Page 127 - Leaders in Legal Business - PDF - Final 2018
P. 127
Pricing Legal Services
Ben Weinberger1
Lawyer in Residence,
Prosperoware
In the “good old days” of law practice, pricing was a simple concept. It was a sellers’
market, and law firms could name their price. Estimates were used for guidance at best. In fact, a
colleague of mine, a former law firm managing partner, regales audiences with tales of how
when he first entered practice, his mentor taught him a simple method for pricing work. It was
less than exact: At the end of the matter, hold the file of paperwork in one hand and set your
price based on the general weight of it (“That feels like it’s about $45,000’ worth of work”).
Somehow, that used to be acceptable. Even for those firms that didn’t subscribe to the “weight =
cost” formula, a simple ballpark figure quoted along with a minimum retainer accompanied by
an hourly rate was commonplace. Firms even passed on a bevy of expenses on top of that
formula, charging for faxes, photocopies, long-distance, and other creative concerns. In 2008,
that all changed and has continued to evolve.
Firms today need to embrace the best practice of evaluating pricing before a matter is
opened, as it allows the firm to have the appropriate enterprise controls. There are two elements
to proper pricing of a matter: (1) determining scope (or budgeting) and (2) what pricing or fee
type should be used with the matter. Firms are becoming better at the latter but are quite
unskilled in the former. Both must be razor sharp and working in concert to form the bedrock of
profitability in the new market for legal services.
Legal services has become a buyer’s market, which is why we must reshape profitability.
Corporate clients expect the same quality of work but now delivered within price guidelines they
set at the outset of a matter. When dealing with outside law firms, there’s no more
“guesstimation” in legal billings, and there’s little room to negotiate. A firm’s value is found in
the delivery of quality matters at the price and level of expertise they expect. The insertion of
price and client-set budgets has upended the law firm business model.
The challenge for firms adjusting to this tectonic shift is that historically, there was little
to no understanding of the true cost of delivery for their services, complicating the transition to
delivering work — profitably — to budget. Firms must reengineer themselves, and quickly.
Clients are aggressively interested in managing rates, are refusing to pay for firms’
inefficiencies, and simply need predictability so they can manage their own intensely scrutinized
budgets. It doesn’t get much more essential, economically speaking, than understanding cost and
1 Ben Weinberger serves as Prosperoware’s Lawyer in Residence. He has extensive experience in the strategic development, transformation, and
direction of operations and technology in a variety of public and private organizations. He previously served as Chief Strategy Officer for a
global consultancy and in senior executive roles for a top UK law firm, two AmLaw 200 law firms, and the largest municipal law office in the
US. Ben has consulted on projects for multinational organizations including The Walt Disney Company and Chevron and previously practiced
law in Chicago where, after clerking for the Federal District Court, he served as legal counsel for the Illinois Department of Professional
Regulation. He is a regular speaker on such topics as Data Privacy and Security, Information Governance and Emerging Technologies, and
Transformational Trends in Professional Services. He holds a BA in Economics from the University of Michigan and a JD from the University of
Wisconsin.
113
Ben Weinberger1
Lawyer in Residence,
Prosperoware
In the “good old days” of law practice, pricing was a simple concept. It was a sellers’
market, and law firms could name their price. Estimates were used for guidance at best. In fact, a
colleague of mine, a former law firm managing partner, regales audiences with tales of how
when he first entered practice, his mentor taught him a simple method for pricing work. It was
less than exact: At the end of the matter, hold the file of paperwork in one hand and set your
price based on the general weight of it (“That feels like it’s about $45,000’ worth of work”).
Somehow, that used to be acceptable. Even for those firms that didn’t subscribe to the “weight =
cost” formula, a simple ballpark figure quoted along with a minimum retainer accompanied by
an hourly rate was commonplace. Firms even passed on a bevy of expenses on top of that
formula, charging for faxes, photocopies, long-distance, and other creative concerns. In 2008,
that all changed and has continued to evolve.
Firms today need to embrace the best practice of evaluating pricing before a matter is
opened, as it allows the firm to have the appropriate enterprise controls. There are two elements
to proper pricing of a matter: (1) determining scope (or budgeting) and (2) what pricing or fee
type should be used with the matter. Firms are becoming better at the latter but are quite
unskilled in the former. Both must be razor sharp and working in concert to form the bedrock of
profitability in the new market for legal services.
Legal services has become a buyer’s market, which is why we must reshape profitability.
Corporate clients expect the same quality of work but now delivered within price guidelines they
set at the outset of a matter. When dealing with outside law firms, there’s no more
“guesstimation” in legal billings, and there’s little room to negotiate. A firm’s value is found in
the delivery of quality matters at the price and level of expertise they expect. The insertion of
price and client-set budgets has upended the law firm business model.
The challenge for firms adjusting to this tectonic shift is that historically, there was little
to no understanding of the true cost of delivery for their services, complicating the transition to
delivering work — profitably — to budget. Firms must reengineer themselves, and quickly.
Clients are aggressively interested in managing rates, are refusing to pay for firms’
inefficiencies, and simply need predictability so they can manage their own intensely scrutinized
budgets. It doesn’t get much more essential, economically speaking, than understanding cost and
1 Ben Weinberger serves as Prosperoware’s Lawyer in Residence. He has extensive experience in the strategic development, transformation, and
direction of operations and technology in a variety of public and private organizations. He previously served as Chief Strategy Officer for a
global consultancy and in senior executive roles for a top UK law firm, two AmLaw 200 law firms, and the largest municipal law office in the
US. Ben has consulted on projects for multinational organizations including The Walt Disney Company and Chevron and previously practiced
law in Chicago where, after clerking for the Federal District Court, he served as legal counsel for the Illinois Department of Professional
Regulation. He is a regular speaker on such topics as Data Privacy and Security, Information Governance and Emerging Technologies, and
Transformational Trends in Professional Services. He holds a BA in Economics from the University of Michigan and a JD from the University of
Wisconsin.
113
