Inflation is a reality and the cost of doing business generally increases from year to year. Lawyers, like all other types of professionals, must increase their prices in order to remain consistent with the price of other goods and services. A multitude of market conditions may justify a lawyer increasing his or her fees from time to time, including years of experience, geographic variables, and various other factors. Although negotiating rate increases with clients can be tricky, attorneys can implement certain strategies to ensure this process goes more smoothly.
New customers
It’s much easier to charge new customers higher rates than existing customers. This is because new clients have no history with a law firm and have no expectations about what they might be charged for given services. Additionally, new clients are often in a worse position to negotiate lower rates based on the volume of work they provide to a law firm or other factors.
When a law firm wants to charge higher rates to new clients, it usually simply includes the new rate in a service contract. In many cases, the new customer will accept or reject the rate without negotiating costs. It is much more difficult to raise rates with clients with whom a client has a relationship, so charging higher rates to new clients is an easy step if a law firm wants to raise rates.
Wait for new commitments
It is generally easier to charge higher rates to existing clients when they are seeking advice for a new assignment. In many jurisdictions, lawyers must provide a client with an engagement letter or retainer before beginning work on a given matter. When such an opportunity arises, it is usually an appropriate time to include the higher rate in the documentation provided to the client and ask them to accept the higher rate.
Clients often need lawyers most when they are seeking them for a new assignment, such as litigation or a transaction that requires expedited work. Bringing up the topic of higher rates might fit naturally during the onboarding process of accepting new work, and clients might be more amenable to a rate increase during these times than if a rate increase is requested at a more random time.
Annual rate increases
Some companies increase their prices at regular intervals, such as once a year. This has the benefit of making rate increases automatic, so the law firm and clients know to expect rates to increase at some point. Additionally, it could make it less awkward for lawyers to broach the subject of fee increases since this topic does not seem random and one-off. Raising rates at regular intervals also reminds lawyers that they need to raise their rates and notify their clients. It’s easy when operating a law firm to forget about administrative tasks, and regular fee increases take some of that work away from the law firm and the firm’s administrators.
Regular price increases have some drawbacks. Market conditions may not justify a rate increase, and increasing rates at regular intervals may make a law firm less competitive in one market than another. Additionally, some clients may not benefit from a rate increase, either because they entrust a large volume of work to lawyers or because they have recently joined a firm. Law firms should carefully consider whether such a system is appropriate for a given store.
All things considered, negotiating rate increases with clients can be stressful, but with certain strategies in mind, this process can be easier to implement.
Jordan Rothman is a partner in The Rothman Law Firma full-service New York and New Jersey law firm. He is also the founder of Student debt logsa website explaining how he paid off his student loans. You can reach Jordan by email at jordan@rothma.law.
