Today we are continuing to charge through on this six-part series of legal marketing mistakes that new solos make as they start their own law firms. Yesterday we talked about the importance of documenting what you do in your law firm so that you can someday “replace yourself” so that your law firm can grow. Today I’m going to address something that is vitally important to the success of every small law firm – legal fees. Most lawyers are not charging enough for legal services.
There are lots of different types of fees – hourly, flat fee, retainers, contingent, etc. You will need to check with your state bar to make sure you are charging the appropriate types of fees in your practice – each state is a little different in this area. For the sake of this post, let’s assume that you are either billing yourself out hourly, as most lawyers do, or you are charging flat fees.
In addition, if your jurisdiction permits you to charge a “true retainer“, then I recommend you take advantage of that when a client first hires you. (In North Carolina, we are able to charge a true retainer that is earned upon receipt and is used only to retain our services. It does not get placed in the trust account and is non-refundable in most cases). I only charge a true retainer when a client is hiring me on an hourly basis.
For most (but not all) litigation cases where the outcome and work is uncertain, I charge my client’s on an hourly basis. I take a trust deposit up front, in addition to a true retainer that is equivalent to my hourly fee. I know of at least one other lawyer that charges flat fees, even for litigation cases – but those fees are staggered depending on the stage of the case and very high because there is uncertainty in how long the case will take. Here is a good article on how to set your hourly rate.
In my practice, I also charge flat fees, but they are typically for uncontested matters where there is not too much uncertainty about what needs to be done.
How do you know how much to charge for your legal services?
Most new attorneys don’t charge enough. I presume that they are not yet confident in either their abilities as a lawyer, the client’s willingness to pay the fee, or both. I think this is a big mistake. You need to develop what Dan Kennedy commonly refers to as “brass balls”. When you are sitting in a meeting with a potential client, you need to quote your fee, then shut up. This is where the brass balls come in – because you have to have a lot of confidence and gusto to sit their quietly after quoting a very large fee. If you have sold yourself appropriately prior to this meeting, and the client is qualified, then they will begrudgingly pay the fee. Maybe not that day, but they will eventually call you back to pay.
If they whip out their credit card and say “what a deal”, then the fee is too low.
Why most attorneys are not charging enough for legal services
Most attorneys tailor the fee to the client. In other words, if they see a client that doesn’t appear to be able to pay a whole lot for legal services, then the lawyer will charge what they think the client can afford to pay, which is usually too little. And since this attorney is probably attracting the wrong type of unqualified clients to their practice, charging too little becomes the norm in their world. This is a recipe for unhappiness, working too much, and making too little. Don’t fall into this trap.
I advocate a different approach to legal fees
In my experience, you need to decide how much money you want to make and then set your fee accordingly. As you become busier and busier with new clients, then you will start raising the minimum trust deposit or flat fees you will take from clients.
I had a client meet with me last week and I quoted him a fee that would be placed in my trust account for future services. He called back yesterday to tell me that he could only pay ½ of the fee and would I be ok with that. When I first started my practice, ½ of my current fee was what I typically asked for from clients, so I may have been ok with that three years ago. But now my fees are higher because I am choosier about the clients that I will work with. I know that this is a difficult case and as such, the fee I requested is justified. I told my legal assistant to call the prospective client back and let him know that I would be happy to work with him, when he has the money together for the full fee.
As a young, new attorney, I recommend moving your hourly rate up quickly and then slowly adjusting the amount you will take from clients for your trust account.
Tips for setting your legal fees
Here are a few tips for how to set your fees:
- Take advantage of charging a true retainer if your jurisdiction allows;
- Move your hourly rate up quickly;
- When quoting flat fees, err on the side of being too high – once you charge that fee you are stuck with this client until the work is finished;
- Adjust your minimum trust deposits up once you start to develope a sustainable client base;
- Make sure you are charging for your initial consultations – free consultations are another recipe for trouble;
- Check with your jurisdiction on how to seek reimbursement for client expenses.
- If you are charging hourly, send out bills a minimum of once a month. In some situations, you should send them out more frequently.
- Make sure to do a good job keeping track of your time for your hourly cases. I recommend using a case management program that allows you to track your time with a timer and input the billing entry immediately.
- Track your daily, weekly and monthly billings. You should have a target billing number for each working day – make sure you are hitting that number regularly. Don’t leave the office until you get to your number.
- Don’t feel bad about charging for your services. You went to law school to be a lawyer. Being a lawyer requires a lot of responsibility and diligence. It isn’t easy. Make sure you are paid what you are worth.
Strong feelings one way or another about your fees? Post a response below!