Category Archives: Pricing


This article was originally published in the Law Society’s Probate Section magazine. Their website can be found here.

Many law firms are using fixed-fee billing, despite a suspicion that fixed-fee work is risky and unprofitable. Nigel Haddon provides some techniques for doing it profitably.

Without question, the legal sector is seeing an ever-greater use of fixed fees. This isn’t something we lawyers should take pride in – it’s come about almost entirely as a result of pressure from the client side. Time and again, clients have expressed dissatisfaction with hourly rates, which can border on distrust of lawyers charging in this way. And it’s not difficult to understand why our clients feel like that.

First, what kind of ‘experts’ do we think we are if we don’t know how much something is going to cost? Second, there is a conflict of interest inherent in time-billing: we don’t mind how long the job takes – it’s all grist to our mill – but the client wants us to spend the least amount of time possible on the matter, commensurate with doing an acceptably good job.

But how can you fix fees in a way that ensures profitability is enhanced and not impaired? How do you price sometimes complex work where there are both variables and unknowns (and not just of the ‘how many bank accounts do you think your mother had?’ variety)?

I have a friend who heads the commercial litigation team of a top-100 firm. I was surprised to learn from him that his team now prices 95 per cent of their work on a fixed-fee basis. Once again, this was client-led, to the effect of ‘If you can’t give me a fixed price, then I’ll find someone who can.’ His team is now only time-recording for the sake of the courts’ costs budgeting regime and internal management purposes. Now, if you can price litigation on a fixed-fee basis, surely it might be possible to price private client services in the same way?

Airlines don’t say ‘it depends’ or ‘there are too many unknowns’ when we try and buy tickets from them. Yet air traffic control strikes, congestion, delays, bad weather etc can all cause significant overtime and incur costs. But your ticket price won’t change after you’ve bought it. Gyms offer membership at fixed prices, not knowing the precise usage each new member is likely to make of their facilities and equipment. If they can price like that, why can’t law firms?

Jay Shepherd, an American attorney quoted in Ron Baker’s book Implementing Value Pricing (John Wiley & Sons, 2011), suggests asking just one question to find out how good your lawyer is: ‘How much will it cost?’ Five words only, but it’s the whole ballgame. If your lawyer can’t correctly answer it, then you’ve got the wrong lawyer. Now, for the ‘teacher’s guide’:

  1. Every case, every matter and every job will have a different answer.
  2. The answer your lawyer gives you won’t necessarily be the same as the answer they give another client.
  3. ‘It depends’ is not an acceptable answer. Neither is: ‘Well, there are variables…’.

The argument runs like this: airlines and gyms know their businesses. Does your firm?

It is possible to put a fixed fee on anything, as most readers will know or have some experience of. The Shard, possibly the most innovative and challenging construction project of the past decade, was built using a standard form fixed-price contract.

Why lawyers don’t like fixed fees

Many lawyers object that they cannot quote a price at the outset because they simply don’t know how long a job will take. This confuses cost and value. Your client doesn’t care how long the job is going to take. They care about how much it will cost, and whether that ‘feels’ like good value. For that reason, many firms advising clients on probate work will estimate costs billed on a time basis as close to two per cent of the value of the estate, possibly accompanied by a fixed-price offering based on that.

I have seen some very impressive spreadsheets used by firms to help with the pricing of estate administration work. This could include, for example, drop-downs allowing the user to enter the number of pecuniary legacies, savings or bank accounts etc, which, when all added together, gives the firm a reasonable idea of how much the job will cost them to complete. That’s a start, but it leaves value out of the equation, and we can’t afford to do that.

Charging clients a ‘value element’ in probates largely went out of fashion when clients started pushing back during the last global financial crisis. But I know of many firms which price probates almost entirely that way. Don’t overlook it – it’s another tool at your disposal. Many of us forget the basics as our careers progress, and I find it useful to remind practitioners of article 3 of the Solicitors (Non-Contentious Business) Remuneration Order 2009. This is – or should be – the starting point in pricing any non-contentious legal service. If you bill every client using the same hourly rate, then you won’t be capturing the value in the job. You won’t, for example, have recognised in your price the importance of the matter to the client or the novelty or difficulty of any issues which arise. And yet our regulatory framework not only tells us we should do so, but relegates ‘time spent’ on the matter to just one of nine factors to be taken into account when considering whether costs are fair and reasonable.

Value is completely subjective – it is the maximum amount which any client is willing to pay for a service. For example, a bottle of water bought at a major sports event on a hot day may be worth considerably more to someone than a glass of water taken at their kitchen sink (an example used by pricing expert Ed Kless).

