Legal Business Development

Alternative fees (Part 7): More on setting a fixed fee

This week I was planning to post a step by step guide for succeeding with fixed fees.

But then several experts raised important issues about last week’s post, so I decided instead to expand my discussion about the most important issue in fixed fees:  how do you set the price?

Litigator Pat Lamb has an enormous amount of real world experience in this area.  In case you missed his post “The Problem with Most Fixed Fee Proposals”, I am reproducing the entire item below:

Jim Hassett's latest in his series of posts on alternative fees is now available.  This is a very important post on how to set a fixed fee.  Jim notes that there are two ways of getting to a fixed number, cost plus pricing and value pricing.  In the former,

estimate what you think it would cost to perform the work on an hourly basis, and then add a safety margin to cover unexpected developments and profit.

This is how most firms calculate a fixed fee and why clients refuse to accept these proposals.  Let's start with the "what it would cost on an hourly basis" part of the calculus.  Hours times hourly rate.  See any problem?  To start with, hourly rates include a very hefty profit margin.  The lawyers also have no incentive in calculating the fee to be skinny on the hours.  The problem is then compounded by "adding a safety margin" (the proper translation of this is "more profit").  So law firms typically come up with a fixed fee that guarantees them more profit under the fixed fee approach than they would get under the traditional hourly system. 

What risk has the firm assumed in this approach?  None.  Well, some might say that "what if" the case turns into a runaway train?  Most who quote a fixed fee identify the assumptions on which the fee is based and if those assumptions change, will submit a modified proposal.  So, in the end, very few firms assume any real risk.

The thing that makes a winning fixed fee agreement is a quote that is lower than the fee that would be paid under an hourly basis, which then creates huge incentive for the firm to do the work at a lower cost (and I mean cost in the traditional sense of the word, not the lawyer sense) so that the firm increases its profit margin.  Client wins.  Firm wins. 

I leave with one final thought.  The second most frequent concern expressed after the "double profit" concern just discussed is that the firm will allocate inadequate resources in order to maximize the profit margin (translation--increase the risk of a bad result).  The holdback or bonus component based on the result is an absolute answer.  Fees are all about the client identifying that which is most important to them--for most the top two are cost and result--and structuring the fee to maximize the firm's incentive to accomplish those objectives while at the same time giving the firm the incentive and latitude to do the work as cheaply and efficiently as possible.

I agree with everything Pat says, especially his emphasis in the last paragraph on using bonuses to align the interests of the client and the firm.  But I see this as an argument against doing cost-plus estimates badly, rather than against doing them at all.

As I noted last week, I think both cost-plus and value approaches to pricing can be useful, and often recommend “a hybrid approach, which starts from cost-plus estimates, and uses value pricing to determine the size of the safety factor.”

When you are preparing a fixed fee bid, the most important goals are to win the work, and to bid a price that makes business sense.  Unless you see the work as a loss leader that opens new doors, you must at least cover your costs.  Starting out by estimating the hours the work will take is the key to doing this.

But, as Pat pointed out, if you start with the hourly rates clients pay, you will be including both your true cost of doing business and profits.  If you then add a conservative worst-case safety factor, the fee is likely to be unreasonably high, and you will probably not get the business, especially as other firms get better at fixed fee pricing.

Another response to my recommendations came in a long thoughtful email from value pricing guru Ron Baker, which said:

Here's where we depart. When you write:

As for trashing timesheets, I’ve done that myself at times, but only when my company was small.  And even when I was the only employee, if I signed a contract for a complex or unpredictable job at a fixed price, I tracked my time so I could analyze profit or loss at the end.

In my experience, the more employees I had working for me, the more important timesheets became in tracking productivity and profitability.

We have large firms that don't do timesheets. One is an ad agency with over 350 employees, another is a Top 100 accounting firm that has around 275 employees, that is getting ready to trash them at the end of June. Size simply doesn't matter. Timesheets are the "illusion" of control. You can't tell how good (or bad) an attorney is from a timesheet, nor can you measure their productivity because they only look at inputs not outputs.  Further, knowledge work requires a judgment (usually from another knowledge worker), far more than a measurement.

