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Episode Description
Implementing value-based pricing can be a game-changer for your law practice – more profits, happier clients, and less stress. But are you undermining your own success with these common pricing pitfalls?
In this episode, Lauren reveals the top 3 mistakes lawyers make when transitioning to value-based fees. You’ll learn:
- The #1 reason your pricing strategy is falling flat (and how to fix it)
- A crucial number you need to know to price profitably
- The website update that’s driving clients away (and what to do instead)
- How to avoid an unintended “race to the bottom” on fees
- Why “affordable” services don’t have to be cheap
Whether you’ve already implemented value-based pricing or are just getting started, this is a must-listen on optimizing your law firm’s finances. Tune in for practical pricing wisdom that could revolutionize your practice.
Listen now!
Episode Resources
Episode Transcript
LAUREN: [00:00:00] The legal consumer is smart enough to know that a will or a divorce or a civil litigation case or going through bankruptcy or getting help with their tax controversy is not going to cost them a couple hundred bucks. Welcome to a different practice. I’m your host, Lauren Lester, and I’m obsessed with all things business, well being, and optimizing the practice of law for solo and small firm lawyers.
I started my solo practice right out of law school, built it from the ground up, and now work part time while earning well over six figures. I’m here to share tangible, concrete tools and resources for ditching the legal profession’s antiquated approach and building a law practice optimized for profit and efficiency.
Think of this as grabbing coffee with your work bestie, mixed with everything they didn’t teach you in law school about running a business. Pull up a seat, grab a cup, and get ready to be encouraged and challenged. This is a different practice.
[00:01:00] Alright, welcome everyone to another episode of A Different Practice. Thanks so much for spending your time with me today. I’m so glad you’re here. If you didn’t know already, in 2022, I co authored the revised version of the Pricing Toolkit. This was in collaboration with the Chicago Bar Foundation. And over the last couple of years, we’ve had a really tremendous response to the new and improved Pricing Toolkit.We’ve had hundreds of downloads, which you can grab your free copy at thepricingtoolkit. com. Now the pricing toolkit lays out our four step framework for implementing value based pricing in your practice, and we’re really starting to see a shift towards this way of selling services. When we first launched the toolkit, you know, a couple people here and there were into it, but it’s been really cool to see, even over the last couple of years, that more and more practitioners are realizing the benefits of pricing.
It’s a value based pricing, not only for their clients, but for them as business owners. So we’re getting a [00:02:00] lot more momentum. Now the movement is starting with solo and small firms, mostly because they’re able to pivot more easily. I think that they have a better pulse of the market. They sort of are more boots on the ground.
And so they are definitely hearing from legal consumers that this is the way that they want legal services. So, they are the front lines of bringing this movement to life. But there are larger firms out there like Barclay Bett and Valorum that are also instituting value based pricing. And these are firms that handle very complex matters like civil litigation in some cases, and they are still providing fixed, predictable pricing to their clients.
And I think that’s because even large corporate clients who maybe have more of a healthy budget than the average legal consumer, they still want to know what the legal service is going to cost. They may be able to pay more at the end of the day, but they’re a company too with a budget. And they want to know what is that line item for legal [00:03:00] services going to cost them.
So from the average legal consumer, all the way up to corporate clients, value based pricing is really where the market is starting to push us. And it’s been so amazing for me personally to work with lawyers who are on board and see the value here and are wanting to implement this new way of pricing their services because when it’s done right they can see that it’s a win win both for us as the practitioner and the business owner and for the client.
Legal consumers love value based pricing because it’s transparent. It gives them a predictable cost. For most folks it does end up being being affordable because they have that predictable known cost. It can be budget friendly, especially if you offer payment plans. It also empowers the client to choose the legal service that’s going to work best for them.
It provides them choice and it gives them access to help that they may have not thought was available to them. A lot of folks think that legal services are exorbitant, that they’re very pricey and [00:04:00] For a lot of legal consumers, they still run into that, but when they can find a firm that offers value based pricing that provides a fixed, transparent, predictable cost, now the legal consumer is able to get some help that they need that they never thought was available.
For us as the attorney and the business owner, there’s a ton of value for us to in value based pricing as well. First of all, we’re selling our value and not our time. Our value is going to be something that is not fixed. It is infinite. There are a ton of possibilities for how to provide more value to the legal consumer.
