Legal Ease Blog

Do Something! Keep Track of your Clients

It always surprises me when I ask lawyers where their business comes from or what percentage of potential clients become actual clients and they don't know. Many lawyers say that their business comes from 'referrals,' but they have no idea where their referrals are coming from. They never analyze which referral sources are effective or why.

Even if you don't have a sophisticated case management system, you can keep track of client inquiries, appointments and conversions. Create a simple excel spreadsheet that includes:

• The name of the client;
• The date of the first contact with the client;
• The method of first contact (phone, email, etc.);
• How the client came to you (be specific - if a client saw a presentation or seminar you gave, which one was it? If they found you on the internet, did they find your website, your blog, or through an attorney directory? Who referred them to you)?
• If the client comes for an initial consultation, note the date of the consultation.
• If the potential client becomes a client, keep track of the date that they did so, the fee they're being charged, and the specific problem they needed you to address.

Review the spreadsheet at least monthly to determine which referral sources are most effective and to help you follow up with potential clients. The spreadsheet can help you focus on your best referral sources, improve your referrals from other sources, and keep in touch with potential clients that haven't yet become paying clients. It can also help you understand your sales cycle better so that you can plan better and improve cash flow.

Are Timesheets Really an Effective Management Tool?

My previous post on the issue of timesheets (Do You Need Timesheest to Determine Profitability?)talked about whether timesheets are truly needed to determine whether your practice is profitable. Last week I also posted once again on value pricing issues in The Debate Over Value Pricing Rages On, That post concerned one objection to value pricing. Another objection, raised in an article on value pricing from the UK site, AccountingWeb, entitled, Value pricing: a debate without end, involves timesheets again.

Timesheets - or lack of them - is one of the most controversial aspects of value pricing. There are two reasons that most professionals currently keep timesheets: pricing and management. This post will specifically address the claim that timesheets are an effective and useful management tool, and that therefore they should be kept even if they're not being used as the basis for the lawyer's fees.

The AccountingWeb article asserts, "timesheets are a useful management tool, and on occasion they collate handy information to present to the client too."  Timesheets are time consuming. If you're looking for a way to collate information to present to the client, there are other, more efficient and effective ways to collate information for a client than writing down everything you do in 10th of an hour increments.

But what about using timesheets to manage employees? How can law firms compensate associates without timesheets? How will they know if the associate is productive? How will they know if a particular associate is valuable to the firm?

Having been a partner on a management team at a law firm, I can tell you that timesheets and 'billable hours' are a poor way to determine whether a particular employee is valuable to the firm - or even to determine whether they're actually doing their work. First of all, employees create their own timesheets, so you're taking them on faith.

Second of all, if you've ever filled out a timesheet, you know that they're rarely a reflection of how hard you actually worked, of your productivity or of your effectiveness in solving the client's problems. How many times have you spent hours in the office and found only a measly few hours on your timesheet at the end of the day? Associates face the same issues.

Sometimes the timesheet isn't accurate because, in the heat of working with clients and doing the actual work you're getting paid for, you don't have time to stop and write down what you did. Those little missed .1s add up. And then you spend additional time agonizing over what you forgot to write down or where that time went. Who cares? If you're not billing your clients based on time spent, you don't have to waste time worrying about it.

One of the reasons to ditch hourly billing in the first place is that the amount of time you spend on a matter or on a particular task bears little to no relationship to the benefit your service provided to your client. All hours are  not created equal.

There's a great comment left by Eric Fetterolf to the above AccountingWeb article. Fetterolf challenges the value of the timesheet as a management tool and asks these questions about timesheets:

• Does it tell you, for this custom project, that your charge spent too much or to little time?
• Does it tell you that the customer is satisfied, delighted, or horrified with the result?
• Does the time sheet alone tell you how to innovate the process, or even whether innovation occurred that could provide future profits to both your firm and your customer firm?

As you become more efficient, more proficient, and are able to use technology more to your advantage, the time it takes to complete discrete tasks will be reduced. That should allow for more time to innovate, to come up with new arguments or new solutions for clients. But how do you bill the time for 'thinking?'

As Fetterolf says:

Our minds do not switch off once we leave our desks.