This is why effectiveness is always and everywhere superior to efficiency. Would you rather have an effective or efficient heart surgeon? It's not a flippant question, as it goes to the heart of the issue.

There's no such thing as "generic efficiency." It all depends on what customers want and are willing to pay for. My car is incredibly inefficient, as it sits idle most of the time. However, when I need to go somewhere, it's incredibly efficient. To say a lawyer needs to be more efficient is quite silly without being specific about what you mean. Once you are, you realize effectiveness is what clients want. Was Einstein efficient? Was he on budget? Who cares. Businesses aren't paid to be efficient, they are paid to create wealth for their customers. (For more on this, see my post entitled “Pigs, Productivity, and Purpose”.)

Moreover, timesheets are not a cost accounting tool, since the hourly rate has a profit built into it. So you tracking time tells you nothing about real profitability, only opportunity cost, which again, has nothing to do with external value created for the customer. There are other ways to perform cost accounting. Also, cost accounting has to be done BEFORE you do the work, for what possible benefit is there in knowing after the fact that the customer didn't like your price. In the real world, price determines cost, not the other way around. This is how Toyota is able to run without a standard cost accounting system, which should send a chill down anyone's spine that believes timesheets are necessary for cost accounting.

If you agree that Value Pricing is the correct theory (as opposed to cost-plus pricing, another issue where I strongly disagree with you) then it follows that timesheets must go. This has been empirically proven by the firms that have trashed them. Read some of their stories in the Trailblazers section of our web page to see just how useless timesheets are in a Value Pricing environment.

In this case, Ron and I will have to agree to disagree. 

Both law firms and their clients have several decades of experience thinking about cost in terms of the hours each matter will take.  And there are good reasons for this approach, since ultimately most of the cost of doing the work will depend directly on the number of hours it takes, and the salaries lawyers are paid.  In my opinion, asking law firms to throw this experience out the window is counter-productive. 

To get better at pricing, you need to measure which matters produce the largest financial returns, and which people within the organization do.  Tracking the time and money spent on each matter is the simplest way to measure that financial return. 

In the long run, perhaps the legal profession will change so radically that value pricing will become the dominant system.  But in this economy, most firms will need to focus on the short run, on generating enough revenue to survive and prosper with cost-conscious clients.   And to accomplish this, they will need to learn how to win with fixed fees, by starting from a cost-plus estimate.

A dream team discussion of alternative billing

On March 17, I will be moderating a West LegalWorks webcast entitled “How boutique firms are delivering greater value with alternative billing.”  If you’d like advice from the trenches on how to get started with alternative fees, you won’t want to miss this session.

All four participants have founded firms that have significant experience moving away from the billable hour:

Fred H. Bartlit, Jr. is the founder of Bartlit & Beck which was named Litigation Boutique of the Year in 2009 by The American Lawyer.

Patrick Lamb is a founder of the Chicago litigation firm Valorem Law Group, and author of the blog "In Search of Perfect Client Service".

Bruce Raymond is the founder of Raymond & Bennett and started the Alternative Fee Lawyers group on LinkedIn. 

Jay Shepherd is the founder and CEO of Shepherd Law Group, and author of the blog “The Client Revolution”. 

Alternative fees (Part 6): How to set a fixed fee

Lawyers often ask me how to structure fixed fee contracts to eliminate risk.  The short answer is:  you can’t.  As Nobel physicist Niels Bohr once said:  “It is very hard to predict, especially the future.”  And by their very nature, fixed fee arrangements involve predicting the future.  With fixed fees, you must accept the reality that sometimes you will win and sometimes you will lose. 

There are two basic approaches to setting fixed fees:  cost-plus pricing and value pricing. 

