Pricing like a pro

I flagged this post on [non]billable hour over a month ago and I’ve been mulling over it’s message on and off since then.  The basic premise is that value is far more important that price and that if clients perceive value in what they are getting, they will pay more for it.  A lot of this has to do with that bugbear “perceived value” that is both the problem and an answer.

As regular readers of this blog will know, I have been revising my fee structure and looking at alternatives to the traditional hourly fee structure.  One of the models I am exploring is a fixed fee model for various attendances.  The reason I am exploring these capped fees is that I believe it is more important for clients to have certainty as to what they will be spending than it is for clients to pay rock bottom prices.  I used to think that relatively low hourly rates worked in my favour having come from an environment where the sky is the limit (I saw senior commercial directors charging over R2 000 per hour for their input on commercial deals) and now I wonder if it isn’t a factor which dissuades potential clients from instructing me.

To a large extent we look at the price of something and infer either value or something fishy.  When it comes to professional services like legal services image is a big factor.  A previous senior partner of my previous firm used to say that if the firm’s lawyers weren’t driving a BMW by the age of 30, they weren’t going anywhere (or something along those lines).  Sure a BMW by the age of 30 is attractive (many lawyers in that firm have their first BMW before they turn 30) but that BMW comes at the expense of clients ultimately.  I still drive my Mazda Sting that I bought almost five years ago because it is cheap to run and almost paid off.  Perhaps my focus is a little off.  Perhaps the fact that I drive a car worth less than R40 000 means that I am unsuccessful and therefore not very good at what I do?  Does the fact that my suits come from Woolworths mean that I don’t cut it in the commercial legal world?  If I don’t have a secretary to answer my phone, send my faxes and type my letters does that mean I will fumble your case in court?

Perceptions are very powerful and are particularly so when your only way of assessing the suitability of a lawyer is your first impression (and subsequent impressions) of him/her.  As a client you look to see which car your lawyer is driving; whether there is coffee and tea waiting for you in your lawyer’s offices and which store he/she buys suits from.  In the absence of anything else, perceptions are your only guide through the forest of lawyers. 

On the other hand, perceptions can be very misleading.  Unfortunately you often only find out quite a bit later.  One of my client’s commented today that a major firm’s litigation department is terrible.  He based his assessment on his perception of the attorney handling his file as well as his interactions with certain other professionals in that firm.  Is that firm’s litigation department below par?  I know many of the attorneys in that department and they are excellent lawyers so perhaps my client’s perception is not accurate.  Unfortunately my client’s perception may guide him to take his work away from that very prestigious firm with BMW driving lawyers; tea and coffee in every boardroom and more secretaries that lawyers because that one lawyer behaves badly in my client’s eyes.

So when I look at my hourly rate and other fees, I recognise that they are lower than the fees I was billed out at while I was at my previous firm.  If I billed myself out at the rate I would be billed out at had I remained at the firm, I would probably be doing a lot better now (although the chances are my client base would be a tad smaller) but I probably wouldn’t be adding the same value.  To me value is what you get for what you pay for.  You pay me less than a lawyer with my experience in a fancy firm and whose secretary drives him/her around in his/her BMW.  On the other hand, I like to think you get more from me and that “more” is your value.  And then some.

No BMWs were harmed in the posting of this article.  BMWs are not inherently bad cars and if anyone wanted to donate a BMW to me I probably wouldn’t complain … much.

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