The most significant problem we face when pricing on a fixed-fee basis is risk. Under the time-billing model that most of us grew up with, the client took all the risk as to price. There was no incentive for firms to reduce costs or work efficiently. If you ‘nail your colours to the mast’ by fixing a figure, the risk moves entirely onto your firm, and you now have a vested interest in undertaking the work as effectively and cost-efficiently as possible. The trick is to fix your fees at a level that maintains or improves profitability while giving clients what they want: greater transparency and cost certainty.

If we leave ‘price risk’ with our clients, for example by charging on an hourly rate basis, then our prices should to a degree reflect that. Conversely, if we assume all price risk by charging fixed fees, our prices should reflect that assumption of risk. Once we have fixed our price, that’s it (so long as the agreed scope of work doesn’t change). But clients understand that under one model they’re fully exposed to an uncertain final bill which might be much higher than the estimate given, while under the other, they have certainty. And clients will knowingly, willingly and happily pay a premium for that certainty.

There is a perception too amongst law firms that fixed-fee work must be unprofitable. Jobs have a habit of going ‘off piste’ and the firm ends up doing a lot of work for nothing. No wonder clients are so keen on fixed fees!

These objections are understandable – to a point. What is often lost on lawyers is that fixed-fee billing, if handled correctly, can be very profitable – sometimes even more profitable than alternatives such as time-based billing. The problem my firm encounters time and again is that lawyers can see how this works for others, but not in their practice area, or with their own clients – hence the prevalence of fixed fees at the commoditised end of the market (conveyancing, wills, lasting powers of attorney etc). But it is a mistake to think that only such ‘commoditised’ work can be priced in that way.

Getting it right

In the face of more clients wanting certainty around legal pricing, there is an opportunity to gain competitive advantage and set your firm apart from its competitors. If firms can offer fixed fees in commercial litigation, why can’t they offer fixed fees in, say, estate administration? Below, I outline some techniques to manage the fixed-fee process effectively and profitably.

  • Mine your data Use historical information to build up a picture of what similar jobs have cost in the past. This isn’t just about time-cost records; you should also looks at staffing, timescales and fees.
  • Consider which of the factors in article 3 of the Solicitors (Non-Contentious Business) Remuneration Order 2009 apply to your clients and their matter(s) How should the presence (or absence) of any factor affect your pricing?
  • Consider where process improvements and efficiencies can be achieved This can be best done often in consultation with the client and might include, for example, some unbundling (the client does some of the ‘donkey work’). Can your software or newer technology assist? Just because we’ve always done the job in a certain way, do we have to do it the same way every time?
  • Spend more time scoping the work We all know that the majority of jobs have a tendency to go off track. The more rigorous we are in scoping, the more likely we will be able to agree extra fees for the work that is beyond its original scope.
  • Interrogate assumptions Ask yourself what assumptions your client is likely to be making, and what assumptions you are making. There will be several. Every good scope of work will have a number of assumptions behind it, and these need to be identified and set out in the engagement documentation.
  • Monitor and review progress As we have seen, a firm, having given a fixed price, has a vested interest in working as efficiently as possible on a matter. Simply put, your firm mustn’t allow its own inefficiencies to result in things going wrong.
  • Manage scope creep, but do it swiftly and effectively If you have scoped properly, then when something unexpected happens which is clearly outside scope and assumptions, you must then re-engage with the client and agree a revised scope, timescale and price.
  • Accept that you’re in a learning process You will make mistakes, but don’t give up just because you have mixed results to start with. You’re learning a new skill – it takes time and practice. Persist, and watch your confidence and your bottom line grow.

It is fairly common to encounter wills where, while some gifts are expressed to be free of tax, nothing is said about the burden of tax in relation to other gifts. Often it will not be evident whether this is due to carelessness or if the draftsman thought remaining silent would render a gift subject to tax

Your pricing can set you apart

Most law firms still price by charging on a strict time spent basis, with invoices detailing work done by each fee earner and the rates applicable, or where the firm believes it appropriate, on a fixed fee basis. But is that what clients want?

What clients really want is:

  • Real efforts to reduce production costs. In other words, to move away from a cost-plus mentality;
  • Greater cost-consciousness – ‘spending’ our clients’ money with care, as if it were our own;
  • More pricing and payment options;
  • Greater client involvement in the pricing aspect of the relationship;
  • Greater pricing transparency;
  • Greater pricing certainty and budgetary predictability – ‘no-surprises';
  • Greater correlation between price on the one hand and the perceived value of the results achieved on the other hand.

By adopting a new approach to pricing which puts the client’s needs and value delivered at the centre of the pricing conversation (a) much tension is removed from the pricing process and (b) the firm will be doing something that few if any of its competitors are doing.

