Nr. 5. Hour rate x time spend = not equal lawyer price

With fundamentally changing markets. Law billing is no longer about adding up the amount of time spend by a lawyer and multiply that with the hour rate of a lawyer. The client is starting to discuss the price and no longer considered it a valid way of setting a price. Because the core of the problem has changed. Law substitutes have become available.

Even though law firms still set a price rate based on time spend the demand for added value based pricing will become more and more relevant in the law business. The availability of law service, the law service substitutes and the financial crisis changed market balance fundamentally. The law suppliers lost the ‘power’ over the market, so to say (nr. 4 of the series discusses the substitutes in greater detail).

From past crisis euphoria to erosion of demand within a year’s time

Just a year ago law firm news covered stories on strong increase of US lawyers’ earnings. Due to positive economic developments and increasing demand for legal services. Price level of law services did go up slightly as well but did not fundamentally go up to before crisis level and it most likely never will again. Now, July 2017, nearly a year has gone by. A sense of deep concern in US law firms shows when looking at the results published in the Altman Weil flash report 2017 (click for the link).

  • 52% of firms not enough business.
  • 62% of non-equity partners, not busy enough
  • 43% partners, not busy enough
  • 25% of associates, not busy enough
  • 61% of law firms deal with overcapacity
  • 88% of law firms, chronical underperformance

The law service substitutes and the erosion of law service demand will have a serious effect on US law firms and the way they do business, how they go about managing their business and how fast they can implement value based pricing

According to Jordan Furlong, and I fully agree:

In the end, you need to ask yourself: Is our law firm a platform for lawyers to sell their services? Or is it a business that delivers value to buyers of legal services. … Explain how billing [your clients] by the hour is serving the clients best interest.


Jacky Wetzels for Salesmoves




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