It Won’t Take Too Long, It’ll Just Take Money: Selling Value

That’s a line from a song by the great (and extremely tall) Alan Jackson.  It’s worth a listen, as it’s a discussion between a mechanic and a songwriter about the relative values of their services, based on a consideration of need.

Most lawyers charge by the hour; they don’t charge based on the value, or perceived value, of their service.  But, all hours are not created equal.  And, all lawyers don’t maintain the same competency level.  And, all law firms don’t execute on customer service the same way.  If you can tell me that your call to a state administrative agency to inquire about a particular record is worth the same as another fifteen minutes spent managing a tense deposition, then your notion of value is off — even if your client’s isn’t.  It’s just not true that every hour is worth the same amount of money; yet, that’s the antiquated notion that most lawyers still abide by when setting rates.  But, the market knows better than that; and, your clients know better than that.  The lawyers who figure that out do a better job wringing revenue from their law firms, because they know when they can leverage a need, and when they shouldn’t.  In many ways, it’s a more honest way to run a business; and, there is additional cache drawn from a client’s knowledge that you, too, know what’s really important -- and what isn’t.

Of course, most lawyers (and legal ethics investigators, too) like the simplicity of the billable hour.  But, clients of law firms view that model as a money pit for their hard-earned cash.  The reason you bill on value, then, is partly because your clients will appreciate that, but also because it helps you to practice at the top of your law license, and to ultimately earn more, just by dint of focusing on the most important, highest value work.  There is no better way to encourage efficiency and delegation at a law firm than by enacting a value billing model.

My good friend Alan Klevan tells the following story of an engineer who comes into a nuclear power plant where a meltdown is impending.  He calmly walks in, turns a screw, and walks out.  The management team then gets a bill for $1000, and complains to the engineer: ‘You were here for two minutes!  This is outrageous!’  But, the engineer says, ‘Right.  It was $5 to turn the screw; and, it was $995 to know which screw to turn.’

Getting at value is essential for all business owners; and, lawyers are starting to come around on how to build value into their law practice pricing.  And, step one is often dropping the billable hour model.