Systemizing Your Shop and Presenting Palatable Prices

Systemizing Your Shop and Presenting Palatable Prices

By Sofia S. Lingos

Setting up systems to manage expectations from the onset of the client relationship is the key to successfully collecting fees.  Developing a distinct image, creating a clear fee schedule, establishing competitive rates, communicating the terms clearly, capturing the agreement in writing, and consistently collecting are all tools to build into your billing and collections plan.  Putting this plan into writing will provide understandable and accessible guidelines assisting your firm in presenting an appetizing menu of options which your clients can afford.

Know Your Market: Daytime Diner or Fine French Fare
Whether you just opened your doors or you have been building business for years, understanding your market is the first step in creating a realistic payment plan.  You established your practice based on your interests, experience and expertise, but how is it defined?  You must consider these questions critically.  What services do you offer?  Where are you located and why?  Specifically identify your ideal and typical clients.  How and where do you find your clients (or do they find you)?  What services do they want, what services do they need, and how much are they willing to pay? 

With your target audience in mind you must begin building (or rebuilding) your brand.  If you are charging premium rates, you must convey this from the onset of the relationship.  This begins before you even meet perspective clients.  Presenting a professional website, existing in an executive office space, using support staff and technology, and employing experienced and expert advisors are just a few ways to establish this image.  When you enter a fine dining establishment, dimly lit with candles, greeted by the maitre d' and led to a table decorated with more silverware than you can count, you immediately expect that your bill will exceed fast food fare.  If this is the client that you would like to capture, ensure that your image expresses that up front.  Without any additional effort this will filter out your daytime diner looking for a burger and shake.  Alternatively, if your market is the “jean and t-shirt crowd” make sure you create a comfortable and welcoming environment for all.

Making Your Menu: The Recipe for Success
Lay out all of your ingredients in advance.  What goes into each of your dishes?  Take your practice areas and break them down into micro-matters.  For example, you may have a business law practice, but what are the specific areas in which you provide representation?  Business formation, contract review, employment matters, litigation…?  Take this a step further and detail the specific services you provide.  Under business formation you may render advice regarding legal structures, draft formation documents, complete corporate filings and secure necessary licenses.  Understanding all of the ingredients that you have in the kitchen and how they can go together to make the perfect plate is important in planning your menu of services.  

You are not done yet.  How do you bill your clients?  Are you tied to the traditional time-keeping trade?  Consider alternative billing structures such as flat fees, task, value or project-based billing, subscription billing, and blended fees.  If a client asks you to consider an alternative fee structure would you know the cost?  In the progressive legal market this could be the difference between signing or losing a client.  Educate yourself regarding the alternative fee structures and build them into your plan so you know what you are able to offer as a viable alternative.  Also, detail potential payment plans and know what that model entails.  If you are willing to discount services, set internal limits so that you do not sell yourself short.   

Next, you must assign an associated cost.  This can be average or absolute but it cannot be abstract.  Providing a client with an hourly rate, but with no expectation regarding potential hours needed, does not allow you or your client to know if they can commit.  Setting your rates can be a challenge, with few clear guidelines since the Supreme Court decision in Goldfarb v. Virginia State Bar, finding the publication of fee schedules by the bar association to be an antitrust violation.  The Model Rules of Professional Responsibility have attempted to provide guidance regarding the ever-nebulous standard of “reasonableness” set forth in Rule 1.5.  Highlights include: the complexity of the matter, potential for conflict, customary fees charged, amount involved, results obtained, immediacy, professional relationship, experience of the lawyer and type of fee.  Assign each ingredient a price, write out the alternatives and understand the typical charge for the entire meal.

Greeting Your Guests and Presenting the Plates
Now that you have created your menu you are ready to greet your guests.  Remember, presentation is vital; value is not just found in the flawlessly finished filet.  The menu does not need to be a written document distributed at seating, but should be a thoroughly internalized system known to anyone responsible for discussing costs and collections.  This allows you to answer the question regarding the market price for lobster without asking the chef.  Spend time getting to know your client’s palette.  Pair the patron’s needs to your mix of services. 

Taking Orders
Take your client’s order, but before the chef begins to cook, commit your conversation to writing.  Do NOT proceed without the terms clearly outlined in an agreement expressing the specific inclusions and exclusions of the engagement, detailing the fee structure to be employed, and highlighting expectations for when financial commitments must be met.  Review their order and have them sign the written agreement.  A retainer may be required up front as is often the expectation with catering agreements or larger transactions.

Bringing the Bill
Finally, dinner is served.  They finished their food and you bring the bill.  What will they do? You hope that if you have completed each of the steps as expressed above it will come as no surprise; they will pay their bill and leave as a satisfied customer, wanting to return.  However, as we all know, it is not always that easy.  Apparently the devoured steak was overcooked and they actually wanted rice instead of potatoes.  What do you do?  Again, if you have covered all of your bases you have a number of options available.

  1. Review the order with them.  Point out that they signed for the spuds.  Discuss their dissatisfaction and see what you can do to make them content.  Perhaps a free dessert, or an extra hour of your time, will send them away satisfied.
  2. Present your invoices during typical billing cycles.  Just as they pay monthly to keep the lights on, the expectation of receiving and paying your bill should be just as consistent.
  3. Contact your client but don’t do the dirty work.  Separate yourself from the collections and cooking.  Have a “billing manager” reach out to follow-up on unpaid fees. 
  4. Have clear recourse spelled out in your fee agreement or engagement letter that provides for expedited adjudication through alternative dispute resolution.
  5. In extreme cases you can employ collection agencies, file an attorney’s lien, and even adjudicate the matter.  Make sure that the cost is worth the collection.

Building an integrated billing system can be an extreme undertaking, but if you can execute the plan and foster realistic client expectations, the resulting rewards will be worth their weight in gold (or white truffles at $100,000/pound).

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About the Author

Sofia S. Lingos, Esq. is the principal and founding attorney of Lingos Law, a boutique business law firm located in Boston, Massachusetts, representing small businesses and entrepreneurs in forming, protecting, maintaining and expanding their ventures.  Attorney Lingos is also an adjunct professor at Northeastern University School of Law, where she teaches a course on Law Practice Management and Access to Justice.  Additionally, she is actively involved with numerous bar associations and philanthropic organizations.