Last week, we gave you 4 reasons to rethink hourly billing in your law practice. Today I want to talk about the flat-fee pricing model, as many lawyers think that’s the answer to making law practice work, but in some cases, providing flat-fee legal services can be even worse than hourly billing.
Providing flat fee legal services is even worse than billing hourly when your flat fees are too low to pay you enough to provide a meaningful service to your clients.
I see this happen over and over again when lawyers make the switch from hourly billing to a flat fee model. In the beginning, we tend to not charge enough!
Maybe you aren’t charging enough because you think you need to compete with online legal document companies, like LegalZoom or RocketLawyer. Or perhaps it’s because all the other lawyers in your town charge low fees, so you think you have to also.
But, here’s the thing:
If you are providing flat fee legal services and charging fees that are too low to provide a truly meaningful service to your clients, you are going to find yourself in massive time debt to your law practice and to your clients.
Time debt is when you’ve taken on too much work, not gotten paid enough for it, and you now don’t have time or money to market, and you’re drowning in the work you’ve got to do, and you’ve already spent the money you’ve gotten paid to do it. Sounds bad, right? It is! It’s horrible.
The only answer when you are getting paid too little is to try and provide the least amount of service possible, with the least interaction with your clients possible. Now, there is one situation in which that works – if you are able to create highly personalized, automated services, using technology to the maximum, like the online legal document services do it. But, consider this, they have raised millions of dollars to create their services. Do you really have that kind of investment to make in automation? If not, don’t try to copy their model. Instead, capitalize on what you have that they don’t. More on that in a minute.
First, though, I want to address the lawyer down the street who is charging too little for flat fee legal services as well, because maybe you think you need to compete with that guy.
And, if all the other lawyers in town are charging only $1,500, how can you possibly charge $4,000 (as an example). Here’s the thing: that lawyer down the street who isn’t charging enough cannot possibly be providing a service that is truly going to work for their clients, so again, you have the opportunity to differentiate yourself.
Most lawyers simply will not do what it takes to provide a truly meaningful service and get paid well to deliver it. Instead, they will stay stuck in the old model that doesn’t work, because in a way it’s safe, comfortable, known and requires very little investment. Of course, it also provides very little (or quite often, no) return on investment. And results in lawyers hating their lives. But, also, not really making a difference in their clients’ lives.
If you want to love your life and law practice AND make a real, positive impact on your client’s lives, you have to charge what you actually need to deliver a great service.
And delivering a great service is the best differentiator you can possibly have in your law practice. One of the primary things we teach at New Law Business Model is how to structure legal services in a totally different way so that clients who need and want a high-value outcome – like keeping their family out of court and conflict in the event of their incapacity or death, or building a business that thrives – are happy to pay for it with flat fees that are high enough to provide the service well.
We call this style of flat fees “affordable premium” fees. Affordable premium means that you get paid premium fees, and yet it’s STILL the most affordable solution for your clients because they actually need the legal services you offer to be performed well, so they can get the high-value outcome they need.
If you’d like to understand more about “affordable premium” fees and how it allows our lawyers to command $3,000 – $5,000 per estate plan and $750 – $3,000 per month for strategic business counsel services (even in communities where lawyers charge $1,200 for an estate plan or $1000 for business incorporation), I’d recommend you watch the replay of our most recent training on the 5 Shifts Our Most Successful Lawyers Have Made to Build 6 and 7 Figure Law Practices They Love.