How much should you charge for your legal services? It’s a difficult question to answer, especially when you consider the range of factors involved.
When setting a rate for your legal services, it can be tempting to fixate on default market prices. But such a narrow consideration is problematic. If price were the only measure of competition among law firms, then we would ultimately sentence ourselves to a quick race to the bottom; if the only way to compete with a $200/hour lawyer is to charge $150 per hour, there’s good incentive for another firm to charge even less.
Fortunately, you don’t have to compete on price. A better solution is to demonstrate the value of your services to your clients, and to encourage them to pay accordingly.
Price boils down to the actual amount that clients pay. Value on the other hand, has to do with what the client is getting for what what they pay. If clients see that they’re getting a lot of value from your services, they’ll be more comfortable paying more for them.
What goes into setting fees?
Any discussion on legal fees should start with the rules that govern your practice. A good place to begin is with the American Bar Association’s Model Rule 1.5, but be sure to follow the rules specific to the jurisdiction in which you practice.
From there, we can look at how certain circumstances of your practice can—and should—ultimately increase your rates.
1. The demand for your legal product is high
Lawyers who view their services as products can put forward clearer value propositions, or statements explaining how they solve client problems. Lawyers tend to cringe when equating their services to anything resembling a product, but it’s a fact, even if it is an uncomfortable one
Much like the rules of supply and demand affect product pricing, they also affect what you can charge. Finding a niche for your practice is not just a way of refining your expertise. It’s also about making your services more exclusive to your clients’ needs.
If you’re a fashion lawyer in Boise, Idaho, you’re probably special. If you represent medical marijuana dispensaries in a state or province that just legalized them, you’re a rare bird. If you’re a Second Amendment rights lawyer in Cambridge, Massachusetts, you’re an outlier.
In other words, rarity increases cost for services.
2. You’re below the industry benchmark rates
Benchmarking your rates based on your market is a very good place to start. The challenge here is in finding information you can rely on. Many lawyers are hesitant to share their rates out of fear of being undercut. And, many bar associations will avoid the topic due to legitimate concerns over price-fixing accusations. Industry surveys can also be a poor resource, as their scope and frequency are often lacking.
To get a better sense of market trends, the Legal Trends Report provides insight into actual law firm billing data across the United States. For example, it shows that the average billing rate across the United States was $232 per hour in 2016. It also shows us the average hourly billing rates for specific states: for example, $267 for California, $219 for Texas, and $154 for Montana. The report also compares cost of living factors for each state and provides average billing rates across different practice areas.
3. You provide seamless client experiences
A satisfactory product is only part of the bargain with legal clients. The experience of walking into a law firm office and the level of care received can greatly affect the sense of value. Dealing with a well-organized firm, regardless of whether it’s a solo or team environment, ultimately determines whether a client feels cared for.
Technology can play a huge role here. For one, the ability to provide a secure online portal for communications means that you can host a record of all relevant firm matters, which clients can access at any time, without having to rely on you being in office.
If your client really needs you, being able to tend to their needs when out of office also provides a higher degree of care that won’t go unnoticed. This is where being responsive to emails as they come in via your mobile device, or being available for a short call, can earn great appreciation.
Interested in learning more about setting your rates? Read our free guide, How Much Should Lawyers Charge? 7 Factors to Determine Your Hourly Rate.
4. Your reputation and legal experience command more
There is a reason why experienced lawyers can charge more than less experienced lawyers: They’re better and faster—and clients recognize them for it.
Even if certain tasks take you the same amount of time as a less experienced lawyer, your experience may justify more confidence in your work.
How? Your familiarity with specific court or administrative systems, expertise at predicting outcomes based on prior experience, and ability to spot issues before they become real problems may even result in better overall outcomes for your client.
If that experience relates to a valuable niche practice area, that’s even better.
Reputation, which often comes along with experience, is also a factor here. If you do good work, others will be more likely to speak to the value you provide. Depending on your practice area, and whether it is effective for clients to speak about their experiences with you, having a few descriptive testimonials on your website can help encourage your would-be clients to reach out and become actual clients.
The key here is, if you’ve been an estate planner for twenty years, you should be able to explain why your higher hourly fee is a better value than the lower fees charged by a novice practitioner.
5. It’s an emergency
Don’t be caught flat-footed if a new or existing client has an immediate need. There is value in providing an immediate response for an immediate need, and it should be reflected in your rate.
Imagine if you were a plumber, and were called out under exigent circumstances: That’s probably not far off from what you would be dealing with. If a client is putting significant time pressure on you, that means you need to clear the decks and put other things on the back burner in order to focus on their present need.
You can adjust your rate upwards for emergency circumstances. If a client needs you to reply to a demand letter in a week, you can charge more than if you had a month to reply. Similarly, if a client brings you a claim for which the statute of limitations is about to run, you can charge more for that work than you could if you had three years left on that deadline.
Settle on and apply emergency rates when the need arises. Add those to your existing fee schedule—which you can then specify as defaults when using Clio, across all members of your firm—and be sure to discuss those potential fee shifts with the client before they retain you to avoid billing disputes.
6. You’re doing resource-intensive and lengthy case work
It’s also worth noting that some cases are more expensive to prosecute than others. Medical malpractice claims, for example, should be well-funded because they’re difficult to win, and an award may not pay out for years.
There’s risk in working cases that may have a long trial life, which can also meaning turning down other work, creating potential cash flow issues for your firm.
It’s okay to ask for a large retainer if the situation warrants it.
Increasing your rates? Communicate value on your invoices
Your increased rates aren’t going to pay off if you don’t get paid. Invoices and billing statements are a key place to communicate process and value to clients.
No law firm client in history has ever said: “You know, I just have to pay my lawyer. She’s totally the greatest.” To convince clients of the value of your work, your invoices must be clear and compelling.
Make sure your clients understand what you’re doing for them—especially when you’re not charging them for the work you do. Don’t leave work you won’t be charging for off of the invoice: List it, with NO CHARGE (yes, in ALL CAPS) appearing next to the description. Let your clients know that you’re not nickel-and-diming them.
Clio helps structure your invoicing by integrating time and billing data into automated billing features. Learn more.
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