The process begins, counter-intuitively, with the client, not the service to be provided. The lawyer needs a clear understanding of what is important to the client and what they are happy to pay for, what is less important to them and for which they would prefer to pay little if anything, the extent to which they wish to assume price risk or prefer the firm to do so or whether they want to share that price risk. From there, the firm can quickly develop pricing choices for the client to select from.

And that is key here: clients have made it clear time and again that they much prefer to be given choice rather than being presented with a single option. The options might include:

  • fixed fees for the entire case and/or stages of the matter;
  • abort and success fees;
  • bundling/unbundling;
  • gold, silver and bronze services,

and so on.

The list of alternative fee arrangements available for an innovative firm to use is surprisingly long! The important thing to bear in mind is that whichever option the client chooses and however the particular matter plays out, the client needs to feel that they have had good value and the firm needs to feel that it has been paid properly.

With the vast majority of law firms struggling to differentiate themselves from their competitors, some go-ahead firms are finding that an innovative approach to pricing really can set them apart.

Nigel HaddonimagesUD5R2LBC

Pricing Consultant

Burcher Jennings Pricing & Costs Consultants

So, what are we going to do about pricing?

Although lawyers are generally highly effective negotiators on their clients’ behalf, many are less good at discussing their own fees with those same clients. This is due to a number of factors. First, the all too easy use of hourly rates and occasional fixed fees was rarely challenged by clients, who until the last recession weren’t powerful enough or ‘savvy’ enough to ‘push back’. Second, when clients did start to push back, lawyers felt awkward or embarrassed or simply that they had to capitulate and take the fee the client was willing to pay. And that awkwardness had and has its roots in a lack of training in pricing skills, resulting in a lack of confidence in negotiating with clients.imagesZ4O29889

If a firm, and all those lawyers within it who have pricing conversations with clients, learn pricing skills, practice those skills and master them, then there is no doubt but that both the law firm and the client can benefit. Lawyers leave less on the table, and clients benefit from greater choice, transparency and control.

Firms often know that pricing is something that they need to address, or at least would benefit from addressing but aren’t quite sure where to start. Managing Partners often bemoan the fact that they have had a couple of attempts at implementing change from within but have been met with indifference if not resistance.

So, where might you start?  There are broadly speaking three areas you need to tackle; the list under each heading below being anything but exhaustive, they are:

1. Pricing governance and policy:

  • Each firm needs a shared and consistently implemented strategic approach to pricing
  • Pricing policies need to be well understood and universally enforced – for example do you have firm wide policies about what is written off, by whom, for what reason and up to what level?
  • Price and market position disconnect – most firms do not understand that price is a powerful proxy for quality. Firms claim a certain market position in relation to quality of advice and service and then price below that, thereby undermining the message.
  • Poor or non-existent induction training on pricing – the blind leading the blind?

2.  Pricing analytics & reporting:

  • Practice management software has historically provided plenty of data, but data on its own is largely useless unless it also provides actionable insights
  • Fixed fee arrangements in particular suffer from high write-offs and poor realisation rates due to lack of historical analysis
  • Any firm serious about utilising conditional fee agreements must invest in proper analytics capability, and not simply something cobbled together in an Excel spreadsheet

3. Pricing execution:

  • A broad lack of price negotiation skills and a lack of awareness or understanding of the many pricing strategies and tactics available to lawyers results in pricing that is often a poor ‘fit’ for the client and/or the firm
  • A lack of pricing collateral, templates and pricing precedents
  • Confidence is absolutely critical to good pricing behavior. Do you set and negotiate prices confidently or through fear of losing the client and/or fear of losing the job?

Lawyers are highly skilled in devising bespoke solutions to their clients’ problems. But few presently meet the wide-ranging needs of their clients by devising pricing solutions tailored to the needs of ‘this client, this time.’

The ability to deploy a wide range of matter specific and client specific pricing and payment options, of which the hourly rate is but one, mitigates the often confrontational dialogue between lawyer and client. When lawyers are able to engage in sophisticated pricing discussions, the results are twofold: a closer-to-optimal fee for the firm, and happier clients, who see that they are being given choice, certainty, and control. In other words, a ‘win-win’ for the firm and its clients.

There is in fact abundant evidence that what clients really want are pricing choice, certainty and control. Yes, some want the lowest price available, but there are far fewer of these than you might imagine (about 10% according to research). Offering clients an hourly rate is offering Hobson’s choice, as would be a fixed fee.

