After researching trends in business owner billing rates, you have decided to increase your rates . It can be uncomfortable. We may be reluctant to charge the value we really are worth or feel guilty about raising rates for our long-term clients. While we may have difficulty serving clients in high-rent markets like New York and San Francisco, it is possible to do so while still providing services in lower-cost locales.
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Clients may not be thrilled to hear that their rates will increase, but they are used to such information.
Why not use this opportunity to communicate with clients clearly, accurately, and confidently about where their money is going?
Instead of letting the unhappy few claim that they are your ticket to a vacation cabin, you should share the changes made within your company and how you are using their resources to deliver better services. To show that you have made smart investments in your company to provide a better product, send your rate increase letter. This could even mean that your rate increases, but their bill decreases due to efficiencies and better resource use.
Business Owner Billing Rates: Clients Value Transparency
Survey after survey shows that clients, whether corporate clients or consumers, want transparency in pricing and greater price certainty. Clients want to know how rates are determined and be part of the conversation. These are some suggestions to make it easier for clients to communicate your rates and open up important conversations about how they are treated.
1. The Strengths of New Hires
Small firms may need to hire new employees. This can be costly, especially early on. You can share with them how you have been able to do some work that would normally go to a senior-level person, and then let the new member of your team handle it. Sometimes, a new invoice can be a good idea.
Explain that they are administrative hires, and not being billed to clients. Talk about the value they bring, the small problems they solve every day, and how it affects the client-business owner relationship. You want to convey the message, “We hired that person to make your lives easier.” If you have direct client contact, you might include a short handwritten note saying, “I’ve enjoyed working alongside you this year.” This sets a wonderful tone of appreciation.
2. Clients Benefit from Legal Technology Investments
Which elements of your legal tech upgrades have benefited clients? Are you able to bill for trademark applications in less time with better search functions? Have clients found that investing in new billing software or matter management software has made their lives easier and allowed them to access their spend rates?
There are many things that business owner have to do, even though they don’t directly benefit clients. Concentrate on the things that make clients’ lives easier.
3. The Math of the AFA Benefits
Many legal buyers complain that they are not able to see the information about profitability and cost when they have alternative fees with business owner. This creates distrust. If you’ve had a successful AFA meeting with a client and they have given you permission to share the results with your wider client base, Demonstrate that you are open for discussion about what each party sees as the value of a given engagement. Explain to clients how billing model changes can be beneficial.
4. Focus on structural changes and increases in efficiency and sophistication
Let’s suppose you’re an employment business owner who drafts contracts for clients. After reviewing your data for the past 12 month, you found that you were able to cut 12% off the time required to review an NDA. Do the math. The client still wins even if you increase your rates by 3%. These stats can be used to your advantage.
A business owner who has just obtained a specialist certification as an appellate specialist or any other certification such as the IAPP privacy certification can be taken to mean that the market recognizes that they are more valuable than the average practitioner. This could mean that partners spend less time reviewing work as associates progress in their careers. You can point out that strong senior associate teams, even at a higher rate, lead to better outcomes for clients, and not passing on the work to a partner.
These examples aren’t meant to be a beating down on the client. A few examples will suffice. You want to show that you care about the client’s legal budget and are willing to work with them. So invite conversation. Be aware of your larger budget limitations. Inform people that your phone and email are available (and not-to-be-interrupted) for discussions.
All this depends on your ability to understand your profitability. Clients may ask you difficult, pointed questions that you should be able answer. It is important to feel confident in discussing your metrics and the strength or your practice. You can also gain a better understanding of your company’s numbers and be able to experiment with new business models like subscription fees, which can drive growth.
Ask trusted colleagues to send you copies of rate increases letters that they have previously sent clients. Take a look at the tone and format of these letters and decide if they are right for you.
