Did you miss the Firms of the Future 2021 Live Virtual Summit? Don’t worry! We have summarised all the key takeaways from Clarissa Rayward’s session 'How to Successfully Implement Fixed Fee Pricing' for you.
Fixed and Value Pricing. Something that we all know we need to understand, but the challenge for most lawyers is knowing where to start. A few years ago Clarissa's law firm, The Brisbane Family Law Centre, made the shift from timesheets to fixed fees. They now operate solely on Fixed and Value pricing. That's right - no more time sheets!
After years of troubleshooting, Clarissa now shares how you can move your small law firm to fixed-fee pricing with ease and confidence.
During her session, Clarissa covered:
- How to scope - building project plans for your client files.
- Pricing - how to value price and the essential steps and considerations.
- The documents - building your fixed fee proposals.
- Technology - how leveraging tools such as automatic time tracking can make it easy to understand the cost base of your matters.
Here are Clarissa’s 8 tips on getting started with fixed pricing:
1. Start with a small predictable project
Creating a predictable project or workflow will help map out the necessary sequence of activities and responsibilities to successfully complete a project.
For example, within the practice of Family Law, Application for Divorce – a consent order. Where a family has reached an agreement around property settlement, and it’s been documented into the necessary court order. The process is standard and predictable. Other examples include a will, probate, powers of attorney. There will always be variables, but there is always a standard process when it comes to building these documents.
2. Build your workflow
Your legal workflow sets out all the steps that will be involved in completing the predictable project. One of the simplest ways to develop a workflow is to write down all the essential steps you will need to take. Your team members should also be involved in the process to ensure all the steps that you may not have been aware of are included.
3. Prepare your documents
When it comes to pricing situations, there are appropriate requirements that you must meet through the Law Society that you are a part of and different legislations, which will vary depending on the practice area. For example, a Cost Agreement, Fixed Fee Pricing Scope, and Client Communications.
4. Pick your price
There are two common ways people approach pricing. Firstly, consider the past. Gather law firm data for the last few years and examine what your clients have paid for every item. This will give you an average price insight. Alternatively, plan for the future and assess the market. Consider what price is fair and what your clients are willing to pay.
5. Data is your new best friend
Your historical data will show, how much each matter cost clients in the past and what has it meant for the business. Ask yourself, how much does it cost to run the business, and what will that mean in terms of the number of clients your law firm will need to bring in. This will be your magic number.
6. Track it all
Accurate tracking is the basis of your historical data moving forward. This will help you understand if you have charged enough, factored in any challenges met, and will help you review the effectiveness of your fixed pricing.
7. Toss the timesheets
Clarissa highlighted that time-based billing models tend to focus more on the ‘input’ (the time taken) rather than the ‘output’ (the ultimate result).
However, there are still many benefits of leveraging time tracking software, even if you charge fixed fees. Smokeball AutoTime, for example, takes into account all staff’s time and activities and gives you an accurate view of profitability. You can see where your time is spent and the true cost of performing the work for each client. Over time you will see which clients and practice areas are the most profitable - so you can optimise your practice.
8. Rinse and repeat
Constantly refine these steps from the knowledge you have acquired, first-hand experience, and data you have gathered. It’s a continual learning process!
“For legal practices to stay ahead of these changing times, I am firm of the view that we need to move away from the outdated ‘ time-based billing’ models that our professions have survived on for many generations.” Clarissa Rayward.
About Clarissa Rayward
Clarissa Rayward is a Divorce Lawyer and the Owner of Brisbane Family Law Centre. Over the past 14 years, Clarissa has worked with thousands of families during separation and divorce. She specialises in assisting her clients to experience a dignified divorce - staying away from the Court process and finding sustainable agreements for the future. Clarissa tackles the challenging issue of unhappiness in the legal profession through her writing and weekly Podcast ‘Happy Lawyer Happy Life’ where she interviews lawyers who have found a way to maintain a successful career in the law while not giving up their life outside of their career.