Pricing in the legal industry has long been based on an archaic system that prioritises time over value and internal targets over client service.
Before we founded gunnercooke back in 2010, the need for more certainty over costs was something we kept hearing again and again from CEOs, FDs and heads of legal as part of our initial market research. That’s why we made a point of ripping up timesheets in favour of an approach to pricing that’s primarily based on delivering value.
Over the past decade we’ve also been working closely with pricing expert David Abbott to support lawyers on the development of value-based pricing strategies for the benefit of both themselves and their clients. I caught up with David this week for a quick chat and I’m delighted to be able to share these fantastic insights from him.
What are your top three tips for lawyers looking to maximise the value of their services?
David: Firstly, it’s essential that lawyers know what value means for their clients. This starts by taking time to understand every aspect of their client’s situation or business, welcoming feedback and tailoring a service that matches their specific needs. Then they should price on value delivered, not just hours worked.
My second tip would be to avoid scope creep wherever possible. So many lawyers fail to clearly communicate additional costs, time and resources to their clients until the final bill is produced. Then one of two things happens; either they decide to keep the client happy and swallow the extra costs, reducing their earnings, or they have a very uncomfortable discussion and probably lose future work.
If extra work is needed on a project, this should always be discussed and agreed with the client, never just assumed as an extra cost.
Finally, I’d say that every lawyer should consider adopting a pricing model based on fixed fees. This approach offers so much more certainty to their clients from the outset and can quickly become a cornerstone of long-term, high value relationships.
What would you say are the main drawbacks to the legal industry’s traditional approach to pricing based around billable hours and timesheets?
If you were going to design the worst pricing experience possible, what would it look like? I think a taxi journey would be a strong contender. As soon as you get into the cab, you’re immediately charged £2.80 simply for parking yourself on the seat. You pull out into traffic, and the clock starts ticking. You’ve barely moved and it’s up to £6.00. You begin scrutinising the journey, the driver’s decisions and whether they are actually taking the most efficient route possible. And all the while the price is right in front of your face, ticking up and up.
It’s one of the poorest pricing experiences you’ll come across in everyday life because it creates this constant air of tension between the client and service provider – and the exact same is true for legal services and timesheets. When lawyers bill by the hour, clients are left to scrutinise every interaction, conversation and aspect of work because they doubt whether their lawyer is carrying out every task as efficiently as they could be.
Why would you want that kind of relationship with your clients? Shouldn’t your clients be delighted because of the value you’re delivering, not upset because you bill them individually for every phone call?
I’ve even heard stories of firms where they are missing their monthly target and have sent emails to their lawyers to ‘find’ extra billable hours wherever they can. It really seems like a sad caricature of legal services, but unfortunately there are firms out there that still promote this kind of culture.
Why is it so important to understand the difference between price and value?
The key thing here is mindset. There are a lot of law firms out there that choose to operate in a transactional way and are quite happy to charge low prices for the bare minimum in terms of service. Of course, that’s their prerogative and they’re entitled to it; though it’s not a viable way for lawyers to position themselves as a trusted advisor to their clients, maximise the value of their services and build long-term relationships.
Instead, successful senior practitioners tend to look at things from a client-first perspective. They welcome key indicators such as the Net Promoter Score (NPS) because this allows them to gauge the level of value they are delivering and how close they are to meeting their clients needs. But above all, they invest time in getting to know the people and businesses they represent because this affords them the necessary insight to become a trusted adviser, rather than just another lawyer. For the client, that type of relationship is truly invaluable.
It’d be great to hear your thoughts on pricing legal services in the comments. Or, if you’re considering your next career move and you’d like to discuss your approach to pricing in more detail, feel free to get in touch with me by email or phone:
+44 (0) 7789 273 440
In terms of further reading, I would also highly recommend getting yourself a copy of David’s book, ‘How to Price your Platypus’, currently available on Amazon!