Law_Firm_Marketing_Planning_InfograpicMarketing is necessary for the longevity of a legal practice. A structured marketing plan will steer lawyers in the right direction of targeted clients and will make sure any time and money invested in marketing is well spent.

In developing the actual plan, lawyers must consider the impact of various factors such as:  the firm’s priorities regarding workload increases, client types and billing arrangements; funding and marketing support availability; and the timeframe for the implementation of the marketing plan.

 Based on these considerations, we suggest a planning workflow consisting of five steps:

  1. Goal definition,
  2. Status analysis,
  3. Market segmentation & target client definition,
  4. Activity planning and
  5. Implementation

Having marketing goals that are specific and measurable is key to developing a worthwhile marketing plan. Not only does precise goal definition give lawyers a better understanding of the level of engagement needed, but it also helps them to analyze and improve the actual performance of their marketing plan.

A status analysis in the form of a SWOT analysis creates a clear picture of a lawyer’s strengths and weaknesses concerning their current marketability. Additionally, it allows for the identification of marketing and business opportunities, as well as threats to business growth. The next step, segmentation and target client definition, serves as the foundation of the activity plan.  In defining their core practice services and characterizing their ideal clients based on demographic, geographic, psychographic and behavioral traits, lawyers can create a more effective platform for selecting the best marketing tactics for a target audience.

The objective of the activity planning and implementation stages is to develop an activity portfolio that delivers the most effective marketing message to the target audience defined in the previous step. For the purpose of this exercise, we divide legal marketing activities into three categories:

  • Relationship building activities (organizational involvement/memberships, client and referral source entertainment)
  • Content development and delivery activities (content marketing (blogging, social media, newsletter), speaking engagements, publishing)
  • Contact database management (app- or software-based contact management system)

After a weekly or monthly split of the marketing hours between these categories is determined, the implementation can be guided by a marketing & budget calendar to manage the frequency, cost and required support for the activities.

law firm, base salary, lawyer, compensation

Setting and adjusting base salaries requires law firms to consider many factors. While initial base salaries for lawyers are often driven by external market factors, we encourage law firms to consider qualitative factors such as work quality, work ethic, and client service when determining the capability and progression of their lawyers.

To ensure that a law firm develops a market-competitive and fair compensation system that rewards the firm’s valued behaviors, we recommend a balanced approach. Within this approach, we advise firms to evaluate base salaries separate from objective rewards for economic performance. Economic contributions would be considered as one criterion among a range of qualitative criteria that are based on the firm’s culture, experience, strategic needs, client needs and financial model.

Each lawyer receives a score on a factor-based rating table. Since the importance of each factor will vary from firm to firm, it is important for each firm to clearly communicate performance expectation guidelines. In addition to setting base salary, firms can also use this rating assessment, to determine bonuses for economic and other specific qualitative contributions.

When setting compensation for more senior lawyers (8+ years), law firms should also apply profitability methods.

While there is no magic formula for setting and adjusting base salary, effective systems will encourage and reward the behaviors that ultimately contribute to the long-term success of a law firm.

READ OUR DETAILED POST “Setting and Adjusting Base Salaries“, which includes helpful tables and graphics, on our Law Firm Best Practices blog.


compensation, attorney, law firm

When should attorneys receive a bonus? And when does a salary increase make more sense?  From our view, bonus payments represent compensation for contributions that are not necessarily repeatable.  For example, an attorney worked on a large case and generated significant income for the firm. Unless the attorney became more marketable in the process, the current year financial results might not repeat. Without producing the same results in the future, the higher base salary would be difficult to cover.

If law firms can align salaries with such factors as a growth in marketable skills, the ability to serve clients, and a more diverse practice,  they can remove some of the risk associated with paying higher base salaries.  For example, a lawyer who adds a new practice area to her market offerings can increase her ability to remain profitable, making her higher base salary less risky.

