Most marketing gurus counsel lawyers not to compete on price. So I wasn’t surprised to see that advice at the core of this article by Susan Cartier-Liebel, To Solos: Don’t Discount Your Worth, Connecticut Law Tribune (June 5, 2006). Personally, I disagree. I see no way for a new solos to get a foot in the door except if they compete on price, and no way for former biglaw-turned-ownlaw attorneys to wrest cases from their old colleagues unless they include price as a selling point.
When I say compete on price, I’m not suggesting that you setbargain basement rates like this solo
(though he’s certainly carved out a niche) or that you try to make up
in volume what you’re losing on cost. But if the prevailing rate for a
divorce attorney in your area is $250 an hour and you’re a new
attorney, why not charge $175 an hour (@ 30 percent less)? And in fact, what
incentive does a client have to hire a new attorney unless he or she is charging a lower rate?
Cartier-Liebel suggests that if you don’t convey that you’re worth the
same as other lawyers than clients will discount your services as
well. And I’ll admit that if you’re charging half of prevailing rates,
clients will start to question your qualifications. But for most
clients (in fact for many lawyers), your hourly rate, even with a thirty percent discount will still be steep enough that
clients won’t think you’re losing money. And if clients ask why you’re
so cheap, just have a stock answer ready – for example, explain that as
a new attorney, you have the advantage of low overhead or ease with
technology that your older colleagues don’t and you’re passing the
savings on to clients.
Once you’ve offered a lower rate, I agree with Cartier-Liebel that
you shouldn’t bargain. If a client asks you to work for $150 an hour
when you’ve quoted $175, you must tell the client that you can’t go any
lower. In fact, it’s easier to stick to your guns when you’re giving clients a deal to begin with. Also, take an adequate retainer to guarantee payment and draft
your retainer agreement to give yourself grounds to seek withdrawal where the
bill is delinquent. Also, try to give clients an estimate so that
they’re not surprised at the overall fee.
Cartier-Liebel also says that other attorneys may be angry with your
for undercutting cost. Not me. When I was a young attorney, there
were matters I’d handle for half of what I charge now in order to get a foot in the door. My clients frequently couldn’t pay more but they
never stiffed me either which is what happens sometimes when clients agree to a high hourly fee when they really can’t afford it. Now that I’m more established (not to mention a parent), those cases that I once took don’t make sense for me, so I’m more than happy to pass them on to young eager-beaver attorneys
willing to charge less to get their practices going. In short, that
younger lawyers charge less than me isn’t a threat. Rather, it’s a blessing,
because it lets me forego cases that I don’t want, while knowing that
I can still direct the client to other representation.
As for older, more experienced attorneys who’ve left biglaw, their
lower prices can help them draw a broader circle of clients. A few
months ago, I referred to small client to a former biglaw, now
successful solo. This attorney had handled massive deals and corporate
structurings while a partner at a large firm, yet his rates as a solo
were so reasonable that I couldn’t believe it. And the client whom I
referred “got it” right away. The client didn’t think less of the
attorney for charging competitive rates, rather, he was smart enough to
realize that he was the beneficiary of this attorney’s lower overhead.
The other aspect of the “charge prevailing rates” advice that I simply don’t understand is whether any other lawyers (besides me) care about what they themselves pay for services. Years ago, when I was terminated by my former law firm employer, I briefly considered a discrimination action. I called several lawyers for a consult and ultimately chose the one who offered a flat $100 consultation fee rather than those who wanted to charge me $175 or $200 an hour just for intake (incidentally, the lawyer who charged the lower fee was a new solo who has become quite successful). Do the marketing experts who tell you to charge high rates actually take their own advice and pay more for service that could be had for less?
As a final word, I’m sure that you’ve heard the gleeful testimonials from successful
solos who trumpet “And I raised my rates by $50 and I have more work
than ever!” And I believe them. But many of those solos have been in the
trenches for many years and are reaping the benefits of their labor.
Someday, you too will reach the point where you can, if you choose,
charge what the market will bear. But to reach that point, first you
need to get on the map. If it takes undercharging to put you there,
then by all means, ignore the conventional wisdom and do it.