I have come up with great solutions in the shower, at the dinner table, and all other sort of places far removed from the office. In truth, the 15 minutes of active, consious thinking, say at the dinner table, was not the only time I spent on the problem. My mind, subconsiously, was churning on the issue the entire time. Can I bill for that time spent? Can I even articulate it to the customer without being thrown out?

If your associate comes up with a great solution to a client's problem at the dinner table and saves the account, or creates a loyal client for life as a result, do you really care what their timesheet says? Won't you be able to determine whether they're a valuable employee?

Managers that compensate or value employees strictly (or even largely) based on the hours that are written on a timesheet miss many of the most important ways of evaluating employees: their ability to work as a team, their ability to keep clients happy, their ability to bring in business, their ability to creatively solve a problem, or make a cogent and succinct argument, or write an intelligent analysis to the client, or take a good deposition, their leadership qualities, etc.

Managment by timesheet just doesn't make sense when you're dealing with professional services, like lawyers.

Do Something! Five Ways to Improve Your Bio

Even if you don't have a professional brochure or if you don't have control of most of your firm's marketing materials, you do have some control over your biography. Your bio can be used on a website, a blog, profiles on social networking sites, in seminar or presentation materials, etc., etc. You want your bio to be a tool that will help you connect with clients, potential clients, strategic alliances and referral sources.

Here are five ways to improve your biography:

1. Make sure it's updated. When is the last time you reviewed your bio? Does it include your most recent accomplishments? Does it reflect your most recent experience? Your experiences, your clients and the market all change over time. Your bio needs to change, too. Review your bio and update it at least twice a year.

2. Include a photograph. It doesn't matter what you look like. But a photograph will help others to feel as if they 'know' you. It's a way of deepening your connection with your audience. People do business with people that they know, like and trust. If they can see your face, they're that much closer to knowing and trusting you. Not only that, but a photograph helps people remember you better.

3. Make it personal. Put something of yourself into your bio. Ditch the old 'resume format' for your biography. It's dry and boring and makes clients' eyes glaze over. If you want to be memorable, give people something to remember. Put yourself back in your bio. Think of your bio as your client's introduction to you.

4. Consider your clients. Although your bio is about you, it has to be about your clients as well. Your education and work history may be important, but with few exceptions, clients don't care how many bar associations you belong to, where you went to school or where you worked. They care about what benefits them and what you can do for them. If you're going to include something in your bio, ask yourself why your client would care about it - how will it benefit them? Make sure your bio tells clients why your experience matters - what about that experience aids you in representing your clients?

5. Speak your clients' language This is a corollary to #4. Your bio, like any other marketing materials, should be written in language your clients understand. If you're describing your experience and how it can help your clients, use the words your clients use to describe their legal issues or problems. Stay away from language that only other lawyers or experts in your area will understand, unless you're sure that your clients also understand that language.

The Debate Over Value Pricing Rages On

Over the past two weeks, there has been some significant traffic on the legal list-serves I belong to over the issue of value pricing. Lawyers want to know how it's possible, whether they can really ditch their timesheets, whether clients really understand it or whether they  prefer hourly billing, whether you can really use anything other than hourly billing in the context of litigation.

Accountants struggle with some similar issues. Ron Baker, one of the foremost proponents of value pricing, is an accountant. An article from the UK site AccountingWeb entitled Value pricing: a debate without end discusses many of the common objections to value pricing. As the article notes, "[o]ne issue could be that you end up charging clients wildly different sums for the same work." Professionals are afraid that clients will talk, and the client that was charged the higher fee will be angry. The article also claims that it is also worth pointing out that the billable hour prevents these problems occurring in the first place." Really?

Let's take the second statement first. In an hourly context, do two clients with the same legal issue, even in similar circumstances, end up with the same total legal bill? It's highly unlikely that the total cost of the engagement for each of those two clients is going to be exactly the same. The hourly rate might be the same, but the total legal bill isn't going to be the same. And sometimes the hourly rate isn't even the same, is it? You may have different rates for different clients.

