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How Low Can (or Should) You Go: Part II

by Carolyn Elefant on November 2, 2012 · 5 comments

in New Marketing Ideas, Setting and Collecting Fees

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Following yesterday’s post exploring the viability of the $99/hour lawyer as a business model, discussion (if you can call an exchange of 140 character blurbs and bursts real discussion) ensued on Twitter. I wanted to use this post to summarize my view of the argument and also clarify the context of my post.

Defending People Mark Bennett criticized the $99/hour concept even for new lawyers (which is how I’d intended it), noting that his advice to new lawyers is that should try to be the type of lawyer they’d like to be 20 years down the line.  Once a cheap date, always a cheap date; hard to shake a reputation as a low priced lawyer, Mark argues.

Mark makes a good point – and one that I’ve noticed by real world analogy.  Recently, I’ve observed that once cheap stores like Target or Forever 21 (I’ve got teen daughters, OK?) where you can get tank top for four bucks or ten dollar jeans are introducing more expensive, faux high scale products to their low end line.  Although the products are still less costly than designer brands, it bugs me to pay more than $25 for anything at one of these stores because I assume that the quality is poor, and I expect the prices to be cheap.  I can see how the same thing can happen to lawyers who position themselves as cut rate $99/hour alternatives.

It wasn’t my intention to advocate this approach in my post, though I certainly see how it can be construed that way.  I floated the $99/hour option in a particular context; as an alternative to many of the “legal networks” arriving on the scene which encourage lawyers to bid for cases, or agree to take cases at severely capped fees in exchange for the “exposure” provided by a national network.  In this context, getting paid for all work done, even if it’s only $99/hour is preferable to doing a bankruptcy for $500 or drafting $100 wills.  In short, the $99/hour rate may be the lesser of two evils.

But as a stand alone business model, can $99/hour work?  In my post, I suggested that $99/hour could provide a living wage if overhead is low enough.  But as @jordanrushie aptly points out, you’d have to run a volume practice to make ends meet or else do lousy work on these cases because you wouldn’t have sufficient overhead to support yourself.  And as I’ve posted before, once you fall into the cycle of volume practice, it’s tough to escape.

Still, as the rise in the number of pro se clients and those seeking DIY options, there’s certainly a demand for $99/hour lawyers.  For those who want or need to capture that demographic, is there a way to do it without locking yourself into a bargain basement reputation? After all, there are some lawyers who can’t afford to be highly selective in case selection or wait for good, well-paying cases to come through the door.  Here are some quick ideas (tank ‘em if you want as I haven’t thought them all through yet)

1. Limit the $99/hour option – You could tell clients that access to justice is important, so you handle a certain percentage of matters at $99/hour rates based on individual circumstances. Even if the only cases that came your way were $99/hour specials, at least no one else would know.

2. Offer some cut rate services - Offer $99/hour consultations or “clinics” as an add on or entre to your practice.

In addition, if you do offer cut rates, you have to be a stickler for keeping overhead to a bare minimum and for collection.  Unless clients are willing to pay a retainer for those $99/fees on the spot, you won’t be able to make it work, since you’ll be stuck spending time trying to get paid. However, there is a value to $99/hour up front rather than billing $500/hour and chasing down collection.

3. Create a low end subsidiary – To return to the department store analogy, it works the other way too.  Mossimo a top designer has a Target line, Norma Kamali has a WalMart line.  The populist offerings don’t diminish the brand because they’re marketed separately, they allow for revenue from volume sales and make quality design accessible to Joe and Jane Average.  If you believe that access to justice is important or see a business opportunity for affordable service, then create a stand alone subsidiary or service to market to those segments (Family law attorney Lee Rosen offers several different levels of service at one site).

A final note about premium rates. Of course, we’d all love to have unlimited clients paying $400 or $600 or $900 an hour.  Nonetheless, it goes without saying that when you charge premium rates, you need to provide premium service.  I had a recent, personal experience with a law firm that charged rates that were on the higher end of the scale for that market.  That might have been OK (there were convenience reasons for using that particular firm) except for the fact that the work was riddled with mistakes. I’d have tolerated the errors from a low end firm, but not from one billing at the higher price.  Moreover, even though I’m not one to care about how an office looks, paying the higher fee made it matter more. And so the lack of coffee in the office and the bland, uncomfortable furnishings were an annoyance at the higher price. Bottom line:  while it’s nice to get top dollar, if you don’t offer exceptional value in exchange for exceptional rates, you’ll gain a reputation as a dis-honest, do-nothing lawyer which if just as bad as being a bargain basement one.

  • Tim

    I’m not convinced that offering a lower per hour rate will bring in much business–I’ve noticed that most potential clients are much more interested in lower retainer fees than in lower hourly rates.  Sure, I could cut my rates from $150/hour to $99/hour, but I don’t think I’d have even one more client than I have right now.

  • EJ

    Tim I am not sure if she is suggesting you change your billing structure to $99/hour what she is saying is take advantage of the network that a service like law 99 has set up to potential bring in some clients and broaden your own network. 

    For most of us solo’s the challenge is not what we bill, but marketing and consistently keeping paying clients coming through the door. Maybe a referral service such as this could work. 

  • John

    About a year ago I started implementing more flat fee work, including on some lower-end litigation matters.  I required these fees to be paid in full at the beginning of representation.  Clients loved it because they knew what the cost was going to be and I liked it because I had been paid and wasn’t going to be wasting time chasing down clients for money.  My overall hourly rate is less, but as you said in the article it is better to get paid than to bill 50 hours and only get paid for 15.

    It is an interesting time in law because of how drastically fees are going down.  Lawyers are going to have to get creative to compete in a world of Legal Zoom and other similar companies.  I know it offends many lawyers to even say that we are in competition with these types of companies, but I think we ignore that reality at our own peril.

  • EJ

    The problem is if you are in family law, divorce, or immigration law like myself clients just do not have the money to pay. Often times you are putting them on payment plans and are lucky if you get your entire fee. However, the larger the network you can grow the more likely it is that you can find clients who can pay. I agree with John we as attorney’s have to find away to be more competitive because the bottom line is middle class Americans do not have the savings to pay 5k retainers. 

  • RAFIV

    EJ,

    In the Family Law context I have found that Limited Representation Agreements, Flat Fees and Staged Fee Agreements have been the way to avoid or decrease outstanding receivables. Limited Representation allows me to charge for a day in Court or consulting without having to make a full appearance in the case. The Flat Fees for smaller projects and Staged Fee for larger allow me to meet client needs without compromising myself or being tied to never ending payment plans. In a Staged Fee if they do not pay the next fee at the set date, I withdraw.

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