In a recent Lawyers Weekly article, Resistance to value-based pricing: a failure of imagination, the GC of an Australian bank tried to encourage outside counsel to embrace value-based billing. She reassured them that the bank's purpose wasn't to give them a financial haircut, that it wasn't purely about price, that their relationships were important.
For the 25 years I've been doing sales coaching for lawyers, I've heard the mantra, "It's all about relationships," intoned with a certitude akin to religious faith. Fortunately for lawyers, they didn't have to define "relationship" in any meaningful way. For many, it meant professional friendships, what I call "social intimacy." But those relationships weren't often put to the test, at least in economic terms. The huge level of demand seemed to permit buyers to send work to almost all their lawyer friends. Ergo, lawyers spent time developing professional friendships.
In 2009, when economic conditions required buyers to cut back on their legal spending, many found themselves with more lawyer-friends than work to give them. Uh oh, gotta choose which of your kids get shoes and which go barefoot. Suddenly, for a percentage of lawyers, the friendship was no longer sufficient. Gee, maybe it wasn't all about relationships, after all.
Here's a simple test that will let clients and lawyers alike resolve the value question. It involves some risk, but I think what you learn, and how quickly and inexpensively you learn it, makes it worth it.
- Outside counsel: Identify what you believe to be your highest-value service.
- Clients: Identify what you consider the highest-value service you buy. (I'm not talking rare outliers, but things that reasonably represent your anticipated buy with the right firm.)
First, both should compare notes to see if what the other considers most valuable is the same thing that you consider most valuable. This may end the conversation if there's a mismatch.
Assuming reasonable alignment there, outside counsel offers to complete a high-value assignment on a "pay what you think it's worth" basis. The invoice simply says, "Pay us what it's worth to you." If you're reluctant to do this because you're concerned that this client may take advantage of you, why do you want them as a client? After all, they can easily take advantage of you after you send a bill for the amount you think is right.
Outside counsel will be far more attentive and communicative because they're trying to influence the perception of value. Clients will be far more candid, sooner, about areas of dissatisfaction (and the kind and frequency of communication that's welcome) because they want to avoid an awkward conversation necessitated when the outside lawyer is surprised and disappointed by the client's valuation of their work.
This will put to the test buyers' assertions that they're buying on a basis other than pure price. If they truly value the lawyer's skill, commitment, judgment, perspective, etc., they won't want to signal otherwise by paying too little and alienating a valued advisor. They may even pay a bit of a premium to reassure that lawyer and signal their appreciation. Likewise, outside counsel will learn precisely the degree to which their perception of their own value is shared by their client. If there's a big negative spread, they've learned a lot about how this buyer views them. They can use this information to investigate the value/performance gap and improve their value, or they can decide that this isn't the kind of client they want to have.
I welcome you to take me up on a Pay What You Think It's Worth offer for a coaching session. I understand that it's hard for lawyers who have little experience with sales coaching to assess whether a quoted fee is reasonable or not. You have nothing to compare it to, and usually have little understanding of, or appreciation for, what it takes to assess an opportunity and devise an approach and tactics that not only will work, but that you're comfortable applying. It's easier and faster to do it and give you the context, experience and appreciation to value it highly -- or not.
Email me at email@example.com