So if two clients with 'the same' work don't pay the same for their legal services in an hourly context, why don't they complain about it? There are three possible reasons:

First, there's an illusion that they're paying 'the same' amount because they're paying the same hourly rate (although we know this may not always be true either).

Second, no two clients, even two clients in similar circumstaces, are going to have exactly the 'same' work. No two clients or engagements are ever exactly the same. The difference with value pricing is that you price the engagement based upon the value of the engagement and the benefit that your services bring to your clients, instead of on the time it takes you to complete a specific task.

And third, it's unlikely that clients talk that specifically about their total legal fees. The information is too sensitive, and clients don't share that kind of 'inside information' easily. Do your hourly clients get together now and compare the total cost of their legal services? Can they really make that comparison?

Whether your clients complain about your fees or not, you've got to be able to show that your fees are reasonable based upon the client's stated goals and objectives and the benefits that they receive from your services. You have to be able to tie your work and your fees to their desired outcome and show how your services are necessary to advance their goal or to prevent other problems. When the client understands that, and when they agree to the specific work being performed and the specific fee up front, they'll be much less likely to complain.

Of course, if you truly think the work is 'the same' for two different clients, you're free to charge them the same fee. If you've been practicing long enough and pricing long enough, you'll probably get a good idea of how clients with certain problems, in a particular business or industry or in similar circumstances value your services, and you can price based on that value and the benefits that your service provides, without charging different fees to different clients for those services.

As Baker himself notes in a comment to the article:

Yes, Value Pricing is difficult. It requires creativity, innovation, creating more value for your customers, thinking, experimentation, and hard work.

This is probably why most firms can't do it, or don't want to do it. Much easier to bill in arrears by the hour.

The AccountingWeb article also raised the issue of timesheets, which I'll discuss in a future post.

Need help re-thinking your own law firm fee structure? Contact me to schedule an appointment for a consultation.

Do You Need Timesheets to Determine Profitability?

Tom Kane of the Legal Marketing Blog posted Has Your Firm Tamed that Damn Billable Hour Yet? last week. He says,

• You can’t make a profit on fixed fees unless you know what your costs are;
• You can’t know what your costs are unless you know how much time (and other dollars) are consumed by the matter; and
• There is no way to know how much time is being spent on matters if you don’t keep track of hours!

Duh!

Tom isn't alone in thinking this way. But I challenge that 'Duh!' the idea that you need timesheets to determine profitability. I left a comment on Tom's post issue because I think it's one of the huge misconceptions that lawyers buy into - you need timesheets to determine whether you're proftiable.

It just happens that there's been a heated discussion about this very issue on a couple of legal list-serves over the past few weeks. Some of the discussion focused on calculating the profitability of a fixed fee engagement vs. the profitability of the same engagement when billed hourly. Other portions of the discussion revolved around overall profitability.

Here's an example of how the timesheet as measure of actual time (and therefore a component of profit) falls apart in terms of comparing fixed fees vs. hourly:

At this point I shave my billing quite a bit. I may spend four hours on something and then I think it really should have only taken me two hours and I end up billing for one hour because the client's total bill seems a little high.

The above is an actual quote from a lawyer participating in one of the list-serve discussions. Many other lawyers chimed in that they do the same. Whether they admit it or not, there are lawyers and law firms that add time to a bill even if they didn't spend the time - it may be unethical, but it isn't uncommon.

Whether they realize it or not, the lawyer that adjusts the bill up or down is actually looking at what they think the value of the service is to the client - so they adjust their time up or down to adjust the fee to be more in line with what they 'think' the value should be. The result? Often the fee charged really has nothing to do with the hours that were 'actually' spent on the engagement, even in an hourly context.

Of course, if you want to track profitability of an individual matter that's been billed on an hourly basis, what you'd really be looking at is the earned hourly rate, ,which takes into account that you worked three extra hours than you billed for.

But what happens if you're not billing hourly, but you're keeping timesheets anyway because you think it's the only way to measure profit (particularly in comparison to what you 'would have' charged if you were billing hourly)?

When you compare the hours reflected on the timesheet with what you were actually paid by a client on a fixed fee engagement, what adjustments do you make to the time on the timesheet? Do you mark down or mark off (or mark up) the same time that you 'would have' if you were billing hourly? Or are you simply multiplying hours by the rate you 'would have' charged? Can you really make an accurate determination of profitability this way?

