How to Put A Price on What You Do
Recently I got a call from a lawyer seeking guidance on setting hourly rates.
For most of his career he had worked at a firm where he had not had to worry much about fees and billing. Now he was opening a solo practice and shifting gears. For the first time, he would be billing his clients for the work he did.
What to charge them?
I had lots of information to share with him. The NC Bar Association publishes an economic survey that includes fees, rates and salaries. Its Law Practice Management Section tracks compensation trends. Private consultants like Altman Weil do the same thing in even greater detail.
To dig deeper, there are Real Rate Reports (fee snapshots from around the country), and the Laffey Matrix (sliding fee scale for the District of Columbia), and the Bureau of Labor Statistics (median hourly wages for eight categories of legal workers, including lawyers).
Or you can read this article and simply throw up your hands at the futility of time billing in the first place.
Start With a Budget
The above information gives a macro view of fees and rates. But these guidelines might not be a perfect fit for every practice. To bring it down to a micro level, I suggested that the lawyer:
- Make a business budget.
- Identify a break-even point that tells you exactly how much revenue is needed to stay afloat.
- Work backwards from this point to help set rates.
- Talk to experienced, similarly-situated lawyers in the area and ask about their rates.
- Experiment with different rates and fee structures to see what works.
- Identify your target clients and do some market research.
- Be flexible and adapt when necessary.
What is My Self-Worth?
We went over all of this information in a couple of conversations. And yet I sensed none of it really got to the heart of the lawyer’s concern. That’s when I started to see that his dilemma had little to do with dollars and cents, and lots to do with his sense of self-worth.
And so I did what I should have done at the outset. I asked him what had prompted his career shift, and how he felt about it.
And then I listened.
He told me he had been with his former firm a long time. He had liked it there and done a good job. He had always been a team player. He had brought home a good income. He had won his share of honors, accolades, promotions. It had been a good ride but he was ready for a change of pace. He wanted a more relaxed schedule. He wanted to scale back, slow down.
But now he was having doubts. He wasn’t sure he was up to the task of starting a practice from scratch. He was thinking he might have made a terrible mistake.
I said I understood. When we do something for a long time, it is easy to become identified with it. We start to equate our personal value with the role we play. Stepping out of that familiar role and into a new one can be scary. What we fear is loss of the known, the comfortable, the tried-and-true.
We can even begin to question our self-worth.
And so I asked why he thought he had been successful in his former job. He said probably because he worked hard, showed up most mornings, had a decent attitude, tried to tell the truth, and never stole money from the trust account.
Didn’t he think those very same qualities would translate into success in his new endeavor?
Almost grudgingly – because change is hard – he said yes.
And then he began talking about his plans for his new practice, and his new life, and how he looked forward to being his own boss, and how he had always wanted to travel and would now have the chance.
Mostly I just listened. Sometimes all we need is someone to listen.
- NC Bar Association http://www.ncbar.org/
- NC Bar Association Economic Survey http://www.ncbar.org/media/88938/2012-Economic-Survey-Final-Report.pdf
- NC Bar Association Law Practice Management http://www.ncbar.org/members/sections/law-practice-management-technology/
- Altman Weil, Inc. http://www.altmanweil.com/index.cfm/fa/r.resource_list/cat_id/E3DF2378-AA64-40FC-BD1E-B60CED008F28/subcat_id/015D3A38-C3B0-48EB-83A9-3AB4E22075EE/resources/Compensation_in_Law_Firms.cfm
- Law 360 https://www.law360.com/articles/641797/2-routes-to-hourly-rates-for-lawyers
- Bureau of Labor Statistics https://www.bls.gov/bls/blswage.htm
- The Atlantic https://www.theatlantic.com/business/archive/2015/10/billable-hours/410611/ Psych Alive http://www.psychalive.org/self-worth/
- American Psychological Association http://www.apa.org/monitor/dec02/selfesteem.aspx