Lawyers must learn to master art of pricing

The issue of salaries dominated the front page of The Lawyer once again last week, reviving concerns among private practitioners about the cost of delivering legal services.

But important as the perennial concerns of salaries and other law firm costs are, the real issue for firms today is learning how to estimate the value of their services to their clients and how to price accordingly.

While most of us now buy into this in principle, we still find it hard to live up to in practice. We know that the resource devoted to a matter should be commensurate with its commercial significance for the client, and that budgets for legal work should be driven by the importance and urgency of the work.

But when it comes to the crunch, we are uncomfortable with the open working relationship that is required to achieve this.

Relationships with clients have changed in recent years, largely for the better. Lawyers devote much more time and energy on understanding their clients' businesses and commercial objectives in an effort to help them provide the kind of service their clients value. Such a policy pays dividends in the long term.

This commitment goes hand in hand with greater realism about clients' budgets for legal fees. Lawyers now raise the issue before clients raise it for them and, generally speaking, dialogue on the subject has never been more frank.

Nevertheless, the accountants are still ahead of our game – they have pretty well mastered the art of pricing, while we remain novices. Lawyers must now take the lead on best practice.

Most clients already adopt a highly commercial approach when purchasing legal services. They know that full and early discussion of the brief is the only way to avoid difficulties with service and bills later. As a result, the days of sticking a finger in the air to come up with a price for the job are largely gone.

It is true that our estimates can only be as good as our clients' instructions, but we cannot off-load responsibility for getting them right. It is up to us to help our clients instruct effectively to facilitate more accurate estimates on our part.

We must invest in helping them clarify the objectives behind a matter, what is at stake and what a successful outcome would be.

We have to ensure that we discuss promptly what may be involved in meeting those objectives, how different developments might affect the picture as the work progresses and what all this could mean for the level of fees.

It is a matter of working in partnership from the beginning, knowing that this dialogue will pay off later.

Clients do not want to see their lawyer lose money on a job. But they do want lawyers to focus on the service they need rather than the service that it is easy for the lawyers to provide and to remember that costs incurred do not necessarily translate into value delivered.

In the 1990s “value for money” became a catchphrase for lawyers. In the new millennium the “art of pricing” has to be equally important.