Whereas our time is fixed. There are only so many hours in the day. And when all we’re doing is selling, selling our time, we’re really limiting ourselves and our business in terms of our growth and our revenue. Value based pricing also gives us a lot more control of our business. It’s certainly going to increase revenue.
You can get payments up front when the client knows what it’s going to cost. They are much more willing to give you [00:05:00] that payment up front, so no more chasing clients down for money, no more wasting time being a bill collector that obviously leads into less admin time. Just overall, it can give you a really predictable cash flow.
And for a business that is just absolutely critical. And most importantly, I just find that it leads to less stress and more enjoyment in the practice of law. The attorneys that I’ve worked with who have implemented value based pricing, they say that they will never go back. Some of them have. done the billable hour grind, and they say there’s absolutely no comparison.
They would never go back to billing by the hour. I have one colleague who had a client, uh, sort of strong arm her into billing by the hour. That’s the one client she does it that way for, and she hates it. She loves the client, but she absolutely hates it. Even though she’s providing very similar services.
to the other clients that she has, that she implemented the value based pricing method with. So a lot of the [00:06:00] attorneys who have switched to this way of selling their services are just happier. They just enjoy their practice a lot more. Business is great. Their profit margins are phenomenal. And that all in turn means that you’re just providing even better service to your client because you enjoy doing the work.
So while I’ve been working with lawyers on their pricing and helping them implement value based pricing in a way that’s going to be profitable for their business, I’ve noticed that there have been some common mistakes that tend to come up again and again. And these mistakes are understandable. Value based pricing hasn’t been the norm for many decades in our profession.
It still feels very new while we have a phenomenal resource in the pricing toolkit, which gives you a four step framework to work through. This isn’t something that you were ever taught how to do in law school. And still when you look around in the profession, the norm, what most folks are doing is still the billable hour.
Now, I personally think that that is going to change here in the very near future, but for now it can [00:07:00] be really challenging to come up with a support system and work with other colleagues who have taken this approach with their business. And so sometimes I have found that while somebody may be intellectually ready to do value based pricing thinking that they implemented it correctly, they either didn’t follow our framework, but even if they did, they cut corners in certain places and then blamed value based pricing when it wasn’t working.
So today I’m going to cover some of those common mistakes, those cut corners that folks sometimes have made and talk about how to fix them so that if this is something you are interested in implementing in your business, that you can avoid these mistakes and implement value based pricing in a way that is going to be not only great for your clients, but a phenomenal business decision for you and your firm.
So of all of the mistakes. that I see the most often, the number one is not being able to clearly define the value that you provide as a business. And this makes sense because value is a pretty [00:08:00] squishy topic. It’s not based on an objective number or even often something that you can tangibly see, but even so it’s the only thing that clients are ever buying from us.
So it’s really critical to understand and be able to communicate the value that you provide to potential clients. So when we talk about value, it can be helpful to talk about first what value isn’t. And for us in the profession, it is definitely not the work product alone. And it is certainly not our time.
While clients understand that they’re going to receive a work product. Especially if you’re in a more transactional practice, that is not ultimately what they are buying. They are buying the value that that work product gives them. And I can almost guarantee that no client ever in the history of legal services has ever been gung ho about buying our time.
They have only been able to buy it because that’s all we have on hand. provided as a manufacturer and market for so many years, but the client is never actually buying our [00:09:00] time. Again, they’re buying the value that they think they will receive by that time being spent. But if you think about yourself in any other service industry, you know, if you have a leak in your faucet, when the plumber comes over, You are not buying his time that he takes to fix the leak.
You’re buying the peace of mind that that water is not going to spread to other parts of your kitchen and make more damage. You’re buying the fact that he could get it done quickly, which is against him spending a lot of time. You’re buying his expertise that he would be able to identify the problem and have a quick solution for it.
So this is why. With a lot of service based industries, you don’t see a lot of time being sold. You see the value that is being provided. And what that value is, is things like peace of mind, a reduced risk, simplifying the process, creating a legacy. Reducing their anxiety, providing access, making the client money, organizing things for the [00:10:00] client, reducing the client’s effort, avoiding hassles that the client may encounter, producing quality work, offering a variety or choice, and sometimes something as simple as just informing the legal consumer about what their options are, or Or just how the legal process works in general.