Attorneys can experience higher percentage increases in base salaries early in their careers. These increases are primarily a result from economic improvements relating to increases in billing realization, an ability to handle more workload, and less frequently, billing rate increases.  As mentioned earlier, adding skills can lead to a higher value to clients and can help justify higher base salaries.  As attorneys progress through different levels of expertise, (which typically include novice, intermediate, advanced, and expert), they increase their ability to generate more income.


However, prevailing market factors can limit an attorney’s capacity to create the income and resulting profit needed to support base salary increases. Some of these factors include:

  • Clients rarely agree to an annual increasing rate scale commensurate with experience;
  • Lawyers can struggle with adding noticeable increases in marketable skills sets;
  • The provided legal services can have limited value to clients;
  • The supply of available lawyers;
  • New technology;
  • Increased litigation management and client scrutiny; and
  • Alternatives to providing traditional legal services.

Since these existing market factors can often constrain base salaries, additional compensation becomes more reliant on economic contributions.


Law firms can minimize market limitations and risks with a bonus approach. Bonuses usually rely on the accomplishment of certain factors such as billable hour targets or profitability contributions. The at-risk component of compensation typically increases as an attorney matures, and at the equity member level, all compensation is at risk. Again, well-run firms can offer certainty in the process for determining compensation, but the results depend on profits.

Consider the following chart of a 10-year equity membership track that portrays a typical relationship between compensation, economic contributions, subjective contributions, and experience level.  All law firms compensate differently, but the basic relationship between a new lawyer’s compensation (which is largely guaranteed) and an equity member’s compensation (none of which is really guaranteed) is as depicted. Equity members are paid from profits. If a firm has no profits, there is no income to allocate.

attorney compensation, law firm, infographic

The economic and subjective contributions include the most common elements we encounter. Many firms, however, do not formally recognize training and supervision or billing management as discrete economic contributions. Some firms recognize training contributions subjectively, and billing management can earn some credit in an origination sharing system.

We recommend that our clients create a similar guideline for their firms and share it with all of the lawyers. We also recommend for firms to  explain the compensation and progression process to their lawyers, provide them with the necessary profitability information, and help them learn the  business of law.  Excellent tools that support a process-oriented approach include practice plans, mentoring programs, and ad hoc feedback.


When we implement a structured approach to compensation and progression, we sometimes encounter resistance from some of the lawyers. At the partner level things such as confidentiality, competitive fears, and concerns relating to an irresponsible use of the firm’s important financial data is not uncommon. We appreciate these concerns, but firms who struggle to share information run the risk of fomenting a back channel information system (rumor mill) that disseminates inaccurate information.

At the non-owner level, providing more transparency, guidelines, financial information, and profitability reporting can result in a level of accountability that can make some uncomfortable and even intimidated. If a firm has trust issues, the process may initially seem contrived. It is our experience, however, that as lawyers progress in a transparent environment, they either become comfortable and thrive or they decide to move on. Lawyers who are fortunate enough to work for a firm that shares information about the underlying economics of the practice can learn to practice more successfully.





This article is Part 4 of a four-part series focused on subscription-based services for law firms.  READ PART 1 and PART 2 and PART 3.

law firms, subscription services, AFA

Given the necessary focus, developing a customized subscription-based agreement for legal services can be beneficial for both law firms and their clients. Communication is the key to success. When a law firm’s incentives are aligned with their client’s expectations, the focus is on end result, not the number of hours it takes to get there.

Front-end loaded agreements and service level management

Developing a customized subscription based agreement can present challenges, especially when a client requires a disproportionate level of initial time investment. In such instances, a law firm can find themselves with negative profits for several months. For example, an on-boarding process that requires an initial review and documentation process of several files before new work can commence. Status reporting and progress reviews can ensure that clients appreciate the level of the firm’s commitment.