In cost-plus pricing, you “simply” estimate what you think it would cost to perform the work on an hourly basis, and then add a safety margin to cover unexpected developments and profit.  The size of the safety margin will depend primarily on your market.  The stronger the competition, the smaller your safety margin will be, because you will need to assume more risk to offer a competitive price.

The problem is that legal matters are often not simple at all, and many lawyers have little experience trying to estimate costs.  As Frederick Krebs, president of the Association of Corporate Counsel put it in a New York Times article entitled “Billable hours giving ground at law firms,”  “Many lawyers may not be good enough businessmen to pick the right price.”

Similarly, Fred Bartlit, founder of Bartlit Beck, wrote on Legal OnRamp:

“Almost NO ONE knows what tasks should cost done right. I usually ask meetings of General Counsel and other inside lawyers ‘what should it cost to prepare for and take the deposition of an economic expert in a 100 million antitrust case’, I get answers ranging from ‘$30,000 to $500,000 in the same room.’  So, to me, we have a dramatically atypical situation facing us: a huge market that is not competitive, that does not foster innovation in business processes, and has NO useful metrics for comparing efficiencies of different competitors or calculating roughly what various aspects of litigation SHOULD cost.”

(My thanks to Pat Lamb for calling my attention to these comments in his blog)

Clearly, the more you know about a situation in advance, and the more control you have over the way it will develop, the easier it will be to determine a reasonable fixed fee.

Ian Shrank, a partner at Allen & Overy, says that the best way to start is to:

“Make assumptions about as many objective factors as you can think of, such as the number of months to complete the matter, travel needs, number of meetings, number of drafts of documents, number of depositions.  Also include some softer considerations if they are feasible, such as how hard the other side negotiates.”  And if both sides agree that the fixed price is contingent on certain assumptions, be sure “to alert the client right away when an assumption is being violated, noting this may result in an adjustment to the fixed fee.  This is the single most important rule about fees - no surprises!  Always keep the client informed about the progress of the fee.”

In complex cases, it is wise to estimate scope for two different scenarios:  the best case and the worst case.  If those predictions are too far apart, try again by breaking the matter down into smaller stages, or specifying factors you could control that would affect cost. 

But avoid the trap of spending too much time on this step.  There is no right answer, so just come up with a reasonable cost estimate, and move on. 

The alternative to this cost-plus pricing model is called value pricing, which, according to Wikipedia, “sets selling prices on the perceived value to the customer, rather than on the actual cost of the product, the market price, competitors prices, or the historical price.”

And how do you do that?   Value pricing guru Ron Baker, founder of the VeraSage Institute, offers many examples in his books and his blog.  But he also believes that lawyers often overthink this step.  In a blog post entitled “How to value price: Just do it”, Baker advised lawyers to: “Stop analyzing, stop looking for a checklist, a formula, or detailed instructions like this was a piece of IKEA furniture—there aren’t any... Just do it.”

In another post, Baker makes the case for getting away from the cost plus model:

“If you want to become a better pricer, you have to trash timesheets. You have to do other things as well (project management, key predictive indicators, after action reviews, leadership, etc.), but there’s no doubt in my mind, if you are serious about creating and capturing value, the timesheet must be buried.

I used to not believe this. I used to say, ‘Keep your timesheets, but use them as they were originally intended, as a cost accounting tool only, but price on value.’ I no longer say this, because empirical evidence has changed my mind.

The best pricers across all Professional Knowledge Firm sectors—from accounting and law, to advertising and IT firms—all have one thing in common. None of them maintains timesheets.

I used to believe this is because they became so good at pricing, timesheets became superfluous. But I now believe that they became good at pricing precisely because they got rid of the timesheet, which forced them out of the ‘we sell hours’ mentality and made them obsessed with value.”

Ron Baker has worked closely with many value pricing leaders for years.  I, on the other hand, have not.  So I am not in a position to argue with his observations. 