So again, while we often create work product to provide that value, say if somebody hires us to produce an agreement, we’re going to create the agreement itself, but that’s ultimately not what the client is buying. They are buying the value that they receive by getting that work product. So take, for example, the creation of an owner’s agreement.
My husband just went through this process with his company. He hired a lawyer. The lawyer created a 50 plus page owner’s agreement. Do you think my husband understood every single word? No. Even married to a lawyer, the osmosis has not worked over all of these years. And he doesn’t understand every single thing.
It certainly can be confusing for him to read that [00:11:00] contract. And if his attorney just provided him a 50 page document without having discussed it, So I’m going to be talking a little bit more about that in just a moment, but first, I owner’s agreement. And that they didn’t have to worry about possible conflict or litigation down the road.
That is the value that they ultimately paid for. So in the work I’ve done with other lawyers, I find that they struggle to define value in a way that doesn’t have to do with the work product or what they are doing as lawyers. When I ask them, okay, great. Tell me about your business. What is the value that you’re providing to your legal consumers?
What is the value that you’re providing to your target market? They’ll start to say things like, well, I bring my expertise or my experience to the table, or I care about keeping them out of court, or I’ll create a really great [00:12:00] agreement for them. And they’re absolutely right. They do all of these things.
There’s nothing that’s untrue there, but you can probably hear what the issue was. Everything was about I, I, I, I, me, me, me. You absolutely bring your experience to the table, but what the client wants to know is how does that experience help me? You very well may care about keeping the client out of court, but what the client wants to know is, well, how does that affect me?
What are the benefits to me if you do that? And you likely would create a very fantastic agreement, but the client wants to know, well, what is the benefit to me? You have to take that next step and connect it to the value that the client is looking for. Now, this is definitely something to be practiced.
Like I said, nobody ever taught us how to do this in law school. There was never a CLE about this. Even if you look around to other practitioners in your practice area or where you live, you’ll often not find very good examples of this because we just don’t do it very commonly in [00:13:00] our business.
Profession. However, look around outside of the profession at any other industry, and you will see that they do it a ton. Some businesses do it much better than other businesses and the businesses who can define value and communicate it to their potential clients in a way that’s very clear. Are those businesses who stand out above the rest?
So this is something that we have to practice as law firm owners. It’s a muscle, right? The more that you do it, the easier it will become. And no matter your practice area, I guarantee you, you provide value. It’s just a matter of tweaking the language slightly. To be reflective of the practice area that you’re in and what problem you are solving for your target market.
So we talked a little bit before about a business practice. Let me give you a couple of other examples just so you can see how this gets flushed out in different practice areas. Let’s say you work in an immigration practice. Part of the value that you’re going to provide is peace of mind to your clients that they can live without the fear of being ripped away from their family.
If you’re [00:14:00] in a civil litigation practice, part of the value that you provide is reducing the risk that a small detail could be missed that would jeopardize the client’s case. If you’re in estate planning, part of the value that you provide is simplifying the process so that your client can create the legacy they want for their family.
And if you do tax controversy, part of the value that you provide is using your experience to save the client money and reduce the client’s anxiety that they won’t be able to provide for their own basic needs. Being able to clearly define the value you provide through your business is the first step in successfully implementing value based pricing.
It is not something that you can gloss over. It is not something that you can assume. Zoom you’ve got, even if you’ve never practiced doing it, if it’s not a way that you’ve spoken with your target market before, and because it’s the very first step of our four step framework, if you skip over it, if you don’t put the time in, you are only setting yourself up to not be able to implement [00:15:00] value-based pricing successfully.
The second mistake that I see lawyers make when trying to implement value based pricing is not knowing the numbers of their business. At a minimum, you have to know what your target revenue is, and your target revenue is going to include your operating expenses, your salary, and any other owner’s withdrawals you may take, taxes that are necessary, and a profit margin.
Most law firm owners aren’t including a profit margin. Some of them don’t account for taxes very well. And a lot of the times the lawyers that I work with are just guessing. They don’t have hard numbers to use in their calculations. They’re just kind of going on a gut feeling. This is what I think I pay myself.
This is what I think my operating expenses are. Oh, I’m not sure about my taxes. I don’t know. Maybe it’s 10%. They’re just sort of shooting off the hip and they don’t have hard numbers that they can use. Because of that, there is no way for them to confirm that the [00:16:00] amount of money that the market is willing to pay for the value of the service being provided is going to profitably work for their business.