The decision to include the start-up costs at no additional cost or to charge an on-boarding fee is another significant consideration. It is certainly an inducement for the law firm to absorb the startup costs of a new agreement, but it is better to negotiate an on-boarding fee if possible. Law firms that have good pricing processes can also consider a hybrid approach that includes absorbing part of the startup costs and spreading the remaining amount over the term of the agreement. Other options include a higher first-year fee with future adjustments based on negotiated volume, results, realized efficiencies, and other agreed upon metrics or milestones.

Each practice area comes with unique priorities, and professional responsibilities stand. But working to an agreed upon service level can produce efficiencies that help manage the level of time and cost invested in matters at a given point compared to the revenues.

Value-added Services

As mentioned previously, law firms can learn a lot from technological and other value-added services that provide clients additional insights into managing their legal efforts, budgeting, best practices, improved outcomes, and advanced legal business intelligence.  Today, law firm must provide value-added services to have a competitive advantage.

Examples of value-added services include:

  • Activity management and reporting;
  • Response time management and reporting;
  • Real-time case status reporting;
  • Average cost per matter;
  • Average matter duration;
  • Service level compliance summary and detailed;
  • Exception reporting and early warning systems;
  • Predictive metrics and trend analysis (legal and cost);
  • Document repositories and forms management;
  • Web-based portal for requesting services and managing open items (dashboard);
  • Recommendations for improving the client’s customer service regarding legal.

Many other value-added services can exist based on the practice area, client practices, industry, and the role of legal services in a client’s business. We recommend creating SSA’s using a value-added approach that only an outside law firm can provide.

Perfecting a subscription based pricing model can be difficult for law firms, especially for firms geared to hourly billing. Several key business processes will need attention, including profitability measurement, workload distribution, productivity measurement, compensation and incentives, advanced pricing, and marketing support. An objective 3rd party is often necessary to help support the development of the necessary processes and improve internal core competency.

Though some time and effort are needed to initially develop these customized agreements, the end result includes strengthened client relationships and increased firm profitabililty.


This article is Part 3 of a four-part series focused on subscription-based services for law firms.  READ PART 1 and PART 2.

Law firm pricing

Developing a pricing structure for subscription based legal services can be difficult, especially if your law firm is geared to hourly billing.

For existing clients – historical data and knowledge of the client’s needs can make it easier to set subscribed services fee levels.  Other factors, however, can make the process strategically difficult.  Concerns can range from setting a price that causes a client to include new competitors in the process to opening oneself to internal scrutiny – “the new deal is not as good as the hourly deal.”

Arriving at a pricing structure for a new client will initially rely on client-supplied data, which I have often found to be limited. In other service industries, it is typical to conduct an in-depth analysis of a prospective client’s current costs and service level expectations. In the legal market, however, due to confidentiality and attorney-client privilege concerns, prospective clients rarely share any data beyond estimates of their total legal spend, types of matters, and possibly a projection of future service needs. A client may provide more information if they believe it will benefit them in developing a credible fee level.

Finally, small and mid-sized clients (legal spend and needs) may not have any organized approach to their legal spend. In these instances, modeling based on assumptions is necessary. Other sources of data may include running simulations on similar current clients and discovery questionnaires designed to organize the evaluation process.

Economically justifying subscribed services fee agreements can rely heavily on removing administrative costs that include billing, collection, the speed of cash flow, other savings related to automating workflows. Efficient staffing models, which include the freedom to assign any appropriate resource to the task, should also provide additional cost efficiencies and better realization (value for time spent). Firm’s who primarily bill hourly can struggle with cost allocation for non-hourly billing approaches.

It is also important to gain agreement on the cost savings that the client can realize, which include reduced bill review, matter management, and payment processing.

A Trial Run

Such clients will require a more fundamental business case:

  • clients who do not have an organized process for managing their legal spend,
  • clients who do not take a strategic approach to their legal spend or
  • clients who do not yet understand their legal needs will require a more fundamental business case.

To insulate the client and firm from the risk of a bad agreement, I suggest a trial period with a reassessment opportunity. The length of the trial period can depend on the scope and complexity of the agreement.

