Roy Ginsburg | This is no time to be shy. Clients are never as price-sensitive as you think.
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It’s that time of year when lawyers decide whether to raise their hourly rates and fixed fees. Many fear doing so, believing they will either be unable to attract new clients or will incur the wrath of existing ones. Such worries are exaggerated; your practice will not suffer. And when you examine your bottom line after 2025, you will see that I was right. Here’s why.

Existing Clients Will Not Flee Over a Rate Increase

Do you really think your long-term clients will abandon you because of a price increase? I certainly don’t need to remind you that everybody — not just law firms — has been doing that since the pandemic. Take this headline, for instance:

“Netflix U.S. Price Hikes Could Boost Revenue by $500M Even with Subscriber Cancellations, Analysts Say”

So what does Netflix know that you don’t?

For starters, Netflix knows that its customer base is loyal. Further, it is confident that, even with competition from the likes of Amazon, Apple, and Disney, its consistent quality and voluminous content will satisfy the vast majority of subscribers. They aren’t going anywhere.

Will some of your clients complain about a rate hike? Maybe a few. But they are the same ones who constantly complain about your bills anyway. Will you lose some clients? Here again, perhaps a few. But who cares? Clients who recognize the value of your service won’t leave. Just like Netflix, you will come out ahead. So stop thinking you’re smarter than the finance folks at Netflix. You’re not.

New Clients Will Not Be Scared Away

There are many ways to attract new clients, including through your website, social media presence, speaking engagements, and print advertising. That said, most lawyers still get new clients the old-fashioned way: by referral from satisfied clients or other lawyers and professionals who know and trust the attorney’s work. Referred clients, in general, aren’t as price-sensitive as you might think.

These potential clients have gone to a trusted source to find a lawyer. Someone has already vetted you. For them, your fees only have to be in the ballpark of market rates. They will not flinch at a rate in the upper decks. Referred clients don’t shop based on price. They shop based on the quality perceived by the referral source.

Low Hourly Rates Create a Marketing Drag

Many attorneys mistakenly believe that low hourly rates help their marketing efforts. After all, don’t low fees enhance the value of services? Somewhat counterintuitively, the answer is an emphatic NO! Indeed, there is something of a cachet to charging more than competitors. Lawyers tend to forget that price affects the perceived value of a product or service. It is human nature to associate higher fees with high quality, while lower ones signal lower quality. Just talk to anyone who owns a Rolex. Isn’t that who you want as a client?

Back in the day when I was in-house counsel, whenever an outside firm quoted me a higher than the middle-of-the-market rate, I always thought, “Huh, these folks must think they’re pretty good.” And when quoted a below-market rate, my thinking was not, “Wow. What a great deal this firm will be!” Instead, it was, “Why are they charging so little? What does the market know that I don’t?”

Further, whenever I socialized with other in-house lawyers, it should come as no surprise that we often grumbled about the crappy service we received from the law firms we used. And yes, we also talked about the high rates charged. However, when we went around the table comparing hourly rates, whoever boasted about the highest walked away with the bragging rights for which company hired the best lawyers in town. That perception was not wrong. It was reality.

Here’s another story to prove my point. I once managed a huge legal mess for my company that required the retention of counsel in about a dozen different states. Not surprisingly, the hourly rates varied significantly based on location and firm size. The range was somewhere between $300 and $800 per hour. Guess which lawyer provided the most value? Hands down, it was the $800 one. And it wasn’t because the others were bad; all were decent. But the $800 lawyer was more competent, responsive, efficient, and a better writer than the others. He was worth every dime my company paid him.

The takeaway? Be proud of your high rate, and never be defensive about it.

Still Not Convinced to Raise Rates? Consider This Hypothetical

Prospective client Debbie walks into attorney Karen’s office, looking for help to get a divorce. Debbie has never hired a lawyer before.

Karen is a family law attorney with 20 years of experience. She practices in a mid-sized city suburb where family attorneys bill between $250 per hour for newbies and the lower $400s for a small handful of old-timers. Most family law attorneys in the area bill around $300 per hour.

Debbie went to Karen because her best friend hired her 10 years ago and had only good things to say about her. Like most clients getting divorced, she had no idea what it would cost, but remembered her friend saying that “getting divorced is not cheap.”

Karen never wants to scare away clients because of her hourly rate. Her rate is $250. She is well aware that it’s below market compared with most competitors and significantly below market from comparably experienced lawyers. She doesn’t care. She believes she is smarter about hourly rates than them.

After Karen explains to Debbie what to expect during the divorce process, Debbie asks, “How much will all of this cost?” Karen responds, “I charge by the hour, and my rate is $250 per hour.” Upon hearing that, Debbie thinks to herself, “Wow. My friend wasn’t kidding. Getting divorced is not cheap.”

Let’s fast-forward one month. Karen has spent 10 hours getting papers filed and analyzing financial information about Debbie and her spouse. She sends a bill for $2,500. Upon receiving the bill, Debbie once again thinks, “Wow. My friend wasn’t kidding. Getting divorced is not cheap.”

Now, let’s roll the tape back to the initial meeting, but let’s increase Karen’s hourly rate.

What do you think Debbie’s response would have been upon hearing that Karen’s rate was $375 per hour? No different. “Wow. My friend wasn’t kidding. Getting divorced is not cheap.”

How about when she received the first bill of $3,750? Once again, “Wow. My friend wasn’t kidding. Getting divorced is not cheap.”

For most people in Debbie’s shoes, $250 per hour is a lot of money; so is $375. If she had been charged the $250 rate, Debbie probably wouldn’t say to herself, “I’m thrilled I found Karen. She is saving me so much money!” Whether charged $250 or $375 per hour, her self-talk will be the same, “Wow. My friend wasn’t kidding. Getting divorced is not cheap.”

Keep in mind that even if Debbie had interviewed two other divorce lawyers and learned that their respective hourly rates were $350 and $400, her response to hearing Karen’s rate of $250 probably wouldn’t have been, “What a deal!” It would have been “Those other lawyers must be good enough to command a higher fee.”

The bottom line is that you won’t attract the clients you want with a lower fee—and you could very well turn them away.

It’s All About Managing Expectations

Let’s face it: legal services are expensive for businesses and individuals alike. That includes clients who are the CLOs of Fortune 500 companies, and your neighbors and friends who need estate plans. Good lawyers cost a lot—and they’re worth it.

When choosing legal counsel, clients never think that they are shopping at Target and “Expect More. Pay Less.” In fact, clients “Expect More. Pay More.” When discussing fees at my CLEs, I often joke that clients expect to be charged a lot of money, so you shouldn’t disappoint them!”

I Am Right

I’ve been coaching attorneys and consulting for over 20 years. I have provided guidance on marketing, practice management, career, and strategic succession planning. My advice has always stemmed from good, educated guesses based on my judgment and experience. Unlike some lawyers, I admit that I don’t know everything and occasionally get it wrong.

And the same is true for advice in my past blog posts, but NOT this one. This one is not a good, educated guess. It is spot on. High rates enhance the bottom line with little risk. Never in 20 years has a client or CLE attendee come back to me and told me that following this advice was a big mistake. No one.

You leave money on the table if you don’t charge more. It’s foolish to think otherwise

“Addressing Pricing Questions” by Sally Schmidt

“The Ditching Hour: Why Consumer-Centric Pricing Will Take Over Legal Billing” by Jared Correia

“When to Raise Your Rates?” by Ruth Carter