Raising the Fee Bar: To What Level?
Raising fees is not always a no-no. In fact, there are times when raising fees is particularly appropriate and well accepted by clients. The big question, then, is how much to raise those fees.
Conscionability Test
Many jurisdictions have specific rules concerning fees. For example, in Rule 4-0200, the California Rules of Professional Conduct provide that “[a] member shall not enter into an agreement for, charge or collect an . . . unconscionable fee.” The rule defines unconscionability by saying that all of the facts and circumstances existing at the time are to be considered, including the amount of the fee in proportion to the value of the services performed, the relative sophistication of the member and the client, and the time and labor required.
Market Test
Assuming that your current fee structure passes the conscionability test, modest fee increases will not cause a disciplinary problem. The only remaining issue is whether your fee increase will pass the market test. All other things being equal, the smaller the fee increase, the easier it is for clients to accept it.
Other Considerations
Here are other considerations in deciding how much to raise rates.
- Your growth pattern. As you continue to grow, you can afford to be more selective about your clients. Raising fees is a way to let your clients self-select.
- Your success. When you are successful, achieving more success is easier and less risky.
- Your strategic plan. How much you raise rates is partly a function of your strategic plan and your desired position in the market. Do you want to be known as a low-priced volume leader or a top-of-the-line, exclusive legal services provider?
- The nature of your practice and clientele. An economically sound client will be less burdened by increases and accept them more readily.
- The general economy. A robust economy will result in less resistance than a retreating economy.
- The competition. Your rates must be competitive with others in your geographic and practice areas.
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