So they lose money because they didn’t take the time to actually learn the numbers of their business. They’re just shooting off the numbers. HIP and making a guestimate. And then again will blame value based pricing when that’s not really the issue. The issue is not knowing the numbers of your business.
And when you don’t plug in accurate numbers to a calculation, you’re not going to get accurate information out. If you’ve been in business for at least a year, the great news is you have data that you can pull from. So go back and look at the average numbers in each of those categories over the last 12 months.
If you have been in business more than a year Even better, you can shape that into calculate an even more accurate average. Looking back, it may be the last 24 to 36 months. Do you want to determine what your numbers have been historically? And then also consider if there are any [00:17:00] adjustments that need to be made.
Maybe for the last couple of years, you’ve had a pretty steady operating expense line item, but you know that in the next six months, you’re going to be shifting practice areas. And so there’s going to be a new expense coming up. You want to go ahead and factor that in because that’s something that you can strongly count on.
Maybe in the past you haven’t stored away enough for taxes. So even though historically you might have done 10 to 15 percent, you’ve now worked with a tax accountant or you have figured out that every year Uncle Sam asks for more money. So we want to avoid that heart attack come April. April and we want to put more money away.
So maybe you go ahead and increase that to 15 to 20%. Maybe you look at what you’ve been paying yourself and say, you know, ideally I’d like to pay myself a bit more into the future. And so that’s a number that you want to account for. And most importantly, maybe you haven’t been including profit into your goal.
target revenue. And that’s something that you want to start doing. And if it is, amen, [00:18:00] hallelujah, you go. So either start putting in a profit margin, or maybe the number that you’ve used historically when your business was just getting off the ground was a smaller number, and now you feel ready to increase it to a higher percentage.
Whatever it is, it’s really https: otter. ai
Period. No questions asked, but it’s also absolutely necessary to successfully implement value based pricing. And on the note of numbers, in addition to knowing what your target revenue is, including those four categories that go up underneath it, It’s also important to know some other numbers that aren’t directly related to the four step framework for value based pricing, but they are critical to help you reach your goals.
And those numbers are going to be your conversion rate. So how many consultations do you have and how many of those convert into paying clients? You want to know how much every new client is offering. worth on average to your firms or what [00:19:00] the average sale is for everyone that you sign up. And then you also want to know how long does it take you from the time that someone contacts your firm to getting them onboarded as a client?
What is that time that’s invested per sale? Because not every potential client that you talk to is going to convert into a sale, but you do want to know for the 20 hours that I spent last month on client acquisition, that resulted in this many sales. And that means that per sale, I’m spending an average of X hours.
Once you have value based pricing implemented, those numbers like conversion rate and price An average sale value and time per sale can help you calculate precisely how many consultations you’ll need to hit your revenue goal. So if in doing your target revenue, you said, you know, I’d really like to pay myself more this year, or I’d like to increase my profit margin, or I know that I have this expense coming up that is really going to invest into the future of my business, but I have to be able to cover it.
You’re going to have to generate more revenue [00:20:00] to do that. And when we look at generating more revenue, we can easily break that down. If we have some of these other numbers to say, okay, last year I did an average of 20 consults per month. This year I need this target revenue. I know what my conversion rate is.
I know what my average sale is. And so we do the math and that turns out to be that now you need. 30 consultations a month, because if you do that, then the numbers will flow from there, and you will, without even trying, hit your revenue goal. Knowing these numbers, like the back of your hand, having them be accurate, just makes the math that much more easy.
I know you didn’t go to law school to do math. I didn’t either. But when we run a business, it really is a vital part of our business and the success of our business. And at the end of the day, putting these numbers together isn’t the end of the world. It should be just basic arithmetic. Knowing them will give you so much more confidence in your business.
It will help you dictate the right decisions financially for your business into the future. [00:21:00] And it will certainly set you up to have a very healthy business. All right. So the third biggest mistake that I see when it comes to value based pricing and implementing it into a law firm is not providing pricing information on the website.
I feel very strongly about this, but I don’t believe you can call your law firm client centered or even modern if you do not have pricing on your website. You can choose to continue taking the traditional approach of making pricing opaque or requiring potential clients to jump through a bunch of hoops to get it.