Offering clients a choice between an hourly rate and a fixed fee is a start. But there are many, many more pricing options available, and, once understood and practised, these can be offered too, either singly or in combination. It’s no bad thing to offer a client three or four pricing options, then adding a payment option too, such as a discount for payment in advance. Some of the many pricing options now being offered by innovative law firms are:

  • Conditional fees                                                                    imagesUD5R2LBC
  • Cap & collar
  • Abort/success
  • Retainers
  • Service level guarantees
  • Bundling/unbundling
  • Versioning (eg gold, silver, bronze)
  • Premium for urgency
  • Combining one or more of the above

One of the consequences of the recession and the increasingly competitive nature of the legal sector has been that law firms’ approaches to pricing have tended to the defensive and reactive, aimed at preserving existing relationships and getting every last job across the line.  Not enough have grasped that sophisticated pricing strategies can be a central plank in the firm’s business development strategy.

In fact, smart pricing can be used both a sword and a shield. Once a firm has mastered smarter pricing, and put in place policies and the infrastructure to support those policies, it can begin to use its now extensive pricing repertoire as an icebreaker with prospective clients and intermediaries. Pricing is a skill that is just as essential to the business development toolkit as networking or selling, yet has a more immediate impact on the bottom line.


Nigel Haddon

Pricing Consultant with Burcher Jennings, Pricing and Costs Consultants,

[This blog is based in part upon ‘Chapter 10: Pricing and Fees’ of the Law Management Section Guide to Business Development, published by the Law Society, February 2015, and co-authored by Nigel and Richard Burcher. Nigel is one of the joint General Editors of that work, which is available from The Law Society bookshop:]

Raise our prices? Are you crazy?

imagesEFBHZ8I9Many readers will have seen the recently published research by Morar Consulting for Veyo. To remind you, a few of the headlines were:

  • 42% of consumers were unsure that they would use their conveyancer again;
  • 60% found dealing with their solicitors the most stressful aspect of the process;
  • 27% chose their conveyancer because of the price being the lowest, making it the fourth most important factor in choosing a solicitor;
  • 25% said they would pay more for a faster service.


Why would a firm seek to raise prices in this dog-eat-dog world? When one in four choose their lawyer on price and price alone, where’s the mileage in exploring raising prices?

The answer lies in the questions. If every law firm competed to be the cheapest, who would win? Not your firm dear reader. That is a race to the bottom that nobody can win. So how, against this competitive, consumer-empowered backdrop, can law firms push back?

In business literature, commoditisation is defined as the process by which goods and services that were distinguishable in terms of attributes (uniqueness or brand) end up becoming simple commodities in the eyes of the market or consumers. Critically, it is the movement of a market from differentiated to undifferentiated price competition. It is the received wisdom of the residential conveyancing market that that is the position we now find ourselves in. But is that so?

Differentiation is not confined to large firms or high value matters. Pricing and service level options can be used very effectively, in isolation or combination to create significant visible differentiation around wills and powers of attorney, divorce, pre-nuptial agreements and residential conveyancing.

One of dozens of examples includes the option of a ‘premium-priced’ residential conveyancing package that includes up to two home/hospital/rest home visits by a legal executive/paralegal – one to take instructions and one to get documents signed. This is a proven and very popular option with the elderly, the immobile, the unwell and those without easy transport options. It is this kind of differentiated offering that helps you stand out from the crowd.

Almost anything is capable of differentiation. If this were not true, how is it that Fortnum & Mason can charge £5.95 for a pot of orange marmalade compared to £0.27 for substantially the same thing at Aldi? Answer – maybe there’s a clue in the names – ‘Aldi Everyday Essentials Marmalade’ doesn’t have quite the aura of ‘Highgrove Duke of Rothesay Marmalade’.  Who would know if there is much actually to differentiate the two products (although one would suspect there is)? More obviously, would anyone seriously suggest that the shopping experience is the same at both? And yet Fortnum & Mason is as busy and as profitable as it has ever been.

The firms that differentiate themselves most effectively are those that have identified aspects of their culture that make them superior service providers in their area and then communicate those advantages to the market in a consistent, compelling and memorable way.

There is clear evidence that home buyers are willing to pay more for a fast track service, so the opportunity is there for firms which are able to demonstrate both speed and efficiency.

Firms must resist the temptation to buy into the inane and demonstrably wrong assertion that legal services are all becoming commoditised and therefore you have no option but to slash your prices to preserve market share. There will always be people willing to pay for the ‘Highgrove Duke of Rothesay’ product provided you give them good reason to do so. If you don’t give them reason to do so, you will never command anything other than ‘Everyday Essentials’ prices.


Nigel Haddon

Pricing Consultant at Burcher Jennings, Pricing and Costs Consultant