Leigh Jones’s article on Law.com today called "Law Firms’ Billing Rates Climb Ever Higher" will confirm what the clients of many clients of law firms already suspected was happening.
This article will give you a lot to think about. Is demand for legal services ever impacted by price? Are 10% (or greater) rate increases appropriate? How high is too high? What possible justifications do law firms have for introducing efficiencies or technology innovation into the process when clients tolerate 10% or better rate increases? Is it time to look to smaller firms, regional firms, spinoffs from large law firms or individual lawyers with focused practices and big firm backgrounds? At what point to clients need to get into the driver’s seat and drive technology, alternative fee arrangements and the like? What increased level of service do you get at the increased rate? Aren’t those rates in the Midwest (say, for example, St. Louis) starting to look good these days?
Make sure that you notice the associate rate increases mentioned in the article.
There is good news in this article, even beyond the invitation it gives you to shop around your work that doesn’t need to be done at the highest-priced firms. Here’s the quote from Joel Henning of Hildebrandt International you will want to ponder carefully:
“Lawyers tend to be terrified of losing clients because of increased rates.”
This is so true. Clients will want to ask for special treatments and discounted hourly rates as a matter of course. The odds are great that you will get them. You can thank me for this tip when you see how easy it is to save some money on rates. That still leaves the issue of the number of hours spent, but we can save that topic for another day.
Reed Smith reported the highest partner hourly rate – $875 per hour – although you will notice that the firm uses an interesting “it depends on what the meaning of dollars is” argument about this rate. Although blogging fans may think that blawg (and Blawg Channel) favorite and all-around great person, Denise Howell of Reed Smith, deserves to be the firm’s highest compensated lawyer, it appears that the $875 does not reflect her hourly rate, so hourly rate bargains for top lawyers are still available even in this market.
[Required humor warning and disclaimer for lawyers: the previous paragraph is intended to be both a joke and a compliment to Denise, not any type of commentary about the policies of Reed Smith, which certainly has the reputation of being one of the best firms in the US - after all, they were smart enough to hire Denise. I still cannot believe how accomplished she is for someone as young as she appears in the picture on the front page of her blog.]
For what it’s worth, I’m not raising my hourly rate for 2005 and my approach has been to make any rate increases apply only to new clients. I’ll keep my clients on an hourly rate at the same rate that they started with me until they decide that they want to raise them. I’ve always thought it makes sense to do something special for your existing clients, as does Matt Homann.
The bottom line, as I have told many people this year, lawyers won’t move to new technology, KM, alternative billing or much of anything else until clients make them pay a price for continuing to play “business as usual.”