We have all been there…you listen to your client give you chapter and verse on a legal problem they need advice on. You give them a general overview of the work involved, and then comes the ‘killer’ question: “how much is this going to cost me?”
You set out the usual disclaimer that it depends on this and that, and give them a range of figures, the lower end of which is probably very unrealistic. Sometimes the client is happy, and goes away in the hope that your fee note is going to come in at the bottom end of the range you have quoted. Others will tell you that the figures are more than they were expecting, or more than they have a budget for, and ask for a discount. The question is, what do you do in that situation?
The answer is…firstly, ask the client why? Often they are not actually looking for a discount, but simply certainty as to the cost. That is a completely different request, although the client doesn’t realise it. You may be able to agree a fixed fee, at a level you reasonably expect your WIP to be at by the end of the matter (meaning it is not, in fact, a discount). This will often result in a happy client, simply because they know exactly what their spend is going to be. An awkward conversation has then turned into a ‘win, win’ situation, leaving both you and your client happy.
In the situation where a client is genuinely looking for a discount because they have a budget they cannot exceed, or because they have a cheaper quote from another firm, you need to think about a number of things, such as:
- Is this a loss leader that will definitely lead to further, better paid work for you, or others within your firm?
- Can you get the client to do some of the ground work themselves, thereby taking up less of your time?
- Can you delegate the work, or parts of it, to more junior fee earners?
- Can you offer to carry out the work in stages, with a fee cap for each, and the decision on whether to proceed further lying with your client?
- Should you say ‘no’ and refer the work to another firm?
In order to answer these questions, and others which will likely arise, you need to know the ‘value’ of your time, and whether you can do work profitably at a certain rate. You also need to understand your firms’ strategy (which will often be far from clear!). For example, are you a high street firm that wants to retain all business, regardless of whether some of it is not profitable, or do you want to be the market leader, or niche firm for a certain type of work, where people will be willing to pay slightly more for an expert service.
What is important to remember is that saying ‘no’ is sometimes a very powerful, and in the long term profitable, tool. By saying to a client that you cannot do this particular piece of work for the price they are looking for, you emphasise the value of what you do. On one hand, you may make the client think that your service is worth paying for, and get the work at a profitable rate. On the other, by referring them to somebody else who can do it cheaper, there may also be a number of benefits. Firstly, it will free up your time to do profitable work. Secondly, your client will respect your honesty and appreciate you finding a cheaper way for them to get the work done. Having built that trust with them, you will probably find that when they have a different legal issue that they consider justifies your price, they will come back to you. In addition, by referring work to another firm, the chances are that firm will refer other work to you when they have a conflict of interest, do not have the particular expertise, or perhaps even in another area of law where they cannot do a piece of work for as cheap as your firm can!
So, remember the next time a client asks for a discount, to think carefully about your response. It could be an opportunity to agree a fixed fee, or emphasise the value of your service. Also, hard as it can be for many lawyers to comprehend, sometimes saying ‘no’ is the best and most profitable way forward.
Please connect with me on LinkedIn and Twitter for future articles and blogs