Exit the Discounting Trap

Published March 11, 2008

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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Audience type: Administrators, Associates, Large Law Firms, Small Law Firms, Sole Practitioners