Why Discounting Fees Is Destructive To Your Law Practice

Recently, I spoke to a lawyer about handling a matter for me.

After we discussed it, it came to the ultimate question: How much do you think this will cost?

She quoted me her fee. I said that I would like to think about it for a day or so.

The next day I got an email from her saying she was giving me a “friends and family” discount. Of course, I was immediately excited to get the “bargain price” and almost sent her a request for the engagement letter.

Then, I got to thinking:

What’s the real price for handling this matter?

I attend many networking events with lawyers. As I listen to lawyers share their “elevator speeches,” rarely do I get through a round of these statements without hearing this one, “We provide large firm quality at small firm fees.” Inwardly, I groan when I hear this.

I’ve had many conversations with my clients about resisting the habit of discounting fees. Yes, I know, discounting fees in the legal field is common.

But I’m going on record to say:

Discounting your fees is destructive to your business.

You are training your clients how to treat you – cheaply.

I won’t be surprised if I get a lot of flak about this viewpoint, but just hear me out:

There are 4 important reasons discounting your fees are damaging to your practice:

Your clients don’t trust your real fees, and therefore there’s a seed of doubt about you (they often come into the conversation with doubt because so many lawyers employ this bad habit)

Your profitability and firm financial health are at stake. After all you set these fees so you could make a healthy profit. Discounting is chipping away at that financial health.

Your clients see your services as a commodity, cheapened by bargain pricing tactics. They certainly don’t see you as a sharp business person if you can so easily lop off what they see as “cream” at the top.

You may think that discounting your fees gives you a competitive edge. Guess what? There is always another professional ready to undercut you in price.

Lawyers discount fees for three reasons:

  1. They think clients will push back about price.
  2. They are fearful they’ll lose the client to a lower-priced competitor.
  3. They don’t want to have the difficult conversation about money and fees. Low-balling fees feels more comfortable.

So if you are ready charge what you’re worth and stop discounting, remember:

  • Clients will push back about your fees if you can’t demonstrate valid fee/value relationship.
  • They will push back or hire someone else if they are not interested in quality but are kicking tires for the lowest fee.
  • They will also push back if you send them the unpleasant surprise balloon invoice, either because you’ve waited too long to send the billing, or because costs have escalated and you’ve avoided that “difficult conversation” giving him/her a heads up about unanticipated costs.
  • Clients will also hire another attorney based on fees if they feel you aren’t certain about the true value of your work or you misrepresent it.

The 3 solutions:

  1. Be prepared to demonstrate your value and how you came to charge what you do.
    Make sure you bill regularly and don’t give your clients invoice surprises.
  2. Be confident with your clients, educate them about fee ranges in the market place. Help them make a confident decision in hiring you at the rate you know you are worth.
    Practice having these difficult conversations with prospects and clients.
  3. Stick to your guns. You’re worth what you charge. If you’re not sure about that, why should your client be?

 

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Nancy Fox

About Nancy Fox

Nancy Fox, founder and President of The Business Fox, a business advisory firm, has consulted to and coached hundreds of lawyers and professionals in business development, online and offline marketing, niche marketing, and networking, guiding them to breakthrough levels of success. She’s been featured and quoted in Business Week, The New York Times, The Daily News, CBS Money Watch, and has spoken at Rotary Clubs, national conferences, and co-founded the highly successful networking event, Metro Roundtable, bringing top tier lawyers, accountants, and trusted advisors together to meet, mingle, and refer business. Her book, Network Like A Fox™ will be released in Spring 2013.


Website: http://thebusinessfox.com
Email: nancy@thebusinessfox.com
More posts:View all posts by Nancy Fox

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