Never Discount Your Fees!
I’ve said many times before that competing on price in your law practice is a spiraling race to the bottom. No matter how low you go, there will always be someone else willing to charge less than that. This not only leaves money on the table, it sends three messages to a prospective client:
- You’re worth less
- Your services aren’t as good (people often equate higher price with higher value, as they should)
- The real fee is BS and for suckers that didn’t haggle
Lawyers that compete on price tend to attract, and represent, price sensitive individuals. They either can’t afford a decent fee, or they’re taking advantage of you, because they could easily afford a more expensive competitor. Either way, you end up taking less than your worth, and run the risk of obtaining a poor quality client.
Unless There’s a Good Reason
There are, however, instances in which a discount may be to your advantage. Discounting to compete is never a good idea, but discounting to get something that is to your financial advantage is something else. This is called discounting with a quid pro quo. Here are three examples.
Cash Flow Benefit. If I’m towards the end of a month or a quarter, I’m fairly close to reaching my goal for that time, and I sense some hesitance on the part of the potential client, I may offer them a small discount on the fee in return for being paid by the end of the month or the quarter. They get a deal; I make my goal.
Encourage an Upsell. In addition to representing clients for bankruptcy, traffic, tickets, student loans, and the like, I also do estate planning. In the course of discussions I may mention that to a potential client as an additional service I can offer them. If I sense some resistance, I say that they don’t have to get the estate plan now, but if they do, I will discount the fee by a particular amount. I may get less money for my upsell service, but I might not have gotten any if they had chosen the “later” option and then didn’t ultimately pull the trigger. It creates a sense of urgency with a dollar value attached, which can help you.
You’re Raising Your Fees. This isn’t really a discount, but you should consider doing it as you approach the end of the year. Essentially, the strategy is that you are raising your fees in the new year. If they want to pay the current fee they must retain you by December 31. This creates a sense of urgency for the potential client to retain you, while not selling yourself short on the fee itself. After all, you’re charging that through the end of the year anyway, so there is no discount.
And There Always Has to Be a Reason!
Never, ever, ever, discount your fees without communicating a clear reason for doing so. Lowering your fees because the potential client wants to haggle is never a good idea, as it cheapens you and your services in the mind of the potential client and makes them think the higher price quote was BS.
However, if you offer the discount in the context of an understandable reason – they are only getting this deal because of X – then that is far less likely to happen. They will accept the real price as genuine, not BS, and they won’t expect you to cave on price if they come back to you in future. This preserves your position at your price point for repeat business.
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