Focus on Efficiency

Finally, considering compensation drivers and incentives for timekeepers working on subscribed services accounts is necessary. The focus must shift to efficiency and adherence to service levels from billable hours based compensation and pay.


Keeping time on on subscribed services accounts is still necessary for internal measurement purposes. The type of services provided can inform the level of detail needed, but a code based timekeeping system that is tied to matters, projects, advice or another logical schema will work. Recall that one element of an SSA is to reduce administrative burden.

A code based timekeeping system that groups like tasks can facilitate advanced metric analysis including  efficiency analysis for each timekeeper, timekeeper experience level, task level, and several others that can help identify improvement areas.  The data should also indicate potential staffing issues, client-side inefficiencies, and  key profitability metrics.  All of these data can inform operational decisions, timekeeper compensation and incentives, and future pricing decisions.

A predisposition to hourly billing and profit measurement is a major challenge to the creation of a successful subscribed services model in many law firms. A well-developed cost accounting process and profitability measurement system can encourage partners to allow the time needed to perfect a subscribed services model.

Check back on our blog soon to read more about subscription based legal services, including:

  • Challenges of this type of billing model.

This article is Part 2 of a four-part series focused on subscription-based services for law firms.  READ PART 1.

Subscrition services law firm As a consultant who rarely bills hourly, I have had my trials and tribulations with scope development and client expectation management. I have even considered if the concept was workable. Achieving a sustainable market-fit approach has taken creativity, the patience for trial and error, and a level of flexibility in the early stages.

Our experience finds that a subscribed services approach is still considered too risky by many lawyers, but some lawyers are earnestly probing for the right approach economically and ethically.  If you or your firm are considering a subscription based pricing strategy, apply the following fundamentals to increase your success chances.

Scope Development and Expectation Management

Perhaps the most difficult element to perfecting a subscribed services pricing strategy is to develop a scope of the agreement. “Scope creep” occurs when clients request additional services not covered by the agreement without also offering to pay additional fees.  This can destroy profitability since most lawyers are eager to please their clients and provide these additional services without much resistance.  Scope creep will be further discussed later in this section.

When a subscribed services agreement (SSA) includes a well written scope, terms and conditions, and pricing, success is more likely.  It is also important to adhere to the provisions which requires discipline and excellent communication skills.

Developing a Scope: An Example

A scope of basic services included in an agreement is easy to develop. For example, your firm may agree to do the following for a client:  manage human resources compliance efforts, review and support hiring and termination processes and decisions, and to oversee management training twice a year. An experienced employment lawyer can easily write an adequate agreement scope.

Under this agreement, “pressing the scope” could occur if the client requests a lawyer to participate in the termination process of an employee. Wanting to keep the client happy, the lawyer agrees.  The termination process goes so smoothly that the client decides it is a good idea to have an attorney present at all difficult terminations.

When creating the initial scope, the lawyer never anticipated offering this level of service, which is often time intensive and comes with potentially more risk. And while the client is pleased in the short run, these added services quickly become an expectation and profits begin to evaporate.

If we were advising our fictional lawyer, we would recommend the following:

  • Immediately analyze the agreement to determine how well the pricing fits the expanded services offered. We will address accounting issues later, but for now, assume the data exists to perform the recommended analysis. Next, determine how the additional services impact the pricing model built for the agreement.


  • If the impact is material, contact the client and review the initial scope. Gain agreement that additional services are beyond the scope and offer solutions.


  • Think of solutions: It is in this area that creativity is needed. For example, instead of raising the price, you may consider eliminating a service from the initial scope as an offset. You may determine that you can handle a limited number of additional instances and propose an incremental fee for every instance beyond the allotted number. Finally, you may decide that the solution is a fee increase.

In these situations, it is important that clients see an honest effort to manage the cost of the agreement.  Your firm’s credibility will increase if it can propose alternative that do not involve a fee increase.

With experience, future scope agreements will anticipate potential additional service requests and inform pricing agreements.

