“I’m Thinking It Over!”

Published July 21, 2009

Those of us in the vicinity of a “certain age” will remember one of the most famous comedy skits of all time, whether we heard it on the radio or saw it on a grainy black-and-white TV. Comedian Jack Benny, who created for himself the persona of a notorious tightwad, is suddenly confronted by a robber who demands, “Your money or your life!” Benny is immobile and silent. “Did you hear me,” the robber repeats, “I said, ‘Your money or your life.'” At last Jack responds: “I’m thinking it over!”

Plenty of law firms face the same dilemma today when a client demands, “Give me a 10%, across-the-board rate cut, or I will take my business elsewhere.” Some firms may feel they have no choice, but others, like Jack Benny, are paralyzed as they “think it over.” I believe it is fundamental to “The Business of Law”® that lawyers should resist discounting their fees – particularly if the client has earlier agreed to pay the full amount in the engagement letter. Once you start on this slippery slope, it’s hard to get off, as you begin competing against yourself. Even so, in today’s legal services market a client is bound to find a law firm who will agree to a discount if your firm won’t. So the question becomes, what is a viable response?

One answer is to pursue the lesson of the Industrial Revolution: the more efficient you are at doing something, the less labor is required and the lower the price that can be charged. With a lower price, satisfied clients will increase their business, which theoretically should mean higher revenues and profits. The key to higher volume is partnering with clients. You bridge the gap between understanding what they need and listening to what they want by providing value.

The costs of legal services can be reasonably reduced when the client and lawyer team up to create a budget for future services. The parties generally agree that each one will assume certain risks and that the costs will go down. A general counsel once told me that budgeting caused everyone to focus on the goal line and how to get there more efficiently. In one specific instance, budgeting saved over $500,000 for this client, all without reducing the billing rates. Of course, that reduction also means that the law firm’s overall revenue was impacted, but lawyers’ rates were not. The client got the desired result at a lower cost, and happy clients tend to bring the firm more work.

A word of warning – resist the temptation to push back against a price cutting request by asserting the uniqueness of your firm’s practice and services. Remember that to most clients most lawyers are all alike. Be flexible and don’t believe too much of your own rhetoric. All lawyers can’t be the best at their practices!

Categorized in: Management

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