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Exit the Discounting Trap
Clients often try to wrangle discounts because the remuneration system for partners is based upon how much has been collected by the end of the year. Any bills collected in January do not count for another 11 months.
That's bad enough, but even more inexcusable is when law firms themselves propose the discount themselves just to get money in the door. If clients are used to receiving discounts, even when they signed an engagement letter, the practice may be hard to stop cold turkey. However, there are a number of ways to exit the discounting trap - some better than others, but all certainly practical.
- Offer the discount immediately to get outstanding bills paid, emphasizing that subsequently there will be no more discounting in December or any other month - and mean it.
- Refuse to offer the discount in December, tell clients that there is a fee agreement in place and it will be enforced - irrespective of the firm's failure to enforce it in the past.
- Tell clients that unless they honor the agreement that they accepted and signed, the firm will not continue to work for them - which Code of Professional Conduct, Rule 1.16 permits. They should get other counsel and the firm will seek to collect all outstanding fees.
- Offer a discount for everything to date ... and make it interesting for the client with the proviso that all work hereafter will be billed at full rate and collected in accordance with the fee agreement. Get full acknowledgement of both the discount acceptance and the future adherence to the fee agreement.
- Accept the discount process and admit to yourself that instead of getting 100%, you're getting only 75% (or whatever) - then compensate by raising the fee/rate either higher or sooner than other firms.
Each of these options for breaking the discounting cycle says that the firm is a business with certain policies in place, and that you are willing to treat clients well when they treat you fairly.
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Personal Commentary
Last week was an outstanding adventure for me. I went to my 5th "fantasy" cycling camp, run by Chris Carmichael, former coach to Lance Armstrong, the winner of a record 7 Tours de France. While very competitive, Chris understands the real value of support and camaraderie when in a group environment. The participants do ride in groups of similar skill ranges, and in the sense of wanting to be placed with the better and faster riders, there is competition. But, the groups stay together and learn from one another and the coaches that accompany them. In our case, there are 3 groups, A, B, and C. In the first year, I was in Group A (the slower group) and was able to stay with the group, most of the time. Since then, I've been way "off the back" of Group A. In fact, on occasion, I would have my own coach and support car. This year, I was again in Group A. But, this year, I was the strongest I've ever been and was at the front of our group! What a feeling of accomplishment. It was outstanding. Despite riding over some very steep hills, including one which was a Category 1 climb, I remained in the front of our group, pulling more than my share because of my new-found strength, and still strong at the end of the week.
This is a great metaphor for a law firm, in my opinion. While there are star performers in any group, the group dynamic is such that each individual is better served by helping the entire group improve. When an individual puts himself ahead of the group, especially in compensation issues, the group disintegrates, falls apart and each one is less than he would have otherwise been. Again, to paraphrase the quote, a rising tide lifts all boats.
I mentioned in a previous discussion about the competitiveness ingrained into us by our society. When I told my son how well I was doing, he congratulated me, and then said "... get into that middle pack (Group B) ..." When we give our best, what we do is good enough, and better than most. I am personally "stoked" that I could do so well both as compared to the others in my group and, more importantly, to my previous personal performance. This experience encourages me to go back home and ride more, to ride better and, possibly, to return next year with the intention of moving to Group B, not because my son urges me to do so, but as a sign of my own improvement. Time will tell whether I succeed. This path can be traveled if I'm prepared to commit to the training needed. Likewise, the law firm can be more successful when everyone in it is working for the good of the whole firm without personal agendas.
Best wishes,
Ed Poll
lawbiz.com
800-837-5880
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What Readers Are Saying...
"I look at Ed as my business partner now—my once-a-week essential business meeting to take the pulse of my practice. During our one-hour phone conversations, we hash out the larger and smaller business challenges of my law firm. I always come away from those conversations enlarged, challenged, and sometimes even quite shaken, but with the tools necessary to move forward down the path he and I are constantly redefining for me and my firm."
-AL, Northern California
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