Sometimes Price Matters – And So What If It Does?

Believe me, as a solo who competes frequently with large firms for clients, I’d love, love, love to buy the arguments made by my blogging colleagues, Chuck Newton and Tom Collins that small firms don’t need to, and shouldn’t have to compete on price (Chuck’s post is here, Tom’s post is here).  And perhaps that’s true in some cases.  For example, if you’re dealing with a multi million dollar company involved in a multi million dollar deal, whether you charge $300 an hour or $450 an hour doesn’t matter much in the greater scheme of things. But that’s nice work if you can get it, and many solos and small firms can’t.  Instead, many of us target that niche of clients who can’t quite afford biglaw, but at the same time, aren’t destitute.  For those companies, saving $50,000 or even $25,000 on legal fees can make a difference.  And we solos and small firms can capture those clients without it making a dent in our bottom line, because of our lower overhead.

In addition, while it’s nice to hear from lawyers who say that price doesn’t matter, I’m more interested in what clients say about price and small firms.  Consider this article at law.com about why clients hire solo and small employment lawyers.  At least two of the lawyers quoted in the article cited “cost efficiency” and low price as one of the reasons why they preferred their small firm employment lawyers.  Sure, other things mattered, like knowledge and quick turn around.  But price was also cited as a factor.  Similarly, consider this year old post by Larry Bodine about the trend towards “pinpointing,” where firms seek out smaller firms in other cities to handle litigation rather than relying on their biglaw attorneys in major urban centers.  Obviously, cost is a factor in those cases as well.

Moreover, we do a disservice to small firms when we advise them to
ignore price – particularly when their large firm competitors don’t.
Recall the dotcom era, where emerging small businesses went to large
firms like the now felled-Brobeck, Phleger, or Wilson, Sonsini over
small firms.  The reason?  Large firms were able to deeply discount
fees, or even work for free in exchange for a stake in company equity.
And recently, I lost out on a client to a large firm that discounted
its rates by close to 50 percent to capture the client.  If price
didn’t matter, why would large firms discount their rates?

I agree that solo and small firm lawyers may undervalue their service.  But as I’ve shown above, price does matter some of the time; and it matters to clients and it matters to large firms when they need to compete for clients.  And for that reason, it’s got to matter to us solos or small firms if we want to stay in the game.

8 Comments

  1. Susan Cartier Liebel on January 12, 2007 at 1:28 pm

    Carolyn,
    Once, again, you make a strong argument. However, we all need to make sure we are talking apples and apples. From a marketing and strategic pricing position your point is well considered. The larger picture is 1)Are we automatically required to discount our fees because we are solos and have lesser overhead…which is Chuck’s point and 2)should most new solos discount their fees because they are perceiving themselves as unworthy of more money? The answer to those questions is emphatically, “no.” If those issues are not on the table and not part of the equation at all and pricing is strictly a marketing decision, then you have to weigh the costs and benefits of reducing your fee. Yes, there will always be the “Wal-marts” of law firms looking to knock you out of the market with deep discounts which they can write off without breaking a sweat. But we also need to make sure that we are not just broad-brushing all practice areas and clients with your perspective because institutional and governmental clients are very different from individual clients as are the solos who serve them. One-size does not fit all.



  2. Susan Cartier Liebel on January 12, 2007 at 1:28 pm

    Carolyn,
    Once, again, you make a strong argument. However, we all need to make sure we are talking apples and apples. From a marketing and strategic pricing position your point is well considered. The larger picture is 1)Are we automatically required to discount our fees because we are solos and have lesser overhead…which is Chuck’s point and 2)should most new solos discount their fees because they are perceiving themselves as unworthy of more money? The answer to those questions is emphatically, “no.” If those issues are not on the table and not part of the equation at all and pricing is strictly a marketing decision, then you have to weigh the costs and benefits of reducing your fee. Yes, there will always be the “Wal-marts” of law firms looking to knock you out of the market with deep discounts which they can write off without breaking a sweat. But we also need to make sure that we are not just broad-brushing all practice areas and clients with your perspective because institutional and governmental clients are very different from individual clients as are the solos who serve them. One-size does not fit all.