Next, consider the difference between billing hourly and getting paid after the work is performed with billing on a fixed fee basis and getting paid up front. With the hourly bill, there's no guarantee that the client is going to pay your entire fee. In other words, the fee *paid* may also not be in line with the time spent. Do you take that into consideration when you're making your profitability comparison, or are you just assuming that if you had billed hourly based on your timesheets, that the client 'would have' paid the full amount?

Again, if you're determining profitability on an hourly billed matter, what you're actually paid (as opposed to what you charged) will be factored into your earned hourly rate. But the hours that you spend on client work aren't the only hours you work. If you really want to determine profitability, and you really think that time is a component of profitability, you have to take into account all of your hours. The problem is that a good number of those hours aren't allotted to any particular client, so they won't be factored into the equation when determining profitability of an individual matter.

For those of you that think that timesheets are a valuable tool to determine profitability - are you keeping track of all of your 'non-billable' time, whether it's tied to a specific engagement or not? If time is such a big factor in profitability, when you're considering the overall profitability of your practice (as opposed to the 'profitability' of an individual matter or engagement), you have to take all of that 'non-billable' time into account.

How do you measure the profitability of the hours you spend doing business development? Do hourly billing lawyers consider all of the hours spent reviewing timesheets and adjusting your bills in your profitability equation? Are you considering mentoring, staff management and other time in your profitability assessment?  Even lawyers that say that they keep track of their nonbillable time don't do so as meticulously as they do with their 'billable' time. How do you account for all of the time that isn't reflected on a timesheet?

Most lawyers think keeping track of time helps them with profitability assessments because they can look at the revenue received and divide it by the amount of time spent on the engagement, but what does that do? It gives you the idea that you 'make' $x per hour, or that it 'cost' you x hours in order to make $y. How, exactly does that show whether you were 'profitable?' What is the actual 'cost' to you of those hours?

In other words, if you believe that time is a cost, is it a fixed cost? If you aren't billing hourly, how do you determine how much an individual hour is worth? Are all hours worth the same in calculating profitability? Is the hour spent cultivating a client relationship worth the same as an hour spent preparing a letter or cross-examining a witness? What about an hour spent filling out timesheets? Or an hour surfing the internet? Do you calculate the value of an hour in terms of what revenue that particular hour could bring in, or do you calcuate it in other ways - such as the stress it may have caused, or the perceived difficulty of that task for you? And what about hours spent that might bring revenue from more than one source? How do you calculate the profitability of those hours? Does an hour spent on something you enjoy cost the same as an hour spent on a task you loathe? How does that play into the profitability equation?

All business owners, whether they're professionals or not, have the same number of hours in a day, a week, a month or a year to work with. Time is a limited resource for everyone - lawyers are not unique in that regard. So how do other businesses tell if they're profitable without keeping timesheets?

The truth is that profitability has nothing to do with time. The money that the firm pays to its employees, associates and partners are costs. The time itself is only a cost to the individual lawyer, not to the firm or the practice. And even then, as demonstrated above, the 'cost' of every hour isn't fixed. And I'd be willing to bet that most lawyers have a good handle on how much time they spend working, whether they're keeping timesheets or not.

Do Something! The 15 minute procrastination fix

Most of us, at one time or another, procrastinate. There are whole books about procrastination, what it is, why it is and what to do about it. Sometimes you procrastinate because you hate the task itself - it's boring or time consuming or just not something you enjoy.

Sometimes you procrastinate out of fear - you don't want to know what's in that pile or how the client is going to respond.

Most of the time, procrastination only makes things worse by creating additional stress; the task is always on your 'to do' list or in the back of your mind, but it never gets done.

One way to combat procrastination is with the 15 minute 'fix:'

• Set a timer for 15 minutes and make sure you will be completely uninterrupted during that time.
• Set the item or task in front of you (if it's a phone call, get the number and put it in front of you).
• Stare at it for 15 minutes.
• Do not allow yourself to do anything else - no web surfing, answering calls, reading the newspaper, making lists of other things to do, or even daydreaming - until the timer goes off. Focus on what you've been procrastinating about.

