers and average customers. There are plenty of those in this country and we don't need any more. Hopefully, some of my colleagues will find the courage and creativity to add more value, be different and better, and charge what they are worth. Then, you will unlock the secret to profitability in a fixed-price model.
Although I tend to agree with this statement my practice is stuck on an hourly fee basis. Because we litigate what are known as federal fee-shifting cases or private attorney general cases, the Court has to award are fees based upon what is known as "Lodestar" or in Texas as the "Johnson Factors". The appropriate hourly rate times the number of hours expended, with certain discounts for less productive work. As much as I wish this were different, if the process became more subjective, we would find ourselves at the arbitrary discretion of federal judges as to what we would be paid. And, whereas there are few judges that might award us a small fortune, most of these judges would leave you working from a soup kitchen. You do get the feeling sometimes that many of these judges, although extremely bright and knowledgeable, were not all that successful at pricing and collecting fees off the bench. The ones that were seem to be a little regretful of their career choice.
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