I periodically like to run a year-to-year comparison on five non-negotiable household expenses in order to finesse the household budget. While I expected to be unhappy at the increase in my day-to-day expenses, I didn’t expect to be slack-jawed when I looked at the last ten years.
|Home Heating Oil||$1,000||$4,000||300%|
|Real Estate Taxes||$4,200||$7,200||71%|
That’s nearly a 100% increase in the total of these five mandatory expenses in just ten years. This analysis showed me how more than $14,000 in discretionary income got swallowed up by non-negotiable expenses. And my husband’s salary only increased an average of 2% per annum, many years at 0% and decrease in benefits.
The reason I bring this up is to show you while you may be squeezed as a solo practitioner, raising your prices is not necessarily going to be the answer to covering your bills. Your clients, if you deal with individuals, are going to be looking at their non-negotiable expenses, too, and deeply distressed. Their discretionary income is evaporating as well. What happens to discretionary income when you add in increases to health insurance, daycare, telephone, internet, and more to a wage which, adjusting for inflation, has pretty much remained stagnant for the past 30 years? What about 401k losses due to the stock market or worse, raiding of retirement vehicles to pay for increased expenses? If each of these additional expenses increased approximately the same amount as the five I noted, how does this impact your client’s budget? If their income was stagnant or, even worse, declined due to hours cut or periods of unemployment, how does this impact their ability to hire a lawyer for what you consider a basic legal need?
This begs the question: How will you be coping with your potential client’s loss of discretionary income and their increasing inability to pay you for your services?
Are you thinking about reducing your overhead expenses? Will you go home to go to work? Will you go virtual? Will you be able to provide necessary legal services at affordable rates which will enable clients to still hire you rather than trying to go pro se or using forms? Simply telling potential clients their legal matter is too complicated to do without a lawyer or you provide ‘great value’ will not dissuade someone from doing it themself if they are frantic over their financial obligations. You need to provide a pricing structure, including payment terms, which allows you to earn a living while successfully encouraging a potential client to hire you rather than trying to handle their own legal needs.
It is all well and good to simply say, “I’ll charge premium prices for premium services” and then target the affluent. That pool is very small and shrinking further. Plus, everyone and their brother is competing for this business which turns the affluent into negotiating buyers. Realize that if everyone is experiencing this dramatic shift in their budgets, it is the lawyer who is tuned in to this angst and addresses it with a pricing model which still permits them to take home 60-70% of each dollar earned, who will have plenty of work to do and turning a nice profit.
- Analyze your overhead; and
- Your (in)effective use of technology; and
- delegation of less profitable tasks;
- See if there is any opportunity to decrease your overhead while increasing your productivity; and
- Look at your pricing structure to see if you can improve upon fees, payment terms and payment options.
Very often it is not the actual cost of legal services which will dissuade a client from retaining you…but the lack of payment terms and/or options such as unbundling.
In these trying economic times, put yourself in your client’s shoes.
What have you done to make it easier for clients to hire you?