Discounting Your Worth Is A Loser’s Game


I can’t tell you how often I am asked, ‘How do I set my fees?’

Setting fees for your legal services is a two-fold proposition. It isn’t just learning what the going rate for legal services is and positioning yourself within a reasonable range based upon your experience. It isn’t just about pricing based upon the value to your client. It is also confidently being able to convey to the client the value of your services.

To be competitive in the legal services marketplace you must properly price those services based upon both your demographic area, the practice area, the value to your client and the value to you. (It’s ironic, too, that Seth Godin’s little jewel of a post just came out!) And your fees are basically pre-determined by what the market/clientele can comfortably sustain within a small range.

If you ask a twenty-year family law veteran the going rate in New York City and she replies “$550 per hour against a $20,000 retainer,” will that fly for a two-year attorney in Narrowsburg? Probably not.

The most efficient way to learn what the market can sustain is to talk to other attorneys about the going rate for services and to check statutory restrictions and limitations for services. There are many reasons to charge market rates for your skills even if you are fresh out of law school. First and foremost, today’s client is savvy and has knowledge and expectation of what they should pay for quality legal representation. If you undercharge, you risk making the knowledgeable client suspicious of why you are cheaper. Are they getting “lesser” quality services? You also run the very real risk of alienating your brethren because you are dropping the overall price for services which ultimately impacts every other lawyer. Alienating local lawyers is never a smart practice. Your professional peers play a very important role in the success of your solo practice on many levels. You may feel that by charging less than the market can bear you are doing the client a favor but in the long run you are doing more harm than good all around by diminishing the value of your services unless you have introduced a totally new business model and have actually educated your client as to why this new business model is a game-changer in the profession.

Generally, it is not the fee that will dissuade a client from hiring you. It is failure to provide payment terms the client can live with. If you are uncomfortable charging the same as those who are more “experienced” there is no harm reducing your hourly or flat fee marginally but it should be within a reasonable range of the going rate.

Conveying to the client the cost of your services with confidence is the other component. Clients, as a whole, are market savvy consumers and are generally aware of the legal costs for services. If they aren’t in the beginning, you best believe the internet will help them out as well as review sites and forums.

Realistically, how many people have you met who are shocked a personal injury lawyer generally takes a contingency fee of one third on a case? Not many. Most people know average hourly rates are in the $200 – $300 ballpark. So, if you present a fee of $100 per hour, chances are the client will be suspicious. If you present an hourly fee of $300 and the client tries to negotiate your fee downward and you say, “OK,” now the client feels you were overcharging him to begin with and will distrust you.

Think of it this way. You own a convenience store. A customer brings to the counter a bag of Doritos. The price rings up at $1.69. The customer knows the price is $1.69 because it is marked on the package. He asks you if you will sell it at $1.29. You would easily say, “the price is $1.69.” He says, “but I only have $1.29.” You would have no problem saying, “I’m sorry. But that is the price. The package is clearly marked $1.69.” The customer says, “but I can buy these Doritos for $1.29 at the convenience store down the street.” Would you then lower the price of the Doritos in order to keep his business with the future hope he will come back to buy more Doritos and refer his friends to buy Doritos from you even though you will take a $.40 loss each time?” I think you would tell him very nicely to go buy his Doritos down the street and feel no loss for not having sold the Doritos to him at the discounted rate. However, when it comes to sticking to our guns about the cost of our legal services most starting out (and some who have been practicing for years) most can’t seem to recognize that even though the price is not stamped on our foreheads our services still have a relatively fixed value and we must convey that with the same confidence to our clients. The reality is if the convenience store owner sold the Doritos for $1.29 the customer would have felt he pulled one over on the owner, told all his buddies the guy was a sucker and to not pay more than $1.29 for Doritos at that convenience store. (I assure you if the store owner now tried to charge $1.69 customers would say, “but you only charged so and so $1.29.”) Pretty soon customers would start negotiating the price down for other products, too. Old customers would feel taken advantage of. Well, you get the gist of it.

Never negotiate the fee. Convey those fees with confidence because you know you are worth it. Offer terms of payment if appropriate but do not get in the habit of extending “credit.” An IOU never put food in your children’s mouths, filled your gas tank or paid your student loan.

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7 comments on “Discounting Your Worth Is A Loser’s Game

  • This article reminds me of an experience I had recently. I was in a convenience store. By definition, convenience stores charge more than other grocery stores because of the “convenience.”

    The woman in front of me was purchasing an item. The cashier rung it up and told her the price. The woman proceeded to tell the cashier that she could get the same item elsewhere for much less. She was very condescending and self righteous. She was holding up the line and taking up time. I found myself getting irritated. So I said to the woman “Maybe you should not shop here.” She was taken aback and started to argue with me. The interesting part was that I think she expected the other customers, such as myself, to agree with her. Instead, she encountered the opposite.

    When the woman left the store, the cashier thanked me for having stepped into the conversation. He said that he could not respond to her the way he wanted since he is merely an employee. He also pointed out that he does not set the prices, so he wondered why this woman was bartering with him.

    It should be noted that, notwithstanding this woman’s complaints, she did purchase the item. After I interrupted, she stopped arguing, paid for the item, and left the store.

    The bottom line is, even if people don’t like the higher prices in a convenience store, they will still shop there because of the convenience. I suppose the same holds true for professional services. People will pay higher fees if they believe the provider is worth the price. I guess it boils down to a benefit-analysis approach.

  • My fees tend to be significantly lower than everyone else’s. Maybe my peers don’t like it. I haven’t heard. Mostly, I think their prices are high because they are inefficient. I definitely educate my clients on the basis for my fees, so I agree whole-heartedly with that part.
    I do set aside a certain number of hours per year for pro bono and reduced fee. I require proof of income for that. Again, the client gets an education regarding the value of my services and the reason for the discount. And, I don’t just hand it out. I require documentation of need.
    I’m just going to disagree with the Doritos analogy. 1) I have been a store manager. I let people negotiate in certain circumstances. I did not do that often but sometimes depending on their story. 2) I have worked in stores where I was not the manager, and I was instructed that if someone wanted to haggle, I should summon someone who was authorized to give a discount. It happened every day. 3) I have easily (meaning in less than a minute) haggled prices down in a variety of stores ranging from chains like Walgreens to local bike shops.
    I will end by agreeing that we should all be on guard to defend our worth, but that still leaves a lot of room for negotiation. The way to maintain worth while negotiating is 1) to communicate why a price is what it is and 2) to require evidence for discount (in most cases).

  • Very good article. Stand your ground and don’t lower price even by one penny. We only give discounts to repeat business and those who have a few various cases with us. Even then it is on a per case basis. You are a valuable specialist who is worth to be paid. Let customers know about it. There is cheap and there is stupid.

  • Pricing our services is a challenge that continues to hound the tyro and the experienced alike. Its an ongoing process since the professional dynamics keep on changing. However I fully agree that one should not devalue onself beyond a point. It reflects poorly on that individual / the firm he/she practices in. I have had clients negotiating very hard for a discount and I do relent once in a while depending on the client profile, the volumes that they bring or the number of years they have been with the firm. However, I ensure there is no drastic climb down and any requests to that effect are politely but firmly turned down. In the long run, its about how you value yourself and your services. It all boils down to the question of your self worth.

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