Practice Management
& Business Skills...
This paper was
delivered at a Legalwise Seminar- “10 Points in One Day” in Canberra on Thursday
13 March 2014.
The pace of change in the Australian legal landscape
continues to be rapid, and there remain many challenges, and opportunities, for
Small-Medium law firms. These firms continue to make up the vast majority of
firms in Australia.
In this session I will draw on 40 years in the Profession,
and my day to day experiences working in or with 1331 Australasian legal
practices, to pass on to you some practice management tips and traps that I
observe impacting, positively or negatively, on your peers in similar firms as
I work my way around Australia and New Zealand.
We have less than an hour, so I have necessarily chosen just
six key areas to spend about ten minutes on each, with no particular priority
in terms of perceived importance. There will be time for your questions towards
the end of the session.
• Alternative
Fee Arrangements and Pricing Blog Post 10 March 2014
• Legal
Process “Right-sourcing” Five Blog Posts to follow
• Employment
Flexibility and Remuneration of Employed Lawyers
• Business
Development (“Marketing”)
• Technology
Trends
• Opportunities
To Lift Your Profit Strongly
Alternative Fee Arrangements and Pricing
We are talking here “alternative” in the sense of alternative
to billing by the hour, a methodology that has come to dominate.
Not only are many clients seeking wider and better options,
but in many circumstances billing by the hour can actually be a significant
impediment to you in terms of profitability.
This is especially so if for whatever reasons you have set
your hourly rate too low for the value you deliver to your clients. Worse still
if when push comes to shove your confidence is such that you “find” lots of
reasons to not actually charge what you should!
The key point I want to make is that clients deserve a range
of options in your fee arrangements, and that, properly-structured and
implemented, you will also benefit greatly.
At this stage of development there is still good “mileage”
to be had with the big majority of clients if you take the lead on offering a
range of options for each project they bring to you, making clear they thereby
have real control over their legal spend, in most cases.
It takes a little experimentation usually to get a good
range of options established, and it will be ongoing for the foreseeable
future, but work I’ve done with a number of firms has shown clearly that while initially
not recognised collectively, many firms are already experienced with, and
utilising ad hoc, many more pricing options than they thought.
A careful audit of what billing arrangements are in place
now for individual clients will usually reveal in existence a small suite of
options including fixed fees, fixed fees with “strike-rock” provisions, contingent
fees, success loadings, various periodic retainers…some with their own versions
of “strike-rock”, time-based billing with and without caps, volume-based
pricing etc.
It is important to remember that being very professional and
proactive about the discussion of potential fee options for clients, and being
very professional about assisting clients to understand the value they should
expect to receive for their investment in your services, is a big part of
giving clients, and of course prospective clients, professional reassurance.
Avoid doing it at your peril. Pricing and fee options play a
huge role in firm profitability, and profitability, coupled with vigorous cash
flow management, ensure the ongoing financial health of your business and of
the families it supports.
There is a huge range of fee options being used in the
market, so many that I readily confess to not yet understanding some of them!
One of the leading consultants working in this field is experienced
New Zealand lawyer Richard Burcher, at Validatum, and I commend to you his blog
in particular. In a December 2013 article for “Managing Partner” Magazine,
re-issued as a blog post, he listed a big range of options. The whole post is
well worth a read.
The bottom line in Alternative Fee Arrangements is that you
need to further develop what you already use, always being proactive with
clients, and accept that if you want a client to utilise your services you need
to have a mixture of skill, awareness and confidence, to communicate fully in
every matter the value the client will get for their particular investment in
this particular matter. One size fits all simply does not apply!
That skill will not come overnight and you will not get it
100% right every time. It’s something you need to learn, practise, and test.
There is absolutely no single silver bullet.
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