- June 11, 2018
- Posted by: [email protected]
- Category: Financial Management, Starting a Law Firm, Technology
One of the most challenging aspects of starting a law firm is figuring out what to charge. You’ve got to walk the tightrope of making a living, while also delivering valuable services that justify your rates — even as consumers have more options for legal services, and are more price-sensitive than ever before.
The traditional advice on this topic is that you go out, and ask around. Only, lawyers (especially your competition) are fairly reticent about sharing their rates, probably obviously. This is also a taboo topic in terms of bar association engagement, since those organizations don’t want lawyers publishing or discussing rates under their auspices, for fear of being implicated in price fixing. The majority of lawyers do not publish their rates on their own websites, either — because they don’t want to be undersold by new law firms entering the market. I know lawyers who have asked staff or friends to pose as clients of other law firms, to call and acquire rates; but, the majority of lawyers think that’s cheesy — and, rightfully so. So, your best bet is to find lawyers outside of your geographic area or jurisdiction, or a mentor who may share a niche but not target clients, to help you get a handle on the market. Failing that, you’ll figure it out eventually, after trial and error. That’s not encouraging, of course.
There’s another approach, however; and, that is to start by figuring out what you need to pay your bills, and to create rate sets around that. Once you have that number, add your expected law firm overhead, and then think about how many cases you’ll want to take on in your first year. Divide that total number of cases by your personal and business expenses, and that’s your required hourly rate. You can then adjust up (if you think the value of your services means you can charge more) or down (adding to your required case total). Readjust after six to twelve months.
This is, certainly, a very basic analysis of fee setting, based almost entirely on an hourly rate model, that most law firms still use. Other factors that will relate to your rates include: whether and how much you charge for retainers, and what types of retainers you use; whether you need to construct rates for associate attorneys or staff; whether you need to build in coverage for processing fees or other expenses; whether you can charge more based on your expertise or experience; etc. In some cases, and this may be true of entire practices, contingencies or statutory requirements establish fee structures for you.
. . .
If you want to start your own law firm, join me for an exclusive workshop, coming up in Boston (August 24-26) and New York (September 7-9).
For more information, visit the official site: www.buildyourownlawfirm.com.
Social media hashtag: #BYOLF.
Visit our Sponsors: