Good Lawyers Talk Money with Their Clients

Good Lawyers Talk Money with Their Clients & Billing Is Marketing

by Sally J. Schmidt

If you were to believe everything being written about legal services today, you might think lawyer-client relationships have boiled down to one thing: pricing. Yet in my conversations with clients, fees rarely are the first thing mentioned or the most important factor used to evaluate relationships with outside counsel. Now don’t get me wrong. All clients are cost-conscious, particularly these days. In interviews, clients consistently say things like:

“We are always keeping an eye on costs.”

“I tell them, ‘You’ve got to be cost-conscious.’”

“Do I wish the cost was lower? Yeah, that would be great.”

But even those sentiments don’t mean you have to engage in cost-cutting or discounting. What clients usually want is better communication about, sensitivity to and management of costs.

Opening the Lines of Communication

Here are some actions relating to pricing and fees that will improve your relationships with clients (and your ability to get paid).

1. Have good conversations up front about the

expected costs of services. Clients appreciate lawyers who take a businesslike approach to the discussion of fees. For every new client or new project, put the issue on the table by saying, “You’re probably wondering what this will cost.” Then give a detailed explanation of the potential fees and expenses.

2. Be clear about what is or is not included in your estimate, and what factors will contribute to higher

costs. If you provide a range of $25,000 to $35,000, for example, what will lead to the higher end of the range? If there are things outside your control or not included in the fee, provide a detailed list and, if possible, estimate those items as well. 3. Hold the line on expenses. If you are engaging outside services—from specialized counsel to expert witnesses—do your best to manage their costs, just as you would do with your own. Rightly or wrongly, if those expenses spiral out of control, you will be tainted by association.

4. Be a good steward of the client’s money. For instance, if you need to travel on the client’s behalf, ask for hotel recommendations or whether there are any special travel discounts of which you can take advantage. If a company’s executives stay at Hampton

Inns, they won’t appreciate a bill for a Ritz-Carlton.

5. Look for ways to cut costs. Can the client do some of the work in-house? Or is there a lower-priced alternative for a portion of the assignment?

6. Keep the client posted. Probably most importantly, you must have regular communication with the client about where the fees stand against the original estimate. Whether this is done by holding a periodic budget meeting, generating a monthly chart showing actual versus estimated costs, or providing the client with access to bills through an extranet, nothing will show that you are serious about cost management like monitoring where things stand. And, if you do have a glitch, that is the time to pick up the phone and have a conversation. If you are able to manage expectations about the cost of your services, you are much less likely to have to discount or write off your fees—and managing expectations necessitates good communications.

Remember, you don’t need clients to feel you are inexpensive; you need clients to feel they received value.

Ultimately, the happiest clients say things like this: “He’s not the cheapest, but he’s worth it.”

“They provide us with good value for our legal dollars.”

“The firm is a good value for the work.” Once you have the engagement, your invoices become a critical communication method. In fact, I would argue that bills, properly done, can be great marketing tools. Conversely, poor billing techniques create tension with clients.

Clients use any tangible work product to judge the quality of your firm’s services. Said one: “If you can’t get your billing straight, I don’t have confidence in you to get the file straight.” Clients also use invoices to evaluate the progress of matters. With scant information, they are left in the cold. Technology is a wonderful thing. But too many times, lawyers allow computers to drive the form and substance of the invoice.

Paying a little more attention to your bills will not only enhance your client relationships, it will increase your likelihood of getting paid.

Cover Letters

Everyone talks about providing value. But when was the last time a client said, “Great brief!” or complimented you on the research you did? A cover letter allows you to explain the value you have brought to the engagement.

If you are pleased with a result, say so. If you wrote off time, tell the client what it was and why they don’t have to pay for it. You can also use the cover letter to update where the fees stand on the project. And, most important, you can thank the client. It may not be necessary to put a cover letter on every invoice, but at a minimum, you should include one at the end of a major matter.

Time Entries

In my experience, clients’ unhappiness with bills can have as much to do with the way the information is described as the time itself. Here are tips that can help avoid that problem:

Be careful how you describe your time. Whether it is when you enter time or when you look at your pro formas, augment the terse computer language. Let’s use “office conference” as an example. First, clients don’t like paying for you to talk to other lawyers in your firm. Second, it provides zero insight into the value provided by the meeting. Instead, focus on what you did, for example, “Reviewed requirements for shareholders’ agreement,” “Analyzed tax issues in proposed trust” or “Met with Attorney A to discuss outstanding issues in settlement agreement.” And name names. Avoid red-flag terms. In addition to “office conference,” other phrases that set clients off include “review of file” (paying you to get up to speed), “research” (don’t you know this already?), “attempted to call,” “left voicemail for” and other things that don’t contribute to the progress of the file. Use active descriptions. For instance, instead of “Consideration of” say “Analyzed.” Show progress. When you write down time for the same matter, be conscious of showing progress on the file. Be consistent. If you referred to the matter as a “stock purchase agreement,” don’t just call it an “agreement” in future bills. Demonstrate value before billing. If possible, don’t bill for projects until clients have seen the related work product. If you have taken a deposition, send clients the summary before they have to pay for it. Show time that you are writing off. If you did something for which you did not get paid, such as attend a client board meeting, enter it at “no charge.” Pay attention. Be sure to apply time to the right file! Concentrate your time. Clients would rather see blocks of time than six-minute intervals. Bill on a timely basis. This helps clients see where they stand on a matter and, studies show, vastly increases your likelihood of getting paid. Don’t nickel-and-dime. How do you feel when your $300-a-night hotel charges $12 for Wi-Fi when the Super8 provides it for free? Disbursements, even if they represent a small percentage of the bill, can be a landmine because clients know what most things cost. In addition, charging .25 for administrative tasks—reading emails, reviewing bills—will cause clients to review future invoices in more detail for billing abuses.

Would You Mind?

Perhaps the best thing to do is put yourself in the client’s shoes and ask, “Would I mind paying for this?”

Remember, good billing practices result in no surprises for the client. If things are getting out of hand on a matter, pick up the phone. If your bill is higher than anticipated, deliver the invoice in person. When there’s a problem, it’s crucial that you contact clients before they have to contact you. n

Sally J. Schmidt is President of Schmidt Marketing, Inc. in Edina, MN. The company’s clients have included over 400 law firms throughout the United States and internationally, ranging in size from two to over three thousand attorneys. Sally received her MBA and BS from the University of Minnesota, and was the first President of the Legal Marketing Association (LMA). She was inducted into the College of Law Practice Management in 1994 and into LMA’s Hall of Fame in 2007. Sally has made presentations at more than 200 national and international seminars and conferences, including many for ALA, and her articles have been published in every major legal trade publication. Reprinted with the permission of the author. First published at www.attorneyatwork.com.

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