Expectation management

Managing client expectations is important regardless of pricing agreement or service model. An advantage of hourly billing, although slight, is that clients receive a detailed record of the service provided on their invoices. When a subscribes services invoice only includes a line item for the monthly fee, clients may not appreciate all the work performed during the billing cycle or over the course of the agreement.

To communicate the value received under such agreements, an alternative communication process is necessary.  Borrowing from the IT world, I like adaptations of the help desk ticketing systems.  For example, bespoke versions of Zen Desk or Fresh Desk (several similar systems exist) can help manage client expectations and measure a firm’s service level performance. Further adaptation of these systems includes a web-based client portal process that allows clients to submit requests for legal services online.

Once initiated in the system, tracking, approval and reporting processes can occur.  Depending on the type of agreement, I recommend that lawyers use these data to measure performance and communicate with clients periodically. For example, a firm may review the number of legal requests submitted during the period, the status of each request, any items that need client action, and any other items that can improve the quality of the agreement. As necessary, standard narrative case reports can supplement a metric based reporting system.

A formal process for managing client expectations is an essential part of a successful subscribed services agreement.

Check back on our blog soon to read more about subscription based legal services, including:

  • Pricing (Setting Fees)
  • Accounting
  • Challenges of this type of billing model.
This article is PART 1 of a four-part series focused on subscription-based services for law firms. 

To meet the changing needs and demands of clients, law firms everywhere are rethinking the traditional per hour billing model. While this often means offering clients a fixed or flat fee approach, some law firms are considering subscription based billing for their clients.

A subscription based legal services model may be worth considering if your firm:

  • Wants to simplify time accounting
  • Reduce billing to a monthly technological event
  • Build a sustainable book of recurring business


Realities about hourly billing and business client relationships

Reality #1

Hourly billing can be frustrating for everyone involved. Lawyers dislike keeping time and rendering invoices.  Clients grow frustrated receiving invoices with legalistic time descriptions in fractional increments.  Displeased clients often question charges for seemingly worthless tasks, delay their payments or push for lower billing rates.

Reality #2

Clients who do not regularly engage in the legal process typically do not include legal fees in their operating budgets. They do not utilize  preventative legal services. Rather, they  wait until they have a serious issue to involve their lawyer.  This type of clients can require a lot of immediate attention, producing large legal bills in the initial stages of engagement.  Since lawyers are typically sheepish about securing large retainers or negotiating payment plans early in the representation,  they may find themselves ethically bound to continuing the representation of nonpaying clients.

Understanding your client, their challenges and their disposition toward legal services can help avoid many of these situations and lead a productive, profitable and rewarding legal services relationship.

Subscription Based Legal Services, Law Firm Consultant

The Ideal Client

A subscribed services model can work effectively for small and mid-sized companies who can’t afford or do not want an in-house legal team. Typically, these clients have an immediate or growing need for uninsured legal services. While they may not have have legal issues every month, they have enough going on to appreciate spreading out their legal fees over the entire year. Larger clients may benefit from this subscription based approach with the right value-added services. It is more likely, however, that the in-house legal team may resist or compete internally.

General counsel services can cross many practice areas and can create work for other lawyers in a firm. For example, general corporate services can lead to intellectual property, labor, real estate, litigation and other types of legal services, which can fall out of the basic agreement scope.

Since it likely that a subscribed services client will  have legal needs beyond any one firm’s capability, we recommend offering to manage the interface with the additional firm. To ensure that a client makes its  first call to  the firm for any legal need requires the firm to willingly recommend appropriate counsel. This even means suggesting another firm.

SSM’s can also work for discrete parts of a client’s total legal need. For example, loan closings, collections, labor and employment support, and intellectual property. If a clear scope is attainable, the work is consistent, and an outside law firm can provide efficiency, cost advantages or improved quality beyond in-house solutions, an SSM can work.