But I can say that my own observations of running a consulting firm for more than 23 years, have led me to be more comfortable with the cost plus model, at least as a starting point. 

As for trashing timesheets, I’ve done that myself at times, but only when my company was small.  And even when I was the only employee, if I signed a contract for a complex or unpredictable job at a fixed price, I tracked my time so I could analyze profit or loss at the end.

In my experience, the more employees I had working for me, the more important timesheets became in tracking productivity and profitability. 

People feel very strongly about the relative merits of cost-plus and value pricing,and each has its fans.  It seems that both systems work for some people, some of the time.  In my own work, I use a hybrid approach, which starts from cost-plus estimates, and uses value pricing to determine the size of the safety factor.

Once you master the basics, how can you improve your pricing?  Practice, practice, practice. 

In his description of “Creating The Law Firm of the Future,” Ralph Palumbo, founder of the Summit Law Group, says:

“To be truly innovative, you have to learn to make your mistakes faster... every Summit lawyer has authority to propose any pricing system that the lawyer believes will match the Firm’s incentives to the customer’s goals. If an innovative pricing arrangement works well in one matter, we use it again. If a pricing arrangement doesn’t work, we change it to one that does and don’t repeat our mistake.”

But where to begin?  A few weeks ago Toby Brown, who works in Knowledge Management at Fulbright & Jaworski, wrote a post at “3 geeks and a law blog” noting, "Where this all comes to a head for me is deciding where to start. I have good idea of the various processes and systems involved, but I am struggling with the question of where to best attack this problem.”

Next week’s post will address this question with a step by step guide for succeeding with fixed fees.

For a preview of the major conclusions from this series, see the LegalBizDev Guide to Alternative Fees, in the free resources section of our web page.

Alternative Fees (Part 5): Discounting

It is unfortunate that that a single term – alternative fees – has been widely used to refer to three very different types of billing:  hourly rate discounts, fixed fees, and hybrids which combine hourly billing with a fixed fee element.  While fixed fees represent a truly alternative model which can change the very way business is conducted, discounts are an alternative only in a very limited sense. 

Some law firms argue that they don’t need to discount because they are so efficient at assigning key parts of the each matter to less expensive junior lawyers.  However, clients do not always agree. One general counsel I spoke to from a Fortune 500 company (who preferred to remain anonymous) put it this way:  “Most of the firms we deal with claim to have junior associates or even paralegals do a lot of the preliminary work with the senior partners performing only a review function. From what I've seen, however, the junior associates and paralegals put in an extraordinary amount of time on a particular issue which adds up to quite a lot of money even though their hourly rate is not high.  I've also noticed that many times preliminary work has to be rewritten by more senior attorneys because the juniors just don't have the experience to identify the major issues.  At the end of the day, I haven’t seen much savings.”

In a booming economy in which specialized legal expertise is a limited resource, law firms have all the power, and there is little if any need to offer discounts.  According to Hildebrandt International’s Special Client Advisory: Fall 2008, the years 2001 to 2007 were a “six year period of unprecedented revenue and profit growth.”

Law firms have gotten accustomed to raising rates from this position of power.  But this year the economy is shifting the balance of power to clients.  As a result, every lawyer would be prudent to ask:  do I need to offer lower prices to protect critical client relationships?

If clients love your service as much as you think they do, maybe you can skip the rest of this post, and get back to billing hours.  Then again, there’s a good chance you’re wrong.  In a 2008 survey of general counsel, Inside Counsel magazine asked lawyers to grade their overall performance with clients as A, B, C, D, or F.  42% of the lawyers thought they were earning an A.  But when they asked clients the same question, in fact only 17% earned As.  In other words, most lawyers overrated their performance. 

When the economy heads down and power shifts to the buyer, it may be necessary to discount rates to hold on to clients. 

If you offer a discount too soon, you will simply give away money that you could have kept.  Then again, if you wait too long and a competitor offers a deep discount first, you may lose the client before you have a chance to make an offer.