Even if those hoops are calling your office, waiting for a response, scheduling a call with you to then be able to get the pricing information. All of that still creates a lot of friction. It is not providing pricing information freely. And if you take an approach like that, I feel that you’re playing lip service to being client centered or building a law firm that operates differently than the old traditional antiquated approach that so many law firms continue to take these days.
And I totally get it. It’s [00:22:00] hard to provide pricing information in particular freely, especially when anyone and everyone can see it. But if you want to have a business that serves clients first, I wholeheartedly believe that this is a critical step. Now, all that being said, I am not saying that you have to put a full menu of services.
on there. Day one, even starting out small by having a starting at cost or a price range is going to be really helpful. It may help you dip your toe into the waters. I promise it is very warm, but I get that it is a different pool you are swimming in. So doing that allows you to feel more comfortable with it, but it also provides a ton of information to the legal consumer that they don’t normally have.
I would say in addition to that, including those starting costs or a price range, is also describing some of the factors that will influence the cost so that the consumer can start to get an idea of what to expect. So if you have a practice where the number [00:23:00] of documents for discovery is going to be a factor, which makes sense, or maybe the Total damages that somebody is asking for is going to be a factor.
It’s going to push the legal consumer, maybe higher up in the range that you’re providing, or if it’s a family case, let’s say, and it depends on the nature of the motion or whether they are pre or post decree. Any of those factors, if you can just list them out and describe them to say, Hey, legal consumer, if you’re reading this and you’re checking off some of the list of these factors, you’re probably going to be at the higher end of this range, even if you’re not giving them a flat cost right then and there.
You’re still giving them something because legal consumers with the traditional way that our profession has operated have no clue how much legal services will cost. They just generally know that it’s very, very, very expensive. And so being able to give them something. Is going to be better than nothing.
And that also will make [00:24:00] you more comfortable and allow you to have time to build out a more robust menu of offerings and services, which you can eventually put on your website to give clients the full transparency and predictability that they are ultimately looking for. And when you do that, I promise you will watch your business grow.
I cannot tell you the number of consultations I have had over the last eight plus years of somebody looking for legal services, having to several other firms and only generally gotten the response of this is our retainer. We can’t tell you how much the total cost is going to be. Sometimes they couldn’t even get retainer information.
And then they come along and have a call with me and I say, Oh, this is what you’re looking for. Here’s the services. Here’s the cost. You can see it all on my website. I would say. Eight times out of 10, I got that sale just because of that transparency and predictability in my pricing because the client knew when they were comparing apples to apples from the law [00:25:00] firm that they talked to yesterday and talking to me.
That was the differentiating factor because again, these are not folks who have a money tree in their backyard. They cannot print money. They cannot write a blank check. They will find the money if they’re able to know what the total cost is going to be. But when they don’t know that, that is terrifying for them, and they’re often not going to engage in services because they just don’t know how much it’s going to cost.
So while it may feel very scary and you can certainly go at it slowly, I promise you that providing this information freely on your website for everyone to see, you are going to start to see the benefits in your revenue because clients are going to be knocking down your door to work with you. So you might be thinking, all right, Lauren, you convince me I’m going to dip my toe in, put some pricing information on there, ultimately have my menu of services and all of my pricing up on my website.
But what if I have to change things? And that’s a very fair concern. [00:26:00] I would say for the first five years probably of my practice, I was changing my pricing pretty regularly. This is before I had figured out the framework. That we offer now in the pricing toolkit. I was really just throwing stuff against the wall to see what would stick.
I didn’t have a full grasp of the practice area, so I didn’t know all of the variables I should have been accounting for. So I learned those in real time. I fell on my face. a bunch. I made a lot of mistakes. I underpriced my services a lot, but I was also really intentional about getting feedback from clients as well.
So I would go through a matter with them. I would ask them how the value they received compared to the price that they paid. And for a long time, everybody told me it was a steal. Steal. And so they were telling me, raise your freaking prices. You are not charging enough. And so I just got used to adjusting my pricing on my website.
Pretty regularly. I wasn’t doing it every day. I wasn’t even doing it once a week, but probably every month [00:27:00] in the beginning, I was going back and looking at, okay, what matters had this service that I sold? How are things going? Did something come up that I didn’t account for? What feedback am I getting from the client?