Check back on our blog soon to read more about subscription based legal services, including:

Pricing, law firms, RFP, Client DevelopmentBefore responding to an RFP or a proposal for legal services outside of a formal bidding process, you must first assess the likelihood of winning. Lawyers usually have a good sense about their chances of succeeding in a bid process. If you have never succeeded in bidding for the prospective client’s work,  have never represented them, or have never made a concerted effort to marketing to this potential client, your chances of winning are slim.

Why then should a firm bid at all?

Why not just concentrate on current and prospective clients who are better bets?

To answer these questions, a firm must decide whether the impact of representing the seemingly out of reach client is material enough to warrant a long-term bid process. For example, responding to a an RFP in such a way that it shapes future RFP’s resulting in an advantage to your firm.

Before going for a strategic win, honestly assess the following factors:
• Your firm’s qualifications to excel at solving the client’s legal problems;
• Your firm’s demonstrable track record in the relevant practice areas or skill sets;
• Your firm’s relevant available capacity to dedicate to the client’s account;
• Whether you can offer a unique qualitative advantage to the client;
• Whether you can gvie a real price/cost advantage;
• Your plan for addressing your firm’s perceived weaknesses on the client’s part;
• How you can best remove any perceived risk on the part of the client associated with giving your firm an opportunity.

Carefully articulating each of these points may not win the business. But if the answers to these questions are compelling enough, it may spur a deeper evaluation of existing counsel and may inform future bids.

Many solicitations (RFP’s, formal bids, panel applications) require strict adherence to the form of the proposal or bid documents. These documents often favor incumbent firms for, no other reason than, prior experience with the prospective client’s cases.  Clients may try to compare submissions, making it difficult to evaluate and compare proposals that do not follow bid guidelines.

Enlightened clients may allow for alternate submissions in addition to the proforma bid or proposal response. In these instances, it is much easier to affect the bidding process strategically. Clients who allow additional alternate submissions suggest that they are open-minded to creative approaches and want to learn from their own processes.

Clients who do not solicit alternate responses may not appreciate a firm’s efforts to include an alternate proposal option. Just because they don’t ask, however, does not mean someone who can influence future decisions won’t read it.

Taking this down to a more practical level, you can apply these same concepts to smaller opportunities and clients, or clients that do not have a formal procurement process.  For example, if you have cultivated a great relationship with a prospective client, but your competition is strong and has a long-standing relationship with the desired client. Or if a client has a difficult time adding new law firms a list of approved counsel. In both cases, immediate success is not likely. However, if you can change the conversation to an innovative pricing strategy, a technological advantage, or a forward-thinking approach to the legal work, you may create an advantage for yourself.


Before bidding or proposing on new legal work, give an honest assessment of your firm’s chances of winning. If the existing process favors you firm, comply with the requirements of the bid and submit your proposal.

If winning the new work is determined to be a long shot,  comply with the proposal requirements, AND consider an alternate submission. An alternate approach is more likely to succeed if your firm can convey its real advantages that may create future opportunities.

Strategic approaches take time and often don’t pay off, but they are often the only chance a firm has to secure a prospective client’s work.

Pricing legal services is a complex and evolving topic. PerformLaw posts have recently covered the following points:

Please look for our future posts on the following topics:

  • Contract General Counsel services
  • Technological value adds to build client loyalty
  • Effectively communicating cost savings related to various billing approaches
  • The impact of pricing and cash flow considerations on pricing

law firm, flat fee, fixed price, alternative billingThe demand for value-based billing options presents law firms with opportunities to propose a flat fee approach for their legal services.  Law firms can improve their chances of success in developing this sort of approach with a full-featured model.  Larger firms may have the benefit of in-house pricing professionals, but smaller firms may need outside support. Regardless of who is supporting the data analysis process, a comprehensive approach is necessary.