  3. Carolyn Elefant on January 12, 2007 at 3:38 pm

    Your last sentence summarizes it – “one size does not fit all.” That is exactly right. And it is true that in dealing with smaller consumer clients that competing on price will just take you into a cycle of low cost, volume billing that you may never escape.



  4. Carolyn Elefant on January 12, 2007 at 3:38 pm

    Your last sentence summarizes it – “one size does not fit all.” That is exactly right. And it is true that in dealing with smaller consumer clients that competing on price will just take you into a cycle of low cost, volume billing that you may never escape.



  5. Chuck Newton on January 13, 2007 at 5:18 pm

    Thanks for the discussion. I do not totally disagree with you. My point is that charge what you need to make the living that you want or need. Just do not compete on price. My other point is really that some home based attorneys, in particular, take and market based on reduced fees believing that the home practice will save them, and it will not because although their overhead is lower, the number of cases and the amount they can bill and collect per case is limited. It really is a balancing act.



  6. Chuck Newton on January 13, 2007 at 5:18 pm

    Thanks for the discussion. I do not totally disagree with you. My point is that charge what you need to make the living that you want or need. Just do not compete on price. My other point is really that some home based attorneys, in particular, take and market based on reduced fees believing that the home practice will save them, and it will not because although their overhead is lower, the number of cases and the amount they can bill and collect per case is limited. It really is a balancing act.



  7. RJON@HowToMakeItRain.com on January 14, 2007 at 3:58 pm

    There’s a difference between a steak dinner & a hamburger. I wouldn’t pay $20 for the latter and I’d be worried if someone offered me a $5 steak.
    But you know what? When it’s 3pm and I’m on my way to an appointment and I’ve missed lunch, offering to lower the price of the steak still isn’t going to sell it. What want then. . .what I NEED then, is a quick meal that solves all dimensions of my problem.
    There are lots of valid reasons for clients to choose a small firm INSTEAD of a large or even a mid-sized one. Solos who cut their fees instead of investigating and thinking creatively about how to position themselves in the market, very often end up negotiating against themselves.
    And before anyone goes & tries to read too deeply into my steak/hamburger analogy above, take a moment and notice that I’m not saying which is which. In fact, I have several Rainmaking clients who are high-end solos (steaks), some who are volume-based solos (hamburgers) and in a previous life before deciding to limit my practice to small firms, I had the opportunity to work with several mid-sized firms that pursued all different kinds of strategies in the market too.
    Respectfully,
    RJON ROBINS
    http://www.HowToMakeItRain.com
    Helping Lawyers In Small Firms Make ALOT More Money



  8. RJON@HowToMakeItRain.com on January 14, 2007 at 3:58 pm

    There’s a difference between a steak dinner & a hamburger. I wouldn’t pay $20 for the latter and I’d be worried if someone offered me a $5 steak.
    But you know what? When it’s 3pm and I’m on my way to an appointment and I’ve missed lunch, offering to lower the price of the steak still isn’t going to sell it. What want then. . .what I NEED then, is a quick meal that solves all dimensions of my problem.
    There are lots of valid reasons for clients to choose a small firm INSTEAD of a large or even a mid-sized one. Solos who cut their fees instead of investigating and thinking creatively about how to position themselves in the market, very often end up negotiating against themselves.
    And before anyone goes & tries to read too deeply into my steak/hamburger analogy above, take a moment and notice that I’m not saying which is which. In fact, I have several Rainmaking clients who are high-end solos (steaks), some who are volume-based solos (hamburgers) and in a previous life before deciding to limit my practice to small firms, I had the opportunity to work with several mid-sized firms that pursued all different kinds of strategies in the market too.
    Respectfully,
    RJON ROBINS
    http://www.HowToMakeItRain.com
    Helping Lawyers In Small Firms Make ALOT More Money



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