Clients are wondering. How much? When will I know? Some wonder how they will find out. A few top legal decision makers express amusement about exactly how and when firms initiate direct contact when sharing rate increases — setting the rate increase dance in motion.

Corporate legal budgets are largely already set for 2022. Clients built in a rate increase — but it always seems to fall short of the actual rate increases.

How and when you present the rate increase has as much to do with your client’s reaction as the increase itself. Corporate counsel shared some of the best and worst ways law firms talk about rate increases.

Among the many, here are the 6 most offensive:

“The rate increase finally surfaced in my April invoice for work performed in January.”

“I learned (the rate increases) by reviewing my invoice line by line — not a good use of my time.”  

“I received a snail mail letter addressed to me as “to our valued client” in January.”

“My partner asked how I thought our litigation was going — I told him I thought it was going well — and then told me “That’s good because rates are going up.” I am not sure if he was joking but I thought he was actually asking for some kind of feedback.”

“I called and asked my partner in November — he told me he would let me know in January, but he didn’t. I had to call him again, and again.”

“An email from the law firm’s Finance Director. I save it so I would always have the name handy.”

On the other side of the coin — clients tell us about the most palatable approaches:

“Rates are going up. Let’s review the matters and see if we want to change staffing or revisit our patterns of communication and streamline both.”

“As rates are going up should we think about using a fixed fee — for at least a portion of the work?”

“I know it seems high but we will gain a lot in productivity because (associate 1 and partner A ) are more experienced with you and the matter — we should make this back.”

“The rates are going up, but I was able to keep the same discount we agreed upon.”

“The firm is raising rates, but I was able to stay under the standard increase. Here is the impact on the current matters over the next 12 months — let’s talk about options to bring this down.”

Virtually every firm clients work with is raising rates. Your increase is judged on:

1. 1. How you deliver the message
   2. How other firms deliver the message
   3. How much your rate will increase

You can control 2 of these variables. It is easy to forget rate increases are part of the client experience — it may even turn into a branding event.

Passive contact — email, third party, or snail mail — has the unintended effect of diluting the perceived commitment to the relationship. Clients expect the increase, so how you handle it becomes more important. Almost as important as how you handle the push back — which may not come for a few months.

We discussed handling rate increases in detail here.

Best in the market ahead.

MBR
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The post The 6 Worst and 5 Best Ways to Break the News about Rate Increases appeared first on The BTI Consulting Group.

The top hourly rate paid for an attorney just hit a wall.

And, this market-topping rate is exposing a few cracks in the wall, if not the very foundation itself. Clients identify $2,000 as the top rate they pay for outside counsel—identical to 2016. This means the 8% annual growth for the top rate paid for the last 10 years is over.*

Not Meeting Clients’ Heady Highest Rate Expectations

First, the bad news—the inability to deliver at the top rates isn’t just a client disappointment—it’s a deal breaker. There is only one reason clients say these otherwise excellent attorneys aren’t worth it—they don’t meet clients’ lofty expectations. Top legal decision makers tell us:

“At this rate I expect my attorney to walk on water, not get their feet wet, and be thinking only about me while they do it. I only needed to hear ‘you’re next on my list’ once and I knew it was over,” says one CLO at a large global consumer products company.

“I expect this attorney to be thinking about things I haven’t ever thought of and bring the strategies to deal with them before I bring it up,” says another top-level client.

“This attorney is excellent but is a step or 2 from amazing. So we will be parting ways when this is over,” indicates a top legal decision maker at a large financial institution, with some level of resignation in his voice.

When You Are Worth More Than the Top of the Market

But, there is some good news—just about half of the clients paying these top rates think this hourly fee is worthwhile. The half who report receiving the highest value at the highest rates talk about 4 key attributes:

• Total command of the situation—a deep and penetrating understanding of goals and what needs to be done to get there
• The top rate earner is backed by a team where every single person is equally impressive—not a weak link to be seen or heard
• Seemingly never having to ask questions—attorneys at the top end of the market always look ahead, make sure their clients are in the know, and are 2 steps ahead of client questions
• Timely invoices with updates and explanations of what it’s for and what the next invoice might look like

In the words of a top executive at a global pharmaceutical company, “Our lead attorney has such command of our complicated deal, but he was backed by one of the most impressive collaborative teams. I felt the top rate was worth it to have this team working on this deal. The cost of the top attorney was low despite the high rate.”

Or this description from a CLO at a Fortune 100 company: “This was high stakes, very high. I had updates every morning and he always kept me in a position to field calls from my CEO. You just knew he knew what was needed when and it all just went so smoothly.”

Top Rates Change the Client Expectation Game

Clients always have high expectations, but the rules of the game change at the super-premium end of the market. Clients ratchet what they expect to new unseen heights, and meeting these ever-increasing expectations may be the hardest part of delivering value.

There is no turning back. If you don’t deliver on client expectations at the top of the market—reasonable or not—the relationship is likely toast. But, the most client-savvy attorneys in the world know how to manage client expectations, however high and unreasonable, and end up with the top rates, top value, and the top clients.

