Rates are soaring. At least for some firms. Not all are giants.
Still, other firms continue to suffer a rate pounding as clients look to extract another pound of flesh.
In the new Law Firm Leaders Burning Issues survey of more than 250 law firms conducted with my longtime friend and collaborator, internationally recognized law firm consultant Patrick J. McKenna, we dissect how these law firm leaders are experiencing rate pressure.
The results reveal a split between the rate savvy and the rate pressured — and a new source of advantage. Overall we found:
43% of law firm leaders are getting beat up for rates in a meaningful way — it hurts. Notable reasons why include:
- Rely more heavily on RFPs for new business
- Fewer institutional support systems for delivering superior client service
- Modest use of pricing professionals and tools
- Little if any formal client feedback
- Minimal partner support for rate negotiations
- Low use of client teams
57% are busy raising their rates — and clients are paying. Key strategies include:
- Growing use of and embrace of dedicated business development executives
- Conduct formal client feedback
- Hitting more new and compelling client needs
- More aggressive business development culture
- Using Alternative Fee Agreements
- Higher client service scores in The BTI Client Service A-Team
- Refer out lower rate work to a select group of preferred firms
- More robust industry teams
Rates prowess is only one of a number of client-facing skills offering a leg up. Clients want to walk away feeling like they are getting extraordinary value and insight — you can accomplish this through client-facing skills or lower rates. Ironically — client-facing skills show substantially more value — the discount has its limits in offering value. We’ll be discussing client-facing skills more in the coming weeks, so keep an eye out for those.
I recommend spending the time to train partners in rate discussions — and protect rates by developing a roster of trusted law firms to whom you can refer the rate-sensitive work. In addition, the more you talk to your clients about non-rate-related issues — the easier your discussions around rates will be. Client dialogue provides the insight to enable you to deliver substantially more value — and get more of the plum business.
The rate-savvy law firms know this — and work harder to build it every day. The rate-pressured firms can start the discussion at any time — changing the value (and rate) equation.