So, like everything else in business, it all comes down to an educated guess. 

I think that there’s never been a better time for discounting and if in doubt, you should offer a discount. 

(In case you’re wondering, I’m putting my money where my mouth is, and offering  discounts to my own clients in 2009.  If I guess wrong and give some discounts that were not absolutely necessary in the short term, I still may be better off in the long term due to strengthened relationships.)

But also keep in mind the advice of Ian Shrank, a partner at Allen & Overy, to proceed slowly:  “If you offer a discount, it will always be accepted.  If in doubt, open a discussion with the client about its happiness with your billing arrangement (and probably all other aspects of the lawyer/client relationship) and see where the conversation takes you." 

In a volume discount, a law firm agrees to lower its hourly rates in return for getting a certain volume of work.  There are a number of ways to structure such an agreement.  For example, a firm could offer a 10% discount in return for a guarantee of 10,000 hours of work in the next year or for handling all of the client’s employment cases.  Or the discount could be tied to the actual number of hours as they are billed:  1% on the first 1000 hours, 5% on the next 5,000, and 10% on the next 10,000.

From a marketing perspective this is an excellent approach.  No matter how they are structured, volume discounts represents a true win-win:  the client pays less, and the law firm gets more security.

Another approach is a blended rate, in which a single middle rate is charged for both senior and junior lawyers.  This is far more complex, and may not be a discount at all.  Who wins and who loses will depend on the actual numbers in a particular situation. 

For example, consider a case that is expected to require 100 hours of senior time at $500 per hour ($50,000) and 100 hours of junior time at $300 per hour ($30,000), for a total of $80,000.  A firm could offer a blended rate of $350 per hour, which reduces the predicted cost of the matter to $70,000 ($350 times 200 hours).

But now suppose that once the matter is underway, the firm discovers that almost all the work could actually be performed by more junior lawyers.  If the senior lawyers only need to spend 20 hours supervising the matter (which would have cost $10,000 at the original rate of $500 times 20 hours), and junior lawyers put in the other 180 hours (which would have cost $54,000 at $300 times 180 hours), the client who pays the blended rate will actually pay more ($70,000) at the blended rate than they would have at the non-discounted rate ($64,000).

Now you could argue that it’s still a win-win, because if the firm had not offered blended rates, senior lawyers would have delivered 100 hours out of the 200.  The client won by paying $70,000 instead of $80,000, and the firm won by charging $70,000 instead of $64,000.

From a marketing perspective, that is a terrible argument.  In essence, it implies that senior people never should have been doing the work in the first place and the client must agree to be overcharged a little in order to avoid being overcharged a lot.

Blended rates invite gamesmanship, as individual lawyers may be tempted to manipulate predictions to maximize profit.  And they encourage the use of more junior level lawyers, even when it may not be to the client’s benefit.  For example, one review of alternative fees describes the experience of the general counsel at Marriott International who was unhappy with his blended rate experience because:

“The law firm only assigned to the matter those lawyers whose regular hourly rate was at or below the blended rate, and more senior lawyers were unwilling to engage in significant supervision.”

So if your primary goal is to offer a client a better deal that will strengthen the relationship, blended rates should be used judiciously, only in cases where the client will get an unambiguous benefit.  One way to guarantee that would be to use what could be called a transparent blended rate:  bill the client for actual hours spent at whichever amount was lower - the blended rate, or the standard rates of the lawyers who actually worked on the matter.

Next week’s post will provide guidance for a more radical approach that is a true alternative to the billable hour:  fixed fees.

For a preview of the major conclusions from this series, see the LegalBizDev Guide to Alternative Fees, in the free resources section of our web page.

Business plan webinar on February 26

A few months ago, I wrote in this blog about “Eight steps to a better business plan.”  Since then I’ve given several presentations on the topic, including one at a 1,500 lawyer firm and another at the Philadelphia chapter of the Legal Marketing Association (LMA).  