How do I need to adjust the price? And then I would just change it on the website. And the first time that I did this, I made a policy decision, a promise to myself, I guess, that if I talked to somebody and they said, Hey, I just saw your pricing yesterday and it was this. And now today it’s this new number.
What’s up with that? I had a policy on how I would handle that. And so the two options were I could honor the price that they saw. If they actually did say during a consultation that they saw a different price, I could choose to honor that price. Or I could say that prices change and that happens everywhere in every industry.
So I think that you have to balance that with not changing them every single day because you probably will get more folks who notice that, but most clients are not on your website every single day. I don’t think anybody ever actually said anything to me. So while I still have this [00:28:00] policy in place, a potential lead has never actually brought it up.
So it’s really not a problem as much as we think that it’s going to be. But if you have to change your pricing, you have absolute permission to do that. So don’t use the fear of potentially having to change your pricing in the future as a reason or an excuse not to implement value based pricing.
But Lauren, if everyone is putting their pricing on their website, who is going to stop the guy down the street from undercutting me? And then the guy down the street from him from undercutting him, isn’t this just going to lead to a race to the bottom? Do I think it’ll lead to a race to the bottom?
Probably not. Do I think that that is absolutely normal in any other market? Yes. We have to remember that us in the legal profession have manufactured a market. That is not how other markets and other service industries work. Because we have sort of agreed amongst ourselves that that is how [00:29:00] we are going to do it, and the legal consumer hasn’t historically had any leverage.
Or position to change that we have created this false market for ourselves, which has worked really great for us as practitioners, because we don’t have that natural competition that happens when you have a free and open market. Now we’re starting to see this shift in the legal profession, which I think is wonderful, and I welcome it.
And generally competition is going to only elevate all of the services and have All of us stepped up to our game so that we are better business people providing better services for legal consumers. But at the same time, I don’t think that that is going to lead to the bottom falling out and that all of us are going to have to sell our services for bargain basement prices.
The legal consumer still understands, especially if we communicate it to them well, the value that working with an attorney has. They understand that the system is very complicated, that we provide a lot of value of [00:30:00] helping them through that process. So I don’t think, as long as we stay in front of it and we adjust, that we are going to have a race to the bottom, even if we’re providing our pricing transparently.
Do I think that it will challenge some of us to become more efficient in our processes? Because there are folks who have figured that out. And so they are able to sell a similar service at a less expensive cost, but still make a high profit margin. Yeah. But that’s a market. That’s what it should do. We all should be pushed to be better business people and provide better services.
But ultimately at the end of the day, a floor is going to emerge. And I think a floor is going to emerge too, because being affordable, having transparent pricing, providing predictable pricing doesn’t mean it’s cheap. I think that’s where a lot of folks get mixed up is I say, I’m an affordable attorney and I believe that I [00:31:00] am, but that doesn’t mean that I sell wills for 50 bucks.
My services still cost a decent amount of money. And part of that is because the number that you put on your services also reflects back to the legal consumer, the quality and the comprehensiveness of that service. The legal consumer is smart enough to know that a will, or a divorce, or a civil litigation case, or going through bankruptcy, or getting help with their tax controversy, is not going to cost them a couple hundred bucks.
And if somebody is out there offering services at that price point, most legal consumers are going to have a red flag pop up to say that person is either a civil scam or they’re going to nickel and dime me. Or they just don’t know what they’re doing because I know that that’s generally not what legal services cost.
It would be like going out and buying a car. Even if you don’t know a ton about cars, myself included, I know [00:32:00] that if I were to go look online, go to a car dealership, look for a used car. If I saw somebody advertising by this car, it’s only a thousand dollars. I would immediately think there’s something wrong with it.
You Even if the place was titled affordable car dealership, I would think what is wrong with that car that you’re only selling it to me for a thousand dollars. I just know in general that cars are not sold at that price point. And so when you’re implementing value based pricing, you have to remember that it does not mean that it’s cheap.
Those civil litigation firms that I mentioned in the beginning that also offer predictable fixed pricing, their fixed pricing is not a thousand bucks. I mean, they’re coming at you and saying, great, you want to do this civil litigation case with us. It’s a quarter million dollars. I mean, these are not small figures and that’s okay.
There’s still a huge amount of value to the legal consumer to go, Oh, okay. It’s a quarter million dollars. Great. I wasn’t sure if [00:33:00] it was 10, 000 or a million. Now I know where I’m at in that spectrum. Just because you provide transparent, predictable pricing does not mean and should not mean that it is cheap.