We recommend building a model that contains the following features:

  1. An estimated hours distribution by timekeeper type for a typical case;

  2. A frequency component that allows the testing of several assumptions;

  3. Historical data for comparison to assumptions;

  4. Volume assumptions;

  5. Capacity analysis;

  6. Payroll and overhead cost per hour;

  7. Contributions to overhead and profit; and

  8. Before and after rate comparisons including a rate uplift feature.

  1. Estimated Hours Distribution

We suggest creating a chart with a vertical listing of all the elements of a typical case and a horizontal listing of either the assigned timekeepers or timekeeper types used in a typical matter.  Next, fill out the grid with the estimated timekeeper hours assuming that all cases run entire indicated the course to conclude.


  1. Frequency Component

When determining price, law firms should also include a frequency component that estimates how often a particular element of a case may happen.  Estimating frequency is important since it introduces the element of risk into the model. For example, if a firm simply prices work based on the maximum estimated hours per case, clients will likely oppose the proposed price. With good data, experienced and skilled lawyers can more accurately assess the likelihood of certain events happening, resulting in more risk tolerance.

  1. Historical Data

In an optimal situation, firms can test assumptions based on real case data. An experienced firm can use historical case data to run scenarios to find opportunities to improve. This firm will have a pricing advantage. If a firm has no historical data, a client may offer some help or suggest using certain assumptions, but this is less than optimal. Another idea is to consult with a peer firm or colleague in another state or jurisdiction for insight.

  1. Volume Assumptions

Understanding the impact of volume on the firm’s cost per hour is important. Volume can temporarily reduce cost per hour. Eventually though, continued volume increases will encounter rising costs and declining profits. Alternatively, too little volume may also cause cost per hour to increase and profits to decline.

When compensation plans pay on gross fees and not contributed profit, additional issues arise. Developing a profitable pricing strategy requires a true comprehension of the impact of volume at an indicated price point.

  1. Capacity Analysis

Considering the firm’s available capacity is another component of pricing. A firm with a lot of available relevant capacity may choose to price more aggressively. The reverse is true for firms that have minimal capacity available. Firms should consider that not all hours are the same. For instance, a firm may bid more aggressively bid on a certain type of work if its potential is better than existing work.  Additionally, some firms may try to cure a work slow down with a short-term strategy of picking up filler work.

Here is an excerpt of a simple capacity analysis, which only indicates available capacity and does not consider skill set matches to the proposed work. We consider skill set matches separately.

Regardless of strategy, firms should carefully consider the impacts on available capacity in the short and long term.

Non-hourly fee arrangements can transform a firm for better or worse.

  1. Payroll and Overhead Cost Per Hour

Testing the impact of any new work on payroll and overhead cost per hour is an important element of creating a profitable non-hourly billing proposal. While predictability and simplicity of billing are attractive elements of non-hourly billing agreements, the burden of efficiency falls to the law firm.

Sophisticated clients will compare their ultimate cost of hourly and non-hourly billing agreements. While inefficient firms who bid too high may win in the short run, they eventually sacrifice the entire client relationship. Firms with efficient cost structures are better suited to non-hourly billing approaches.

  1. Contributions to Overhead and Profit

When building a pricing model, a firm must first identify the direct costs associated with any proposed work. Covering direct costs enables a contribution to overhead and profit. Many firms fall into the trap of believing that covering direct costs adds to profit. On the weakest of levels covering direct overhead helps, but firms that price this way have no future. Firm’s that do not account for overhead in their pricing models run the risk tying up their available capacity on unprofitable work, which can transform a firm for the worse.

  1. Before and After Rate Comparisons and Rate Uplift

Law firms sell solutions to legal problems. Solving legal problems takes time. Law firms have limited time to sell and should maximize the return on the time they expend. An hour is a common unit of measuring time and should inform a non-hourly billing analysis. Accounting, finance, economics, marketing, and good instincts all important tools in the pricing process.

Including a rate uplift feature in a pricing, analysis can help reverse engineer a process to achieve a targeted revenue. For example, a smart firm that sets a target rate for a particular type or piece of work can work backward through the process to find cost efficiencies, some which may add value on the client side. Consider the savings that come from eliminating bill audit or the value to the firm of stable and predictable cash flow. Smart firms look for value everywhere.