If you’d like to see my presentation, you could fly to Vancouver to see my speech at the Vancouver LMA chapter next Thursday February 19.  Or you could sit at your desk the following Thursday February 26, and sign in to my webinar at 12 PM Eastern time.  For more details, or to register for the webinar, click here for a brochure.

Future trends for solo practitioners

After I posted last week’s piece on The End of Lawyers, Carol Bertsch, a solo practitioner in San Antonio Texas, submitted this comment:

I am a solo practitioner who serves individual consumers. I agree that my practice has changed and many who would have used my services a few years ago instead go to the Internet. Some of those who used the Internet to get legal services later come to me to sort out the unintended consequences that befell them because "guiding, advising, drafting, and problem-solving" are exactly what they needed in the first place...  Do any of the legal gurus out there include solo practitioners who serve consumers in their predictions?

I passed the question along to two of my favorite experts on business development for small practices: 

Carolyn Elefant  (author of the blog My Shingle) and Roger Glovsky (founder of LEXpertise, a collaboration site for lawyers).  They emailed back within a few hours (on a Sunday), and I found their responses so interesting that I decided they should appear in this separate post rather than be buried in the comments section.

First, Carolyn Elefant:

I agree that many who use non-lawyer services like LegalZoom are finding problems, because that service doesn't give you advice.  For example, if you go to LegalZoom and ask for an LLC, it will draft a great one.  But what LegalZoom won't do is tell you if an LLC was the way to go in the first place - or whether a partnership or corporation would have worked better for you.

The better online trend is what people like Stephanie Kimbro of Virtual Law Tech are pioneering - legally-guided unbundled services.  Stephanie offers unbundled legal services like corporations or wills; others with similar practices do uncontested divorce.  Clients procure these services entirely online, but what is different from LegalZoom is that an attorney offers advice and guides the process.  So an entity seeking incorporation services would order a "package."  The client then emails information about his business situation online and the lawyer reviews and makes recommendations about the appropriate form and drafts it.  The lawyer is able to offer inexpensive flat fees because of savings on overhead by being virtual and also streamlining the process with forms, standard email questions, etc...  The end result is incorporation that doesn't cost much more than LegalZoom but has the value add of a lawyer's attention.  I think that this kind of hybrid approach holds great appeal for consumers and lawyers.

Then, Roger Glovsky:

I agree with Carolyn 100%.  She described what I would call the new trend of “value-added virtual services.”  You get the best of both worlds: streamlined production and delivery of legal documents along with high-quality legal advice and guidance.  I believe price competition will increase for all firms, large and small.  And all lawyers will need to leverage technology to increase efficiency and productivity to offset declining prices.

As for billing, the “packaged” legal services that Carolyn describes will help lawyers to offer fixed fees.  I think there will still be opportunities for hourly billing, but there may be some changes in what types of matters or services clients are willing to pay for on an hourly basis.  There may also be more results-oriented premiums (or discounts) worked into the equation.  Now is a good time to experiment with alternative billing arrangements, even as a solo practitioner.

The End of Lawyers?

Note:  My series on alternative fees will resume next week.  This week’s post is about a book that’s too important to wait.

The title of Richard Susskind’s new book is apocalyptic - The End of Lawyers?  Rethinking the Nature of Legal Services.  The book jacket describes it as “the long awaited sequel to [his] legal best-seller of 1996, The Future of Law.”  In this important new book, Susskind - an Emeritus Professor of Law at London’s Gresham College - predicts (p. 269) that “lawyers who are unwilling to change their working practices and extend their range of services will, in the coming decade, struggle to survive.”

His basic argument is that the legal profession is changing rapidly as a result of advances in information technology and pressures toward commoditization.  One result (p. 2) is that “The market is increasingly unlikely to tolerate expensive lawyers for tasks (guiding, advising, drafting, researching, problem-solving, and more) that can equally or better be discharged by less expert people, supported by sophisticated systems and processes.”

