CEO Chat: Pricing Legal Services Based on Value
by Michelle Bomberger | January 30, 2019The cost of legal services is a significant barrier to companies engaging with their lawyer. Business owners aren’t sure whether to trust an “estimate” and really aren’t sure that the end result will prove to be a worthy return on investment. The general consensus is that the upfront cost of legal services is too high. Therefore, the default is often an Internet search to “gut check” the answer and then a signature and a prayer.
Developing a Fixed-Fee Model
A part of my vision when I started Equinox in 2005 was to provide fixed-fee pricing to overcome this barrier — providing greater access to quality legal guidance and removing the uncertainty of the impending invoice. Fixed-fee pricing offered transparency and predictability for clients; knew what to expect and could move forward confidently without worrying about how much it would cost. This was a novel business model for law firms back in 2005, but we found it built trust with clients.
A constant struggle with fixed-fee services is how best to price it. A logical approach is to evaluate how long the work will take, multiply it by the hourly rate, and charge the resulting price. Another way is to consider what it would take for the client to solve the problem on their own. It’s harder to extrapolate what it would cost someone else to hunt down the answer since we all come to a problem with different perspectives and experiences. However, we can try to determine what it’s worth to that business to have us, as knowledgeable professionals, do this work and focus their team on better things to do.
Baking Value Into the Price
Taking into consideration the value, not just for the work of legal services, but seeking the right kind of counsel, we extended our fixed fee model in 2009 to a more holistic solution: General Counsel Services (GCS). The GCS was developed as a way for businesses to have our lawyers available for all their legal needs at a fixed monthly price. The GCS solution captured the predictability of legal expenses that business owners crave and provided unlimited counsel that executives need but rarely leverage in the traditional hours-based model. Business owners and their teams value the ability to reach out whenever they have a question or need, knowing that the fees are fixed. In addition, the model adds value to their bottom line because their team is focused on the right things, not heading down rabbit holes trying to figure out how some new legislation applies to their business or assessing risk in an area they don’t have a prior knowledge base of. Everyone can get the right answer quickly and move on to more important things.
A Mutually Beneficial Pricing Model
Again, pricing of the GCS solution is tricky. Lawyers ask me regularly how we manage this solution – don’t clients call you constantly? Not really. They actually have better things to do. However, the goal really is to help business owners get real value from their business lawyer. We do everything we can to encourage them to call, so we can help not just put out fires, but assist in avoiding them. However, that means we need our assumptions about a business’s needs to be accurate, which requires partnering with our clients to obtain this information. If our assumptions are incorrect, the model won’t provide mutual benefit. Over the years, we’ve learned a lot about how to manage the GCS internally among our team and how important the partnering element is to the success of the GCS.
Getting the Most Value From Your Legal Team
Many companies ask us at the start of the GCS conversation – “Why would I need that much legal support? I’ve never used that much before.” Tackling the known, needed projects is the easy part — typically things like updating the employee handbook, implementing best practices, getting up to speed with local legislation. But it’s harder to encourage teams to engage with the legal team for the additional value – for the things they’ve been doing on their own without our help. But these are the areas where we can bring the most value.
We provide the legal perspective, leveraging our training and experience to provide the answer more fully and more quickly. This allows the client team to make decisions more quickly and with confidence. Clients have said, “Since we brought you on as General Counsel, I have such a weight lifted off my shoulders. I know you’re there to help and provide the right answer quickly.” The answer to how much legal support a business needs isn’t in the hourly rate, it’s in the value of a business owner’s peace of mind.
If your business could benefit from unlimited legal services — tailored to your industry — at a fixed price, learn more about our offerings.
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