A simple, well-built pricing model can offer true insight into a firm’s ability to compete for non-hourly billing opportunities. In some instances, a creative billing approach can be the only the chance a firm has for securing desired work.

Invest the time in creating a pricing template for your firm. If the resources are not available in-house, look to the outside for support. Subscribed PerformLaw clients should know that these templates and services are available to them at no additional charge under most pricing plans.

Close enough may work in a game of horseshoes. Miss the mark by 5% – 10% in a pricing decision, and your firm may not get the work. Or worse,  you may win the bid and suffer the loss.

  Thinking about a non-hourly billing approach

or have a proposal opportunity?

PerformLaw can help. We offer basic templates, analysis support and pricing advice starting at $750.00.*


* These templates and services are available to subscribed PerformLaw clients at no additional charge under most pricing plans.



Law firm, bidding process, client development

Our law firm clients report an uptick in their requests for non-hourly billing agreements. Requests range from phased approach flat fees to a per case flat fee for similar cases.  Other requests include a bid document in which the lowest bid in the first round only meant you earned the option to submit a lower bid in a successive round.

In other instances, the prospective client reserves the right to compare the firm’s actual effort expended to the agreed upon fee.  Typically, however, there is no corresponding provision that allowed the law firm to request additional fees if a phase was higher than anticipated.  This provision essentially equates to hourly rate competition in disguise.

I believe most clients know who they want to win.  I’m not suggesting nefarious, just that the legal service relationship is very personal.  When clients include current firms in their bidding process, red flags should exist for the other firms. A client’s existing lawyers are familiar with the client’s approach to case management and likely have strong relationships with the primary decision makers.  While a uniform set of assumptions for all bidders to follow makes the process fairer, the veteran firm will still have a better sense of the complexity and duration of the requested services.

Too high, too low, or just right

Bidding for legal work is a much about data and numbers as it is about a firm’s experience and instincts. A firm bidding for client work must review all relevant data and decide to bid a certain amount, which is ultimately a judgment call.  If a firm or lawyers are risk averse, a maximum possible fee offering is typical, which is not likely to succeed unless the firm’s implied hourly rates are substantially less than the other bidders.

Bidding the work too low can also lead to poor results.   A client may attribute a firm’s low bid to a lack of experience and reject it to avoid the possibility of poor representation. On the other hand, if a client happens to accept a firm’s low bid, the firm may get a poor return for the resources expended or even end up with an actual loss of money.

It is important for firms to understand the difference between a reduced realization on a standard hourly rate and an actual loss of money.  Many lawyers define losing money as the difference between their standard hourly rate and the realized rate on a matter. In a sense, this is true if the firm or the lawyer is at full employment and would forgo work at standard billing rates.  If the firm or lawyer is not at full employment, a reduction in hourly rate is not likely an accounting loss, which occurs when the actual cost (payroll and variable overhead) is greater than the revenue received.

Behind the scenes

Law firms must also recognize when a client is just fishing for a better effective hourly rate. If a client’s RFP instructs bidders to price matters based on identified levels of hours per phase or task, there is very little room for differentiation except on rate.

A firm should also consider the reasons for its inclusion in the bidding process. Is there a previous relationship?  Has there been any targeted business development with this client? Does the firm or lawyer have high profile expertise? Does the firm have a solid reputation for handling similar matters? The list could go on, but understanding how the client perceives the firm or its lawyers value can inform your response.  In many bidding situations, firms are included to set the upper and lower ranges. Knowing where your firm fits in the bidding process will allow you to create a more relevant response.

Please look for our future posts on the following topics:

  • Actual win versus strategic win
  • Advanced bidding features
  • Pricing designed elicit more information
  • Contract General Counsel services
  • Technological value adds to build client loyalty
  • Effectively communicating cost savings related to various billing approaches
  • The impact of pricing and cash flow considerations on pricing