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The issue of costs, or how we as lawyers should charge our clients/price our work, is not new. It was a topical issue when I was a trainee in 1992 when client care letters were a new requirement; and they are just as much a topical issue today, 31 years on.

For me, as a lawyer with my own small firm, it has posed the greatest battle. I, probably like many other solicitors, dread most the quoting of costs. I once heard a lecturer say that their job would be perfect if there were no students. I have always felt my job would be perfect if the issue of money didn’t come up, if I could do it for free. But of course, if I did, I would not have a law firm. Despite my innate dislike of the issue, I have managed to run a law firm over the last 11 years which has grown year on year. The following are tips from the lessons I have learnt which have helped my firm to survive and thrive.

Consider what it is you’re trying to achieve. Be fair to your client, but also to your firm

There are many ways of billing a client: hourly rates, fixed fees, value based, capped fees, conditional/contingent fees etc. For years I spent hours agonising over pricing my work until I finally asked myself what it is I am actually trying to achieve. The answer to that question for me, was that I want to be able to provide the best legal service that I can on any given case and to be able to charge for that work in a manner that is fair to the client. Providing access to justice has always been of great importance to me. However, naturally it was not enough to be fair to the client.

In order for any formula or approach on pricing to work, it must also be fair to me and my business. This dichotomy is at the heart of any costs decision I make. In this way, I know that the price I offer is the best I can do by a client but equally I know when to walk away if a client keeps wanting to beat me down on price to the point that it would not be fair to my firm, whilst knowing that I did my best in trying to meet that particular client’s needs.

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Don’t shy away from alternative fee arrangements that offer transparency

From the client’s point of view, how do you judge fairness? What is an attractive and competitive way of pricing? When I first started as a solicitor, the hourly rate was everything. You quoted a rate and billed…and billed… Now of course we must provide accurate estimates and be transparent. In the last 11 years I have been running my own firm, increased access to legal expertise through the internet, technological developments in law and the commoditisation of certain areas of law – not to mention demand by clients – have heralded a seismic shift towards certainty and transparency.

That in turn has spawned different ways of pricing and billing to accommodate demand. In my own firm, there has been an organic move towards fixed fees, resulting from clients’ requests, which has meant that my hours of agonising over quotes and having to notify clients of a change in the original estimate (because let’s face it, how often do we provide an accurate estimate first time) have been replaced by a menu of set fees. It’s a systematic approach that I can reel out at any given moment before going my merry way and continuing my day’s work of actually advising clients.

Use different fee arrangements, for different practice areas, to your advantage

Don’t get me wrong though fixed fees are not a panacea. They do not solve the entire issue of costs for good. Different specialisms in law, require different ways of billing. There is no single solution. For instance, fixed fees work perfectly for me in the immigration work we undertake. The steps/scope are well defined. The lifespan of each case is relatively short, and it is an area of law which means a great deal to clients. Oftentimes their lives or businesses depend on it, and they appreciate the certainty they can have at a very stressful and difficult time in their lives, through fixed fees. The other great advantage is that you are paid up front and unpaid bills are reduced to zero.  

Consider the value of the case to the client – as well as to yourself – when fixing fees

How do you calculate the fixed fee? That’s a very personal question. You have to know what your breakeven is, what figure will make you a profit and then decide what it is you want/would consider as fair for that work. For me, one of the most difficult habits to break has been partly letting go of the hourly rate to work out a fixed fee and incorporating a value-based approach.

That is, rather than thinking that a particular case may take 10 hours of time and multiplying that by the hourly rate to come up with my fixed fee, I now also think in terms of what value that case will have for the client? What is the value of a particular outcome to a client, their family and their business? I still use the hours worked as a base – that has been instilled in me by too many years of practice – but I do also look at the value of the work I will be doing for my client.

Maintain flexibility so your pricing model can adapt to the work

On the other hand, we also practice litigation and one of the worst decisions I ever made was to try to fix fees on an arbitration. Contentious matters can only be taken in stages and best estimates must be given for each stage. There are too many unknowns to fix costs.

However, even in litigation there is room for evolution (I do not yet know what will cause the revolution to make litigation more affordable for all). At my small firm’s level, I have found that quoting a flat rate for the team working on a piece of litigation works well in some cases. So, rather than quote separate rates for the Partner/Director and the assistant solicitor, we can offer a flat/combined rate per hour. This affords a simplicity and certainty that works well for a small team in a small firm, which clients seem to appreciate.

Over the years I have learnt that pricing is at the heart of my law firm. Get it right so that you are fair to the client but also don’t be afraid to back yourself. When you and your clients are happy, there will be an abundance of work, and profit. There is no easy way of knowing how to get it right; pricing is an issue that needs constant attention, review and assessment and a willingness to be flexible. In a profession that is very different today to what it was even just 7 years ago, flexibility and innovation are key. And if it is an issue you naturally prefer to avoid, as I do, then employ people who are good at it to advise you and/or execute it for you. It will be one of the greatest investments you could ever make for your firm.