How Savvy Lawyers Build Their Law Firm Rate Sheet

e-commerce-402822_1280Listening to your gut instinct can be a helpful approach in some aspects of your business, but when it comes to setting rates, the experts have another recommendation: Do your research.

“You have to figure this out the same way that any business would set prices, the way Walmart sets prices, the way LL Bean sets prices,” says Joyce Brafford, director of partner relations at ProfitSolv, which owns Rocket Matter and several other legal tech solutions.

For a small firm or a lawyer just starting out, the research naturally begins with plenty of googling for price comparisons online.

But Brafford also recommends seeking out year-end reviews from legal tech companies. The data they gather from clients is released for marketing purposes, but the white papers they produce can be incredibly valuable. Most reports are free, in exchange for signing up for a newsletter that will probably help in some other way in the future.

And don’t discount reaching out individually to other lawyers in your area. Although local bar associations probably won’t list average hourly rates, your peers in the industry probably will talk.

Start by Building a Baseline Price

On a recent episode of the Non-Eventcast podcast, Brafford urged lawyers to determine first what they need to make and then to work backward from there.

Once that price has been determined, attorneys should build from there, such as when they specialize in a certain field.

Then, consider whether that baseline is still too low. Since most lawyers are willing to negotiate on prices, it’s better to have some wiggle room from what’s listed on your rate sheet.

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Even firms that have already done their research shouldn’t rest on their laurels. In fact, experts suggest reevaluating your rates at least once every year, and many firms are already behind.

“I think it’s clear at this point that most law firm rates are not keeping up” with inflation, says Non-Eventcast host Jared Correia.

The danger is that lawyers who realize their old rates are too low find themselves charging huge percentage changes that scare off clients. Incremental increases make clients more likely to sign necessary documents like fee agreements and credit card authorization forms.

With all those documents in place, a software like Rocket Matter can help track time, send bills, collect e-signatures and set up automatic payments with a credit card on file. Having these systems in place will make it far less likely that clients are in arrears for significant sums of money when all the work has been done.

Consider Alternate Billing Options

Though hourly billing has historically been the most common, it’s far from the only — or best — option.

Evergreen retainers involve starting with a retainer, say $5,000, and the obligation of the client is to replenish the retainer at the end of every month.

“I love that as a model,” Correia says. “The firms I talked to that utilize that in a traditional practice, they’re collecting like 99 to 100% of their invoices, which is not a common thing in law firms.”

Another option is using a subscription model, which runs like most technology software that charges clients a monthly fee. This works best for certain lawyers, like outside business counsel for companies that pay a certain amount every month for a set amount of legal services.

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Finally, lawyers should consider selling products, just like Legal Zoom and Rocket Lawyer have been for doing documents for years. Then the question is whether it’s better to do that through the firm or to set up a separate company.

“If you’re just doing hourly billing, you’re not even thinking of other models that are out there,” Correia says. “That’s just three.”

For more details on rate-setting — as well as how much clients care about rates anyway and even North Carolina’s version of Sasquatch — listen to an informative 33 minutes with the podcast link below.

Building a rate sheet for a law firm requires careful consideration and strategic planning. Savvy lawyers understand the importance of having a well-designed rate sheet that accurately reflects the value they provide to their clients.

One key factor that savvy lawyers consider when creating their rate sheet is the level of expertise and experience they bring to the table. Clients are often willing to pay more for lawyers who have a proven track record of success in their particular area of practice. Therefore, lawyers should accurately assess their skill level and set their rates accordingly.

Another important consideration is the market rate for legal services in the area. Savvy lawyers conduct research to understand what other firms are charging for similar services. This can help them position their rates competitively while still maintaining profitability.

It is also essential for lawyers to clearly outline their billing structure on their rate sheet. This includes detailing whether they bill by the hour, have flat fees for certain services, or offer alternative fee arrangements such as contingency fees. By being transparent about their billing practices, lawyers can build trust with their clients and avoid confusion or disputes over fees.

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Additionally, savvy lawyers know the importance of regularly reviewing and updating their rate sheet. As their experience and expertise grow, they may need to adjust their rates to accurately reflect the value they are providing to clients. By staying current with market trends and adjusting their rates accordingly, lawyers can ensure that their firm remains competitive and profitable.

savvy lawyers build their law firm rate sheet by carefully considering their expertise, market rates, billing structure, and regularly updating their rates. By taking these factors into account, lawyers can create a rate sheet that accurately reflects the value they provide to their clients and helps them achieve financial success in their practice.