You do not want to undercut your services because you are not going to reflect the quality of service that you’re providing, the value that you’re providing to the consumer. And so if that’s what your worry is, like if I put my pricing on my website, somebody may think, man, this lawyer doesn’t know what she’s doing.
Look how cheap her pricing is. Well, that’s a great place to get some feedback. So start to ask consumers, ask your colleagues, ask people in your potential market, how the number that you are putting on your services reflects the value. And again, this is part of our four step framework where we have you do this market research, but you do want to make sure that the number that you are putting on there reflects the value that you’re providing.
And the market is going to be able to tell you that if you are like me. And you get a bunch of folks who tell [00:34:00] you, you are not charging enough. Then that is a fantastic place to be in. You can easily increase prices because you know that the consumer sees the value in that. And again, it’s an iterative process.
So it is okay to change your pricing. It will not lead to a race to the bottom as long as you are still providing quality services. And if you are underpricing your services and you get that feedback, then just update them and know that you are in a fantastic position as a business. So while value based pricing is a game changer for your business, it is hard work.
It’s a lot easier to to continue to build by the hour. There’s a reason that we adopted this as a profession all of those decades ago, because it allowed us to have the client, quite frankly, bear the burden of our mistakes or inaccuracies or failure to spot an issue that we should have seen or failure to account for.
And, A variable that came up, it was just a lot easier to say, well, I’ll just keep [00:35:00] billing you for all of that. I didn’t have to put in that effort at the front to be able to give you a clear, predictable price. But at the end of the day, whether you do that effort upfront or you do it in the backend while discounting your bills and chasing clients for money, you’re still going to do the work.
So if you’d rather be willing to accept only collecting money on 2. 2. hours on average each day, which is what the Clio legal trends report over the last several years has shown. The average law firm collects in terms of earning revenue on just 2. 2 hours of an eight hour day. If that’s the way that works for your business, then keep doing that.
But if you are willing to say, I don’t want to do that work on the backend. I don’t want to be discounting my bills. I don’t want to be chasing clients for money. I want to earn every penny for all of the work that I do all day. Then consider doing the work up front instead. Go through the value based pricing four part framework that is again available for free at [00:36:00] the pricing toolkit.
com. The beauty of this hard work up front is once you do it and make some tweaks along the way, I’ll It’s a little bit more of a set it and forget it. You don’t have to have it come up with every single client the same way that you would do when you’re discounting your bills or chasing clients for money.
Once you’ve gotten to a groove and you’ve made value based pricing work for your business, all of that hard work and investment that you put in on the front end is going to pay dividends down the road. Remember you are in control of your practice. It is where it is now because of your decisions. And that’s great news, because that means where you want it to go is also going to be because of your decisions.
To me, value based pricing is one of the best decisions you can make for your business. And when you avoid those three common mistakes that we chatted about today, you will watch your business grow exponentially. If you’d like help implementing value based pricing into your firm, sign up for my Pricing Accelerator [00:37:00] program today.
During the six month program, we’ll work side by side to move you from living life in six minute increments, giving away 75 percent of your time for free, and constantly chasing clients down for money, into a system that sells what clients are actually buying, Get you paid for a hundred percent of your work and gives you more freedom, enjoyment and profit in your business.
You can find out more and sign up at a different practice. com slash coaching. Thanks so much for spending your time with me today. It is always a joy and the highlight of my week. You are doing amazing work. If nobody has told you that today. Until next time, keep building. I’m over here giving you a virtual high five because you just finished another episode of a different practice.
For more from this episode, head over to a different practice.com/podcast for the show notes. If you found this episode helpful, I’d love it if you’d share it with someone who might like it too. Be sure to rate the show wherever you listen to podcasts. And [00:38:00] don’t forget to subscribe so you never miss an episode.
If you’re ready to unleash your firm’s potential, grab your free guide to the six pillars of optimization today. I have tried everything and made all the mistakes in building my business over the last near decade. I figured out what works and what’s essential. Now I’m sharing the six essential pillars every law firm needs, key factors for implementation, and practical tips for optimizing each.
Grab your free download today at adifferentpractice. com slash optimize. I can’t wait to connect with you next time. Until then, keep building a different practice.
