Raising rates is scary, missing the chance is scarier

In a recent column, I examined possible avenues an attorney can take when faced with a client’s ultimatum for a lower fee.

In this week’s column, it’s the attorney’s turn.

There is no perfect time to raise rates, and setting fees is one of the most anxiety-inducing decisions a lawyer must make. Is the fee too high to get and keep clients? Is it too low to develop respect from clients and other lawyers?

There are several threshold tests you can consider, and each of these scenarios involves a selection process by the client. There will always be clients for whom the bottom line is the deciding factor; those are not the customers to worry about. You need to concentrate on those valued clients who have come to appreciate the worth of your legal services, for they will remain with you — if they can be convinced the higher fee is justified.

• The “big-ticket” or “break-the-company” case

In a case like these, price doesn’t seem to matter. The client’s options are limited, and the perception of need — and, therefore, value — is high. When well-known, successful, big-time litigators ask hundreds and hundreds of dollars per hour, major corporations aren’t likely to balk, because the matters are serious, even precedent-setting. They want whomever they perceive to be the best, and price typically is not a factor. If you recognize a case of yours to qualify for this category, just concentrate on the service — the fee likely won’t be an issue.

• A hot economy

When the economy is rolling, potential clients will recognize that people are paying more for valuable goods and services, and are more apt to pay more to avoid missing out on top-quality work.

• Business bursting at the seams

When a firm has more business than it can handle, expanding the practice is usually the first thought. But expansion is not always possible, and if it isn’t, you can take comfort in the fact that at least you can safely raise your fees. You may lose a few clients, but that may simply bring you down to your feasible maximum. Plus, you will likely increase your gross revenue and net profit.

• Client perception of fair fees
If your clients classify your rate or total fee as “more than fair,” your fee structure is probably at the lower end of the fee spectrum in comparison to your competitors. It seems, then, that there is room to raise your fees with minimal client resistance.

• Business from other lawyers

When your colleagues send you clients because they won’t pay those lawyers’ rates, it’s probably time to raise your fees. If those attorneys are unwilling to accept lower fees, there’s likely some wiggle room in between at which you and the clients can reach an accommodation.

• Comfort zone

Find your comfort zone in which your new rate can exist. Here’s a good barometer: When you stop laughing at the new fee you’re contemplating, it’s time for an increase.

• Overall opportunities

Raising your fees will set in motion a chain of events that will alter your practice. Depending on your geographic location and practice area, accept the fact that some clients will leave. That, however, can create several opportunities: You can work less at the same average revenue; you can agree to take on more interesting work; and you can have extra time to increase your marketing efforts for higher quality at the higher rates.

The bottom line is, like water flowing to fill a hole in the sand, the temporary imbalance caused by the loss of clients will soon re-stabilize. And it will do so at a higher level of income. Your economic situation will improve, your client quality will increase, and the nature of the matters before you will become more challenging.

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Edward Poll is the principal of LawBiz Management. He coaches lawyers and is the creator of “Life After Law,” a program that helps attorneys plan for profitable exits. Contact him at edpoll@lawbiz.com.