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Pricing Legal Services
Ben Weinberger3
Legal Operations Director,
Nextlaw In-House Solutions
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 creating the right
processes around that cost to ensure the profitability of your business — and that’s what firms
must do.
3 Ben Weinberger is currently Legal Operations Director with Nextlaw In-House Solutions and previously served 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.
116
Ben Weinberger3
Legal Operations Director,
Nextlaw In-House Solutions
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 creating the right
processes around that cost to ensure the profitability of your business — and that’s what firms
must do.
3 Ben Weinberger is currently Legal Operations Director with Nextlaw In-House Solutions and previously served 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.
116