15 minutes isn't a long time in the grand scheme of things, and there's a good chance that you can find 15 minutes in a day or even a week to focus on a task that you know needs to be done, as much as you might loathe it. The act of setting the timer and staring at the task is likely to make you nuts long before your 15 minutes is up. Rather than thinking and worrying about it, with no escape, you're much more likely to get started on it.

Perhaps it's something that can be delegated (at least in part) to someone else.  Or perhaps you'll realize that it's a task you don't need to do at all. Even better. Now you've freed yourself from thinking about it.

You don't have to finish the task, but you can't do anything else until the timer goes off. Taking that first step will create the momentum you need. When the timer goes off, you're free to stop - or to continue working, once you've realized it's just better to get it over with.

Update on Lawyer Advertising: Should 'Tastefulness' Matter?

The news over the past few weeks, both online and off, has been full of stories about lawyer advertising. Perhaps the most prominent was the Wall Street Journal article entitled, Objection! Funny legal ads draw censure and the accompanying Wall Street Journal Law Blog post, Provocative Lawyer Advertising: Fair or Foul?

New York and Florida are among the most restrictive states when it comes to rules about lawyer advertising. Both have cases pending which challenge the constitutionality of the restrictions. Round one has been won by lawyer James Alexander in New York in Alexander v. Cahill, which was discussed in my prior post, Some New York Advertising Rules Held Unconstitutional.

Bar leaders that support the restrictions claim that they're doing so to 'protect the public.' But in the case of Alexander's ads, which were fanciful and in no way could be construed as depicting 'real life' (the ads included Alexander consulting with aliens or as a giant-sized figure stomping around downtown Syracuse, New York), what are we protecting the public from? It's difficult to believe that the bar believes actual clients are going to think the ads were 'real.' Can it be considered 'deceptive' if it's clearly fanciful?

Lawyer and legal marketer Ben Glass comments on the Wall Street Journal article in a post on one of his blogs entitled, Do These Lawyer Ads Really Help You?. Ben says that he thinks, "that lawyer advertising is over-restricted by government regulators. Lawyers should be able to do just about anything they want with their ad dollar, as long as the ad is not deceptive or misleading." He goes on to say that he doesn't think these kinds of ads really help the consumer, because they don't say anything meaningful at all about the lawyers.

While I agree with Ben in part, I believe these ads do convey something about the lawyers. Lawyers that choose to use pit bulls or sharks, or gory accident scenes are conveying something very specific about their philosophy and their approach. Many clients will be just as turned off as the lawyers creating the bar rules seem to be.

But there are clients that will respond to these ads. Those clients are looking for an attorney with a particular approach or mindset. And let's face it - those clients are going to be looking for those types of attorneys whether the attorneys are allowed to use certain images in their advertising or not. Those same lawyers are already conveying that message in the way they approach their cases, adversaries and clients. It's reflected in their overall demeanor, their reputation and their philosophy.

Forcing a lawyer that isn't 'tasteful' in any other aspect of his or her practice to advertise 'tastefully' is the real deception; it doesn't give the client an accurate picture of the lawyer.

The state of Nevada went the other way last September when they changed their rules to be less restrictive, citing First Amendment concerns. They decided that taste just couldn't be legislated under the First Amendment. For more on Nevada's changes, see my prior post, Courts Modify Lawyer Advertising Rules in Nevada and Florida.

If you're looking for ethical, strategic ways to market your law practice, take a look at the upcoming teleclass series, How to Grow Your Law Practice on a Shoestring Budget, starting March 5, 2008. But hurry, because prices go up after tomorrow, February 15.

Promoting Women in the Legal Profession

I stumbled across a new blog by Nicole Black, well-known for her New York law blog, Sui Generis. The new blog is entitled, Women Lawyers -- Back on Track.

Nicole says, "My goal is to provide women lawyers with resources and information about the legal field and to explore how they do/can happily and successfully fit into it." I'm looking forward to reading more.

