If you increase legal fees and go too high, you will likely run the risk of losing valuable clients. If you go the opposite direction and price your clients too low, you may be forced to work with just a few staff to help cut costs. These are common and justified concerns.
This is why it is imperative to find a pricing model for your law firm that strikes a balance just right, allowing your firm to thrive while delivering real value to your clients. That said, sooner or later, you may need to increase legal fees at your firm. This post explores how to go about it, so it’s a win-win for both the firm and clients.
Why and When to Increase Legal Fees?
Times are hard, and it is impossible to ignore the effects of inflation or the rising costs. Finding and retaining talented employees at your firm is no cheap affair, and you may need to increase the rates to keep the best people at your firm.
On the whole, you may need to increase legal fees to ensure you stay in business and can deliver real value to all your clients. It is not uncommon to do so, and most law firms actually review and increase their rates quite regularly.
How to Do It?
Once you have established that it is time for your firm to increase legal fees, the next step is to map out how to do it the right way.
1. Conduct Market Research
Conduct research within your local market and find out what rates other law firms are offering. These are, after all, your competitors, and you wouldn’t want to lose too many prospective clients to competitors purely based on pricing.
One of the things you may notice with the South African market, and pretty much everyone, is the perceived greater value of higher-priced services. Keep an eye for that when doing your research.
2. Valuing Your Expertise
Conduct an assessment of what it is that your firm has to offer clients. What is your expertise? Gauge how much value you bring to the value for every legal matter you handle for your clients. Even a few minutes of excellent and strategic advice from an expert legal mind can equate to significant value.
Review your expertise and let the same reflect in the new pricing when you increase legal fees. The compensation should be commensurate with the value added.
Choosing the Right Model to Increase Legal fees
You have several options to consider. You can go with an annual review and increase your rates. Your annual increase should be within the accepted industry standard and the inflation rate. You can also go with occasional increases every few years.
Keep in mind that if you don’t stick to a regular rate increase, such as annually, the increase may be quite significant when you finally get to it. The burden may seem like quite a bit for your clients. To ease that burden, you may want to go with smaller, more frequent increases.
That said, what may work for another firm may not be the best approach for your law firm. Choose the rate increase model that is just right for you after thoroughly assessing all factors worth considering.
Communication is Key
Whatever decisions you make regarding when and how much you’d like to increase legal fees; ensure you communicate with clients. Inform your clients early enough. A 60-day notice is reasonable. In your communication, you can help the clients understand why these changes are necessary. Discuss any value-adds that may come with the new pricing and assure them that you will continue to honour the previous rates for contracted work until the specific date when the new rates will take effect.