How experienced lawyers create a price sheet for their law firm

Listening to your gut can be helpful in some aspects of your business, but when it comes to setting your bids, experts have a different recommendation: do your research.

“You have to solve it the same way any company would set prices, just like Walmart sets prices, just like LL Bean sets prices,” says Joyce Brafford, director of partnerships at ProfitSolv, which owns Rocket Matter and several others legal entities technological solutions.

For a small firm or a lawyer just starting out, your search naturally begins with frequent online searches for price comparisons on Google.

But Brafford also recommends seeking year-end reviews from legitimate tech companies. The data they collect from customers is shared for marketing purposes, but the white papers they produce can be extremely valuable. Most reports are free in exchange for subscribing to the newsletter, which will probably be helpful in other ways in the future.

Don’t give up individual contact with other lawyers in your area. While local bar associations probably don’t list average hourly rates, your peers in the industry probably will.

Start by building a base price

In a recent episode of the Non-Eventcast podcast, Brafford urged lawyers to first identify what they need to do and then work backwards.

This involves taking into account the actual cost of goods and services, which will constitute general and basic remuneration. But don’t forget about other essentials, like contributing to your 401(k) and health insurance premiums.

Once this price is set, lawyers should base it on if they specialize in a particular area.

“If you’re in a niche area in your area, if you provide a special level of knowledge or insight into the industry, that will be a premium that you can charge for,” Brafford says.

Then consider whether this baseline is still too low. Since most lawyers are willing to negotiate prices, it is better to have some leeway with what is listed on the rate sheet.

Don’t stay at the same rates forever

Even companies that have already conducted research should not rest on their laurels. In fact, experts suggest reevaluating rates at least once a year, and many companies are already behind schedule.

“I think it’s clear at this point that most law firms’ rates are not keeping up with inflation,” says Non-Eventcast host Jared Correia.

The danger is that lawyers who realize their old rates are too low end up charging huge percentage changes that scare away clients. Gradual increases increase the likelihood that customers will sign necessary documents, such as fee agreements and credit card authorization forms.

Once you have all of these documents ready, software like Rocket Matter can help you track time, send bills, collect electronic signatures, and set up automatic payments using a credit card on file. Implementing these systems will greatly reduce the likelihood of clients being left in arrears with significant amounts of money once all the work has been completed.

Consider alternative billing options

While hourly billing has been the most popular option in the past, it is not the only – or best – option.

Evergreen benefits start with a fixed benefit, say $5,000, and it is the customer’s responsibility to top up the salary at the end of each month.

“I love it as a model,” Correia says. “Firms I have spoken to that use this traditional practice collect between 99 and 100% of their invoices, which is not a common practice in law firms.”

Another option is to use a subscription model, which works like most tech software and charges customers a monthly fee. This works best for certain attorneys, such as outside business counsel for companies that pay a set amount each month for a set amount of legal services.

Finally, lawyers should consider selling products, just as Legal Zoom and Rocket Lawyer have been in the document drafting business for years. Then the question arises whether it is better to do it through a company or to establish a separate company.

“If you only bill by the hour, you don’t even think about the other models available,” Correia says. “It’s only three.”

For more information on bidding – and how much customers care about rates and even North Carolina’s version of Sasquatch – listen to the informative 33 minutes with the podcast link below.