In a commercial environment where price certainty accompanies almost every other product and service on offer, it’s not difficult to see why clients expect legal services to follow suit.
Without legal service pricing certainty, clients are unable to compare services like for like and determine which offering is better value for money. Nor can they accurately budget their resources or determine whether they can afford the legal service in the first place. In addition, there is the separate but related complaint of transparency (or lack thereof), which commonly arises due to the client’s inability to appreciate the value they have received.
If law firms are to maintain a competitive edge in the current market, it is imperative that both of these complaints are addressed. This article highlights steps your firm can take to meet your clients’ increasing demands for legal service pricing certainty and transparency while still remaining a profitable law firm.
How can price certainty and transparency be improved?
Within the confines of a ‘time-centric’ billing model, the opportunities to improve certainty and transparency are unfortunately limited to providing ‘better’ estimates and itemised accounts. This disappointing reality has seen many firms shift to alternative billing models whereby pricing and scope is agreed with the client upfront.
This not only provides price certainty, but transparency, as the client is able to appreciate the tangible outcomes they will receive for the pre-agreed price.
Shifting to fixed-fee billing while maintaining profit
Interestingly, price certainty can be even more important to corporate clients than the final price of their legal services. This indicates that firms don’t necessarily need to alter the final price of their services, but simply the manner in which they’re served up.
Shifting to a fixed-fee offering or even providing more certain time-based estimates requires a reliable practice management system to optimise productivity and reduce firm costs.
Good practice management systems contain several key components that firms can harness to ensure their fixed fees factor in adequate profits:
- Data storage and workflow management tools can streamline processes, eliminate repetitive tasks and ensure that non-income-earning activities are shifted to support staff, allowing fee earners to concentrate on income-producing activities.
- Skilful use of a precedent management system enables firms to effectively resell the same work again and again. A well-maintained information and precedent database with powerful search engines can allow practitioners to reuse or adapt the work other fee earners have already done to avoid having to reinvent the wheel.
- Costing and time-management tools are vital for setting fixed prices or even providing accurate fee estimates. A comprehensive practice management system can consolidate data on how your firm’s resources are taxed in order to provide a specific legal service or product. This way you can formulate predetermined prices with the confidence that you are not undermining your profits.
Many firms have already taken the plunge and are proving that price certainty can still be profitable.