The book digs deep into details and specific examples, especially regarding IT.  For example, in a section on automated document assembly, Susskind talks about Allen & Overy’s newchange documents system to create and amend certain types of loan agreements more quickly, Linklaters’ Term Sheet Generator, and more.  You may note that most of his examples throughout the book are from the UK, but that only seems fair, since that’s where Susskind is based.  The trends he describes are global.

I have no idea which of Susskind’s specific predictions will prove to be true, and which will be false.  From my perspective, the details are less important than the big picture (p. 270):  “for many lawyers, it looks as if the party may soon be over.”

If you don’t agree that the legal profession is changing rapidly, you might want to talk to lawyers and staff who used to work at Heller Ehrman, Thelen or Thacher Profit, three AmLaw 200 firms that have been dissolved in the last few months.  Or see Hildebrandt’s report on “The Anatomy of Law Firm Failures” to review the facts for other large firms that have dissolved in the last few years, including Altheimer & Gray, Arter & Hadden, Bogle & Gates, Brobeck Phleger & Harrison, Butler & Binion, Coudert Brothers, Donovan Leisure Newtown & Irvine, Hill & Barlow, Jenkins & Gilchrist, Johnson & Wortley, Keck, Mahin & Cate, Lyon & Lyon, Pennie & Edmonds, Shea & Gould, Testa Hurwitz, and Troop Steuber Pasich.

Looking in my own personal crystal ball, I predict that changes in the legal profession will be much faster than most lawyers expect, but slower than Susskind predicts.  I believe he underestimates the power of inertia, lawyers’ ability to resist change, and clients’ need for the human touch.

But if I ran a law firm, I wouldn’t bet on change being slow.  Hildebrandt’s 2009 client advisory came out two days ago predicting that “the current economic downturn in the legal market is likely to be deeper and longer than any we have seen in the last two decades (p. 19).”  This important report discusses many significant implications (p. 11), and argues that “law firms face a fundamental change to their basic economic model.”

As Bruce MacEwen summed it up when he reviewed this book in Adam Smith Esq.:  “We are, to state the obvious, in the midst of once-in-a-career challenges to the familiar business models, where yesterday's conventional wisdom may not suffice for tomorrow.”

Which leads to the most critical question:  what are you going to do about it?  Susskind’s final chapter includes many suggestions.  The one that caught my eye was that in the future (p. 283) “much legal work will either be outsourced or automated, and that which remains will be distinguishable on grounds of packaging and presentation more than on expertise.”  Or, to put it another way:  To prosper in the future, lawyers will need more marketing.

I can’t say that I am proud to live in a world where packaging and presentation matter more than substance, but nobody ever asked me what kind of world I wanted to live in.  In the 24 years I’ve owned a training company, I’ve learned the hard way that sales and marketing are the key to success.  It looks like lawyers are starting to learn this too.

The Legal Marketing Association did not exist until 1985, but it now has over 3,100 members.  Many lawyers seem to feel that they are spending too much on marketing, but you should see what people spend in other businesses.

According to the latest data from the BTI Consulting Group, large law firms currently spend about 2% of their revenues on marketing.  A few years ago, I posted a blog comparing this to the 6% to 8% of revenue that accountants, architects and other service professionals spend.  Not to mention figures that go as high as 33% in other types of business.

The 2009 Hildebrandt client advisory says (p. 18) that to deal with the economic crisis “a good place to start for many firms would be to provide serious business development and leadership training for department heads and practice group leaders, as well as for promising younger partners.”

But enough about the products we offer.  Back to the book.  Should you buy it?  I would say absolutely yes if you need to be convinced that change is coming, or you want to know more about trends in such areas as online legal guidance, legal open-sourcing, courtroom technology, and online dispute resolution.   But if you’re already convinced that change is coming, and just want to focus on how to react, I’d put the time and money into reading about legal marketing.  For twenty books that could help you get started, see my list of the “Top marketing and sales books for lawyers” on Amazon.