This comes on the heels of a discussion I had with a group of lawyers about an an idea to have a CLE program that would focus on leadership and communication skills for women in the profession. Several of the men in the room objected, saying there was no need for a program to focus solely on women, and suggesting that such an idea was sexist - after all, there were no programs on communication or leadership skills specifically for men.

It is short sighted to ignore the very real gender differences between men and women in the profession. Of course, not all women are the same, just as not all men are the same. But the fact remains that there are gender differences, some of which are the result of genetics and some are the result of the different ways that girls and boys are socialized and educated within our society - and within law schools and law firms.

Instead of pretending that these gender differences don't exist, shouldn't we all be educating ourselves about those differences and how they serve (or don't serve) us in within the profession? Shouldn't we be learning about those differences so that we can help both women and men advance in the profession?

Let's face it - the law is a profession that was traditionally dominated by men, and although more and more women are entering the profession every year, the 'rules' were made by men. More men than women hold positions of leadership, and statistics show that women are paid less than men for the same work.

The New York State Bar Association recently released its report, Current Issues Affecting the Legal Profession 2008, which specifically addresses gender equity in the profession (at page 44).

As Black notes in her post, Post-Emily Post, attorney offers women lawyers advice,  a recent Lawyers Weekly article noted continued impediments to the advancement of women in the profession, which include women getting a disproportionate number of less attractive assignments, evaluations that aren't gender neutral, and differences in the business development process.

In a post entitled, Women, law firms and semantics, blogger Jordan Furlong of Law21 agrees that it's 'disheartening' that we still need to discuss gender in law firm operations, but he admits that the problem still exists. Allison Wolf of The Lawyer Coach Blog posts in Rainmaking for Women Lawyers that the increased number of women entering the profession doesn't mean that an increased number of women are making it to the top. She comments on Furlong's post that,

I am interested at this time in promoting a dialogue among women and men about the challenges and obstacles that can and will arise for women and developing strategies for seeing more women through the labyrinth and into positions of power. An emphasis on the development of leadership skills along with career planning and mentorship for young women lawyers are vital elements of the solution.

Larry Bodine posts an article on his site entitled Rainmaking: The Hammer to Break the Glass Ceiling for Women Lawyers. He says,

We know that women start to leave in their 4^th or 5^th year, with the result that only 17 percent of partners at major law firms are women, according to the National Association of Law Placement.  (The same obstacles face lawyers of color.) The primary reason is that law is still a white men’s club – often a legal locker room with little support for ladies without a book of business.

Hopefully, all of this discussion will lead to action - and agreement that programs promoting women in the profession, in terms of developing leadership, communication and business development skills for women helps everyone in the profession - not just women.

Do Something! Stay in Contact

Lawyers often ask what they can do quickly and easily to increase their business. The best marketing and business development efforts are part of an overall plan that is carefully crafted to get and keep you in front of your best prospects and referral sources.

That being said, there is a relatively inexpensive way to stay in front of your contacts even when you don't have a comprehensive plan in place, and it takes hardly any time at all: write a note.

Every week, choose a few contacts, whether they're current clients, former clients, potential clients, referral sources or others within your network and write them a quick note. You can do them all at once or do one a day.

The note doesn't have to be long or complicated. If you can include a clipping, an article or something else of interest to that person, so much the better, but it isn't a requirement. But do make the note personal in some way, by referencing when or where you last spoke, etc.

I've had clients tell me over and over that they got business when they ran into someone that they hadn't seen in a while and that person remembered a potential client or contact that might be helpful. The same thing happens any time those contacts are reminded of you, whether you see them in person or not.

A quick personal note reminds your contacts that you're out there, and once you're top of mind, chances are much better that business will come your way. And a personal, hand-written (or at least hand-signed) note that comes in the mail as opposed to email makes an even more of an impact.

Real Lessons Learned About Discounting Your Fees

One issue that seems to arise frequently with my lawyer-clients and colleagues is whether it makes sense to discount your fees. Recently I attended a bar association meeting in which one lawyer suggested that with the recession coming, lawyers would almost be required to discount their fees in order to compete in the market and keep their business. I generally disagree with discounting unless there's a well thought-out strategic reason for doing so, and I've discussed my position on not discounting fees in a previous post entitled, "Should I discount my fees?".

