Undervaluing of legal services

Speaking recently on The Lawyers Weekly Show, Mr Deverson (pictured) – who is the founder and director of legal business advisory firm Lawganised, which has over 100 law firm clients across the country – said that discounting services in moderation, in the context of a strong, ongoing relationship with a client, is of course okay and often appropriate.

However, too many are too quick to discount their services, even before clients have even raised an issue with the quantum of an invoice, he said.

“If a firm adopts a general strategy to constantly discount their services, I question that in the sense of not only what they’re offering, but what they’re not getting,” he posited.

“The quantum may appear reasonably low when you’re issuing, say, a $3,000 bill with a $500 courtesy discount, but when you do a thousand bills a year and $500 is taken off each bill, there’s half a million dollars that’s lost which could’ve employed three or four solicitors.

“When you utilise that methodology to understand the macro effect of discounting, it can have a considerable effect on the practice.”

In Mr Deverson’s experience, competition with rival firms isn’t necessarily a motivating factor in undervaluing one’s services, except in product-based areas of practice such as conveyancing. Instead, he submitted that what is causing such undervaluing is lawyers “genuinely believing” that their worth is not what the bill suggests.

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“Lawyers say to themselves, ‘I’m too expensive’. That mindset makes billing discussions quite difficult right out of the gate,” he mused.

“I find it disappointing that a litigation firm will spend 150 human hours at $500/hour on a matter, and then when they produce the bill, they convince themselves not to issue it.”

Mr Deverson reflected that he has pleaded with lawyers before to never underestimate their value. “Lawyers are engaged as problem-solvers, and they are providing extremely high value to their clients,” he said.

“Too often, lawyers say that there’s no way they can bill at a certain amount. I say, why not?”

Exacerbating the problem is that lawyers and firms will make the decision to discount their bills without even running the original figure by the client first, Mr Deverson added.

“The quantum that lawyers discount before they give the bill to the client is something they assess using their personal opinion and values. I say, why not at least test how the client is going to feel about the bill? Make a call and see if it’s something they’ll accept. At least then you have an understanding and respect before cutting it back if need be. Otherwise, you may be walking away from thousands of dollars without even testing it,” he said.

“Of course, sometimes your estimates far and away exceed initial estimates and you may have to discount, but I sincerely believe that there’s too much self-assessment going on and lawyers are too quick to judge themselves.”

Billing, Mr Deverson surmised, is an “art form”. It can be done really well, but it can also be done in a detrimental fashion, he noted.

“Too many firms engage in a race to the bottom with constant discounts and constantly undervalue themselves. There’s too much critical self-assessment going on,” he said.

Adopt a retail mindset

What lawyers and firms have to do, Mr Deverson outlined, is adopt a “retail mindset”.

“When you walk into an Apple Store to buy the latest iPhone, you don’t walk out with that phone, wave to the staff and say, ‘I’ll pay you in 45 days’. You pay for the phone there and then before leaving the store,” he insisted.

“Now, a professional service such as law is slightly different, but there is nothing wrong with seeking funds in trust, delivering the work and invoicing it straight away. There are far too many law firms out there that, on average, will receive money in a hundred days after issuing a bill. Get your cost agreements and trust accounting in order so that you can take the money immediately.”

Another way of looking at this mindset is to imagine ordering a banquet menu, Mr Deverson continued: “If you ordered six dishes under a banquet at a restaurant, and then halfway through you decided to add three more, you pay more. You don’t leave the restaurant thinking you’re only going to pay for the initial six.”

“Again, if you’ve got a fixed fee on a matter, and the client suggests that they want to see more occur, then you add those items to the fee,” he said.

In both of these analogies, he noted, “there’s no renegotiation at the checkout”.

“Think about the Apple Store. Think about the banquet menu. You don’t stand at the checkout and say, ‘I don’t think I got value for that phone or meal (unless there’s a considerable problem, of course,” he explained.

“In adopting a retail mindset, lawyers have to be stronger in their conversations and say that they provided a service and they expect to get paid. There is, of course, an appropriate way of saying that, but the key elements are that services are provided, fees are rendered, and that’s it.”

The transcript of this podcast episode was slightly edited for publishing purposes. To listen to the full conversation with Ben Deverson, click below: