It’s not easy but it is not as hard as you think.
If you take several small steps, it will not only transform your pricing but it will transform your firm.
Extract from Australasian Law Management Journal Q&A – November 2018
15 big questions for law firms making the switch to value pricing
In this article, John Chisholm explains some of the key considerations for law firms that are considering moving from time-based billing to value pricing – and the key pitfalls to avoid.
1. A lot has been written about why firms should switch from the billable hour to value-based pricing. How difficult, though, is it for firms to make the transition?
Perhaps it might be handy to define first what I at least mean by ‘value-based pricing’. Value pricing to me means your fee is based on the value you are providing, or will provide, to your client by concentrating on outcomes and results rather than inputs, activities and time. It means lawyers need to understand that the value of what they provide is determined by their clients’ perception of value, not theirs.
Some are now using the term ‘aligned value pricing’, which to me explains the concept well – that the price charged reflects the value provided by the lawyer to the client, and the fact that the fee reflects a fee for the lawyer which provides a reasonable profit.
Those firms that are most successful in making the transition are those which are confident in their service offerings and mature in their approach to their relationship with clients. They understand that clients are now informed purchasers and are looking for more creative engagement arrangements.
The benefits to firms and their clients that have made the transition include…