MBR

*Based on in-depth BTI research conducted on a rolling basis between February 2016 and April 2017. BTI conducted more than 340 independent, individual interviews with CLOs and General Counsel at Fortune 1000 companies and large organizations.

The post Highest Rates Clients Pay Hit a Wall appeared first on The BTI Consulting Group.

Take control of the conversation as quickly as possible in order to discuss your fees on your terms. In this month’s BTI Client Relationship Lab we’ll give you 6 tactics for proactively steering fee conversations to the points you want to make, instead of having to react to a series of rapid-fire questions about rate sheets.

You can view the video by clicking the image below, or on YouTube directly here: https://youtu.be/Lc8gVCvpqX0

With this series we’ll be taking an in-depth look at a wide range of client relationship best practices. We’ll be releasing Client Relationship Lab webisodes on our blog every month—subscribe today (in the box at the upper right of your screen) and be sure you don’t miss a single one.

The post 6 Tactics for Talking Rates with Clients appeared first on The BTI Consulting Group.

The dramatic increase in clients’ need for complex and bet-the-company work is bad for clients but downright awesome for law firm rates. The highest rate in the market now commands 2.9 times the average rate clients pay. Clients* give BTI 6 reasons they pay law firms top rates:

• Attorneys bringing deep understanding of the business risk
• Penetrating command of the solution or path to a solution
• Unmatched commitment to help
• Clearly grasping the magnitude of the enterprise level risk at hand
• Easily anticipating the needs and obstacles from the start
• Eagerness to discuss strategies and actions before being hired

These 6 insights translate into a top hourly rate of $2,000 an hour in 2015, up from $1,600 last year—a 25% one-year increase. Global GCs pay these rates for:

• Bet-the-company IP work
• Enterprise level M&A related litigation
• Large-scale government investigation
• Defense against high-profile activist hedge funds

59% of corporate counsel at large companies now pay at least one law firm $1,000 per hour as their top hourly rate paid—compared to only 39% last year. Again, top legal decision makers credit the increase in the most complex legal work.

The average of the entire spectrum of highest rates paid across all large companies is $982 per hour—up from $909 in 2013, after all discounts. We estimate the highest rate paid by middle market clients—between $50 million and $750 million in revenue—is $862 per hour, primarily for M&A related work.

The top legal decision makers tell BTI how these law firms meet the 6 key criteria above. In virtually every instance where clients are paying top of the market rates—the decision maker knew exactly which law firm they would hire if an ultra-high risk matter came up. These clients had deep experience with these firms and knew what they could deliver.

Law firms position themselves for the high-end work by talking business implications, sharing strategies, and maintaining an active ongoing dialogue with their clients—well before a high-end problem ever rears its ugly head.

MBR

*Based on BTI research conducted between March 2015 and September 2015. BTI conducted more than 300 independent, individual interviews with CLOs and General Counsel at Fortune 1000 companies and large organizations.

The post Is $5,000 an Hour Next? appeared first on The BTI Consulting Group.

Clients pay $1,600 an hour after any discount as the highest rate in the market—a new all-time high for the top rate. And, this is not an isolated rate—more than a few clients report paying $1,600 per hour.

4 Figure Hourly Rates Officially Part of the Legal Landscape

38% corporate counsel report paying a top rate of $1,000 an hour or higher. The 4 figure HRP is clearly embedded in the legal landscape. The largest 30 law firms, including the Magic Circle firms, lay claim to 54% of clients paying the highest rates.

Clients say new and extreme risks make the top rates worth paying. Think monster transactions, global complexity, large scale FCPA and similar enterprise-level risk. 

Top Rates Climbing for All Law Firms  

The average HRP is $875 in 2015 across all law firms, up from $687 in 2012. 50% of corporate counsel report paying a top rate of $900 or more.

Most of the top rates being paid outside the largest 30 firms are for Transaction-related work.

2 Reasons Law Firms are Premium Rate Worthy

Clients think about two hiring factors when a super-premium need arises. The rate goes to the law firms demonstrating one of two qualities, in this order: 

1. A deep, well-developed and working understanding of the client and their business
2. The best-perceived brand

Clients only recognize 24% of law firms as bringing this super-premium, rate-worthy level of understanding. These clients know exactly who they will hire if the super-premium need comes up. But 76% will look beyond their current roster of law firms for the best-perceived brand—unless you give them a reason not to. 

The common ingredient in developing a super-premium worthy understanding of your client and their business is to talk regularly and often about your client’s business. Think monthly or at least quarterly.

Law firms who compete successfully in the super-premium segment invest heavily in understanding their client’s business better than anyone anywhere—this investment is the cost of acquiring premium work.

And, most importantly, your client will never see your deep understanding unless you share and discuss your insights with them—regularly. Your clients will want to teach you about their business once they see you are invested in them.

Your client will learn from you while you learn from your client. The more your client teaches you, the deeper your understanding goes. Without client input, clients will believe you know little about their business—leaving you outside the circle of firms tagged for premium rate status or leaving your client to pick the best-perceived brand.

MBR

The post Highest Rates Clients Pay Jump to $1600, Top Rates up 8% appeared first on The BTI Consulting Group.