Inflation is a fact of life, and the price of doing business generally increases from one year to another. Lawyers, like all other types of professionals, need to increase their rates in order to stay consistent with the price of other goods and services. A multitude of market conditions may warrant that a lawyer increase rates from time to time, including more years of experience, geographic variables, and a variety of other factors. Even though negotiating rate increases with clients can be tricky, there are some strategies lawyers can implement to make sure that this process goes more smoothly.
New Clients
It is far easier to charge higher rates to new clients than to existing clients. This is because new clients do not have a history with a law firm and expectations about what they might be charged for given services. In addition, new clients are often in a worse position to negotiate for lower rates based on the volume of work they provide to a law firm or other factors.
When a law firm wishes to charge higher rates to new clients, they usually just include the new rate in a retainer agreement. In many instances, the new client will either accept or reject the rate without negotiating costs. It is far more difficult to increase rates with clients with which a client has a relationship, so charging new clients higher rates is an easy step if a law firm wishes to raise rates.
Wait For New Engagements
It is usually easier to charge higher rates to existing clients when the client seeks out counsel for a new engagement. In many jurisdictions, lawyers must provide a client with an engagement letter or retainer agreement before starting work on a given matter. When such an occasion arises, it is usually a convenient time to include the higher rate in the paperwork provided to a client and ask that they assent to the higher rate.
Clients often need lawyers the most when they are seeking them out for a new engagement like a litigation matter or deal that requires work on an expedited basis. Broaching the subject of higher rates might dovetail naturally during the onboarding process of accepting new work, and clients might be more amenable to a rate increase during such times than if a rate increase is requested during a more random time.
Annual Rate Increases
Some firms increase their rates at regular intervals such as once a year. This has the benefit of making rate increases automatic so that both the law firm and clients know to expect that rates will increase at some set point. In addition, this might make it less awkward for lawyers to broach the subject of rate increases since this topic does not seem random and ad hoc. Raising rates at regular intervals also reminds lawyers that they need to increase their rates and communicate this to clients. It is easy when operating a law firm to forget about administrative tasks, and regular rate increases take some of this work away from law firm and firm administrators.
Regular rate increases have a few downsides. Market conditions may not warrant a rate increase, and increasing rates at regular intervals can make one law firm less competitive in a marketplace than another law firm. In addition, some clients might not properly be part of a rate increase, either because they give lawyers a large volume of work or they were only recently signed to a firm. Law firms should carefully consider whether such a system is advisable for a given shop.
All told, negotiating rate increases with clients can be stressful, but with some strategies in mind, this process can be easier to implement.
Jordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at jordan@rothman.law.
The post Strategies For Negotiating Rate Increases With Clients appeared first on Above the Law.
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