Here's a real-life story to learn from:

One new attorney (A) reported on a lawyer list-serve that she received a call from an individual (B) and quoted A's regular hourly rate. B arrived for the initial consultation with two other people. Rather than seeking A's advice as an individual, B was seeking legal services as part of a corporation (C). A did the work at the originally quoted rate.

Later, C returned to A for more help. A again quoted a discounted rate, as A was a new attorney and was trying to get as much work as possible. In response, A received an email from C asking for a 10% discount because they were 'repeat customers' and because they 'planned to use A in the future.'  A asked for advice about how to handle the situation.

When clients come to me with these kinds of issues, I usually start by asking questions. Questions I would ask A include:

• Did you tell C when they first came to you and you realized that it was a business matter as opposed to an individual client problem that the fee you quoted was not your business fee?
• Is C aware that the fee they received was already discounted?

If A hadn't told C either of the above, A needs to let them know now, whether A decides to further discount or not.

There are lots of things that go into the decision about whether to discount for a particular client, including whether they are otherwise good clients, what the potential for future business is, and whether they are likely to refer others to you. But keep in mind that as long as they think your 'regular' fee is the one they received (i.e. the already discounted fee), any matter they bring to you is going to be at a discount, and they may tell others that the refer what your rates are.

As you can see, you usually get yourself into a rut when you quote an 'already discounted' price. Here are some tips if you're going to discount for a strategic reason (which sometimes does have merit, as noted above):

• Make sure the client knows you're giving them a discount. For example, you could tell the client that you usually charge $xx for this service, but that since they are a repeat customer, you're going to charge them $yy. (keeing in mind that the client is likely still going to think that your 'real' fee is $yy, not $xx).
• Any bills or invoices should always reflect that a discount is being given, so that the client is reminded in writing that this isn't your regular fee. Discounting without informing the client is doubly shooting yourself in the foot, because the client thinks the discounted fee is your 'regular' fee. If you give in, you're doubly discounting.
• You could also agree to give a 'discount' if the client pays up front or pays within x days of receipt of the bill. The client gets a discount, but you get paid faster.

I'd also advise A to use this experience as a lesson about what to ask potential clients before you quote a fee, and about how to talk to clients about fees in general. It's one of the most difficult parts of being a business owner.

Other lawyers also responded to A's question, relating their own horror stories about clients. One lawyer responded, "I am always concerned about clients who ask for a discount after a meeting. Those clients are the same ones arguing about why they should pay for a 15 minute phone call or how much research time was taken, etc." Another says, "I learned time and again -- the people who give you trouble over your fee at the outset give you trouble when it's time to pay."

A third lawyer relates that their first client that wasn't a referral spent two hours talking to the lawyer at the initial meeting, following which the lawyer sent a proposal for a flat fee. The client immediately asked for a lower price. The lawyer (who notes that he ignored his 'better judgment'), gave in. That client turned out to be unreasonably demanding and the lawyer spent extra time working with him, hoping that it would be worth it for future work. But the client later asked for more discounts because the client felt he had done a lot of the work. End result? The lawyer fired the client. His advice? "Don't go there. It isn't worth it."

Finally, a lawyer related that when he began his practice, he did work for "dirt cheap: because he didn't have a lot of work. Some clients talked him down to extremely low prices. But those same clients, over 10 years later, think the lawyer will do the work for the same fees he charged back then. As I said above, once a client thinks you'll do work for a discounted fee, it's very difficult to get them (or those they refer) to pay your 'regular' fees.

Although clients that give you trouble about fees often give you headaches about almost everything else, if you didn't explain that you were already giving them a discount, they are only partially to blame. That being said, I'm a big believer in 'going with your gut' (see my earlier post about following your intutition) - if you've got a nagging feeling that this might be trouble, or an indicator of future trouble, stick to your guns, and if the client doesn't agree to pay your fee, be grateful that you didn't get stuck with a client that's a headache. Bad clients drive out good clients.

For more information about identifying good and bad clients and setting expectations, check out our upcoming teleseminar series, "How to Grow Your Law Practice on a Shoestring Budget," starting March 5, 2008. Early bird pricing ends February 15!