When law firms get collaboration between lawyers and their clients right – that is, open clear communication—the rewards for both clients and the firm are impressive.
Firms that recognise this understand that collaboration occurs at every stage of the client relationship and is vital right from the very outset of the relationship.
Organisations are increasingly adopting formal procurement procedures when procuring legal services, which requires firms to have a clear strategy and approach when it comes to pricing legal services.
In order for law firms to structure their services in a collaborative way, it is vital that access to clear and accurate information, often in real-time, is available.
Ensure you make a profit by understanding the cost of delivery
Insight into, and awareness of, the ‘cost of delivering services’ rather than ‘top-line revenue generated’ is pivotal to engaging in a collaborative relationship with clients.
This starts with analysing past work performed by the firm. Firms must be able to evaluate every billable hour at client, matter or lawyer level to understand the effect of utilisation, realisation, leverage, and of course profit.
Information can only be leveraged when it is available in a timely manner. There is little point in modelling information if it will remain locked away and unable to be used when client demand arises.
Relying on spreadsheet-based methods to model this information is inefficient and siloed. Firms must find ways to make the information available to key decision makers in an easily accessible format.
Find out more about the latest trends in law firm profitability by downloading our profitability snapshot based on information from 100 leading law firms.
Working together with the client to price services in a collaborative manner
The legal sector is subject to an ongoing trend of commoditisation. With the unbundling of services, law firms need to offer choices to ‘price-aware and savvy’ clients.
To form close collaborative partnerships with clients, firms need to first ask the question, “What is this legal advice really-worth to clients?” Only once this is known can firms align their pricing strategy to suit.
The traditional approach of pricing services on a purely hourly basis doesn’t lend itself to collaboration in this manner, and requires firms to think about how their services are structured and priced.
For example, more complex transactions may require firms to break down their matters into key deliverables or phases, each of which may include a combination of fixed and discounted fees for the different elements of the services provided.
Firms should consider how to align these deliverables with key stages of value in the minds of their clients and seek to bill accordingly.
Whilst firms have long argued the value of each hour is the same, clients often see this differently, associating a higher value to complex legal work than a simple administrative task. Firms should recognise this by ensuring the appropriate resource is assigned to each activity in line with client expectations.
Enhance your service by keeping the client informed
Once a firm has agreed on an initial price with a client, the firm is able to establish a baseline budget for delivery of their services.
As with any business, progressive law firms understand that this in itself allows for an on-going line of communication. If managed effectively, this can lead to increased billing realisation due to a common understanding between the law firm and client.
When combined with an effective client service strategy, firms that engage in pro-active conversations with their clients around budgets can differentiate themselves from their competitors. There are many ways in which this can be achieved. Often this involves a combination of both technical solutions, for example sharing key information via client friendly extranets, and implementation of formal processes around managing client expectations.
Managing communication effectively can even provide a financial incentive to the firm; closer relationships can help manage un-expected scope changes, and identify further opportunities to work together.
Leveraging technology to achieve your goals
We believe strongly that technology offers firms the opportunity to take advantage of the unique characteristics that define their firm whilst building strong, sustainable client relationships.
No two firms are alike. When implementing solutions such as a profitability engine, it is vital that the software takes into account the ‘things that make you who you are as a firm.’ Our clients understand that an ‘out-of-the-box’ approach to profitability will not meet their needs. They reap the benefits of the detailed information they receive as a result of customising the software to their firm.
We work with our clients to deploy pricing solutions that leverage historical information in a way that encourages collaborative discussions on pricing, whether on an hourly basis or where that price is aligned with client value expectations. Just as importantly, the technology also supports the on-going client relationship, providing both internal members of the firm and external clients with information they can rely on for decisions.
Here’s just a glimpse into how a modern pricing tool is different and how it benefits law firms. If you’d like a demo of our software, we’d be happy to schedule one with you – click here for more information.