How should our law firm set our rates?
You want clients to keep coming in the door. (Or, in the age of the pandemic, contacting you remotely.) And you want to be able to cover your firm’s expenses — and have an income.
All those things are possible by determining appropriate rates for your firm.
Laying the foundation
Before you begin calculating your rates, there are a few things to keep in mind.
First, we want to debunk a common misconception: that you should calculate your rates based on those of local competitors’. The truncated explanation for this is that no two firms are alike. That may seem counter-intuitive, but each firm will create a different client experience.
In the same way you want to reflect that difference in your marketing, you want to show it in your pricing. That said, we’re not advocating completely ignoring other firms’ rates in your area. But they should give you a loose set of guidelines—not a full calculation.
The second thing to remember is that the American Bar Association has rules pertaining to client-lawyer relationships, including fees. Specifically, Rule 1.5 states that you can’t charge “unreasonable” fees or expenses.
What to consider when calculating rates
What is the value of the services — in terms of end results and the experience — that you provide for your clients?
The answer to this question may seem elusive, but you can find it through a brief (let us repeat: brief!) client satisfaction questionnaire after you’ve wrapped up a case or matter for a client. While we’re all protective of our time, most people won’t mind answering a few questions, especially if they don’t have to type an essay for each one.
In fact, conducting client satisfaction questionnaires is always a good idea — whether you’re trying to calculate firm rates or not. And using your clients’ feedback can guide you in making adjustments on the client-experience end that can up the value of your services.
You’ll also want to look at your firm’s budget, business expenses and overhead, how many work hours your team will put in during the year, how much you’d like to make — and yes, the rates that other firms in your practice area and locality are charging.
Finding suitable rates for your firm requires some tinkering. And you may need to tinker further to adjust for discounts, referrals, and other situations that make the business world go round. But through client feedback and a good billing and accounting system, you’re well on your way to charging rates that will keep clients reaching out.