You're probably pricing the wrong way (especially if you're a lawyer)
Here's a simple tactic to price your legal services better while maintaining margin
I’m guilty of this too, but here’s a simple tactic I recently used to drop our price to where it needed to be, whilst maintaining margin.
Why bother? Well, there are very few things the human species hates as much as being charged something that feels ‘wrong’.
It’s one of our favourite things to feel outrage about.
I recently overheard: ‘Can you believe they charged £3 for a tea? It’s just a little bag of leaves and hot water!’ (never mind the fact the coffee shop needs to pay a central London lease, staff, utilities etc to deliver the tea - none of that seems to be the point)
Our perception of a fair price is driven by lots of different things, but the ‘cost of making the thing’ is rarely one of them!
Even at our most rational, we are much more likely to connect the concept of a ‘fair price’ to ‘how important is this to me’, not ‘how much effort was involved to create this’.
That’s why companies will for example pay lawyers much more to review a relatively standardised contract for a funding round, than e.g to review a lease for the vending machine in the hallway.
That can be a problem if the ‘work involved’ doesn’t correlate with the perceived value.
So what to do? Are service provider and client destined to be at odds with each other for ‘perceived’ lower value work?
The obvious way to fix this is to align the pricing with the perceived value you create. But for lower value legal work, that means dropping the price. Which is only feasible, if you can reduce the time it takes.
That often means delivering something slightly different than the client initially had in mind. But if you make the drivers of cost transparent, I’ve found clients will be open to helping problem solve this.
Here’s an example of a chart I recently used to guide that conversation.
At the top it shows the spectrum of fixed fees we charge to negotiate a contract end-to-end as part of our contract review product. See the £400 <——> £1,300, as well as where we show the £4k a large law firm might charge.
The bit that cracked the problem was by showing the four cost drivers underpinning it.
We could then say: “if we can move the orange squares closer to the green boxes, we can drop the price. Which one of those orange boxes is easiest to move for you?”
It then turned out that the client was ok with us making bigger negotiation jumps and not pushing on all issues. Although they couldn’t commit to certain volumes. Still, reducing our cost on 2 out of 4 ain’t bad!
It materially impacted how involved the work would be for us, so we could drop the price whilst keeping our minimum margin. It really felt like a win-win to have the discussion.
Anyway, I’m very curious to hear if you’ve come across any other examples of brainstorming pricing solutions together! Let me know in the comments :-).
Thanks for being here,
P.S. If you need help with any of these things, we’d love to help out :-)
Commercial contract negotiation: fixed fees + fast turnarounds. Work done by our in-house lawyers.
Contract playbook solution: create detailed contract playbooks in LexPlay (a smart MS Word plug-in) and:
Train up new and junior lawyers to a high and consistent standard.
Empower sales team to negotiate their own contracts.
Multi-country and repapering projects: such as localising T&Cs, employment contracts, answering regulatory questionnaires as well as Data Protection remediation (SCCs etc).