We all like a ‘good client’, whether it is an existing client, or a big one we hope to land. But what exactly are the attributes of a good client and what do we do about them if they aren't as good as we thought they were? When working with partners on pricing strategy...
When working with partners on pricing strategy, an exercise that involves amongst other things, pricing client files that are active at that time, some of my pricing suggestions can be greeted with, “oh, I can't do that, this is one of my good clients!"
And a good client looks like what?
Really? And what exactly is a good client pray tell? More specifically, why have you endowed this client with the mantle? I am then presented with one or more of the following:
(a) “They have been with the firm for 20 years", or
(b) “They spend £/$XX with us each year", or
(c) “It looks good to say that we act for them", or
(d) “They represent a substantial chunk of my personal fees"
Not to suggest that these issues don't have some significance, but they rather miss the point. Perhaps an empirical analysis of the client might prove more enlightening. For example:
(a) How long have they been clients of the firm and has that relationship been fruitful for both of us?
(b) Irrespective of how many years they have been clients of the firm, are we instructed on matters regularly or only when something significant happens every 5 years?
(c) What exactly are the fees that they have contributed each year over the last 5 years and what is the trend? Is it static, increasing or decreasing?
(d) If they use more than one law firm, what is our share of their legal spend and what is the trend? Is it static, increasing or decreasing?
(e) Leaving aside the question of gross fees generated by the client, what is the profitability of this client? Indeed, are we even capable of answering this question?
(f) Is this client a good ambassador for the firm, referring others to us?
(g) Do they pay their invoices in keeping with our normal terms of trade or do they perpetually reside in the 90/120 day columns? If they are late in paying, what is the cost in terms of the 'decayed' value of the invoice and the firm's resources (partner, staff and otherwise) spent chasing them?
(h) Do they argue over and contest every estimate, quote and bill?
(i) Are they reasonable in their service expectations?
(j) If this is a 'show-pony' client are we getting a demonstrable return from our investment in the relationship through the resulting acquisition of more profitable clients from the same sector?
An unfortunate reality...
The list could go on but you get the drift. This is a very different set of questions. Let me share with you what I perceive to be the reality of (not all but) many of these organisations and individuals that partners are all too quick to characterise as 'good clients':
(a) They have been with the firm a long time and this has gone from being something positive to a situation bordering on familiarity breeding if not outright contempt, at least a lack of respect.
(b) The client treats the firm and the individuals within it as a combination of 'doormat' when they want something done and 'whipping boy' when something goes wrong.
(c) The greater the exposure of the firm and individual partners to the fees generated by this client, the more demanding, belligerent, discourteous and downright bullying they can be. They know that they are important to you and they cynically exploit it.
(d) The chances are that in 2008/2009 they laid into you with aggressive demands for savage discounts to which you agreed because revenues were dropping generally and the prospect of losing this client was untenable. They are still on the same rates 5 or 6 years later and you are now terrified to raise with them the prospect of an increase.
(e) They are unreasonably demanding, always requiring their work to be done before anyone else's and indifferent to your other obligations.
Once again, the list could continue but you get the general idea.
Okay, they aren't so good, now what?
So, what to do? There are actually two aspects that need to be addressed. The first is what can broadly be described as the nature of the relationship. For the solicitor/client relationship to be mutually rewarding and enduring, like any relationship, it must be characterised by mutual trust, confidence, courtesy, respect, understanding and compromise. Absent any of these characteristics, you are headed for the rocks.
So the first task is to have what I can really only describe as a grown-up conversation where cards are laid on the table and those elements of the relationship are brought back on track. Sorry, time to harden up!
More tangibly and contemporaneously, the pricing aspect of the relationship that is frequently the 'elephant in the room' needs to be brought back on track as well. Historically, this has taken the form of a myopic one-dimensional conversation about a modest increase in hourly rates. This approach is boring, predictable, confrontational and frequently unsuccessful.
Those practitioners who have an appreciation of ADR/mediation principles understand that the way that conflict and impasses are progressed and resolved is for the mediator to reframe the impasse so that it no longer relates to one issue but is in fact multidimensional and therefore gives rise to a whole raft of possible solutions.
In the hands of a partner who is similarly skilled in pricing strategies and tactics and has the ability to frame the pricing conversation in an imaginative, creative, innovative and flexible way, the chances of a favourable outcome are dramatically enhanced.