With Validatum Pricing Espresso® we aim to bring you your regular pricing 'shot' - the best, most interesting, thought provoking and informative material we can find globally which will be of interest, relevance and help to you in your legal services pricing challenges. [Note: we don't always agree with the content of others that we post but the philosophy of Validatum Pricing Espresso® is shared perspectives, not a personal 'soap-box']
Law Firm IPOs: Pricing on a Wing and a Prayer
We usually begin our Partners Pricing Masterclasses with one of the most evocative of Warren Buffet’s quotes, “The single most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you've got a terrible business.”
The topic of law firm IPOs has attracted a lot of attention recently with the inevitably polarised perspectives that it represents a new golden age of law firm restructuring and capitalisation or the latest hot air, hyperbole and rhetoric that will soon pass. [For an excellent analysis of the state of the law firm IPO market, read Legal Business’s recent article, No free lunch – will law firm IPOs be the next big thing?] Read more...
How to Increase Your Billable Rate
Advice on setting your annual rate increase — and how to tell your clients.
Right around this time of the year, law firms send out a customary announcement informing their clients that their rates are about to increase. The process is stressful for those who fear that clients will react negatively and switch providers. Some lawyers dread their clients’ reaction so much that they procrastinate their communication long after the rest of their partners’ letters have gone out. But the exercise is much less daunting when you take a step back and analyze its key components. Read more...
Big Law Should Raise Partner Billing Rates 10+ Percent Now
It’s critical to the long-term viability of Big Law that partners delegate more and that firms re-balance where margin is generated; raising partner rates aggressively will help with both.
We’re close to a peak of the business cycle. Client businesses are performing strongly; they can afford aggressively-increased partner billing rates. But the logic for raising rates strongly now is more than just opportunism; it’s about Big Law’s long-term viability. For firms to remain prosperous two things must happen: partners must delegate more and firms must re-balance where they generate margin (i.e. profit) from more junior to more senior lawyers. Raising partner rates aggressively now will help on both these fronts. Read more...
The Ditching Hour: Why Consumer-Centric Pricing Will Take Over Legal Billing
Financial realities will force law firms to ditch the billable in the very near future.
For years, legal analysts have been saying that the billable hour is dead. But killing the billable hour has turned out to be like trying to kill Rasputin. At the risk of falling on that same sword, let me curb the bet slightly and say the billable hour is dying. But it’s dying in much the same way the NFL is dying: Everyone knows professional football will be relegated to a place outside of the major sports landscape, to be replaced by soccer — it’s just that nobody’s ready to talk about that yet.
Of course, for most lawyers, professional sports are divorced from everyday considerations like getting paid. But, like parents who feel the pressure to have their kids seriously focus on soccer, while encouraging flag football as a recreational activity, lawyers know there is increasing pressure to move away from traditional hourly billing models. Read more...
Demand, Revenue Continued to Grow in Third Quarter, Citi Survey Says
Law firm demand is at its highest point since 2007, according to a new nine-month report.
The top-line strength of 2018 continued to build in our nine-month results for the law firm industry. Revenue growth accelerated and continued to be fueled by inventory buildup that is being replenished almost as quickly as it’s collected. Further, growth in 2018 has been more balanced than any year in recent memory as demand has added lift to billing rate increases—the perennial driver of revenue growth in the extended post-recession period.
While we remain confident that revenue results will remain strong through the end of the year, we see some challenge to profit growth for 2018. Expense growth, which was already relatively high at the midpoint of the year, moved very close to revenue growth at nine months, threatening to place pressure on law firm margins by year-end. In fact, almost half of all participants have experienced margin compression thus far in 2018, despite stellar revenue results. While this will most certainly be a year of unprecedented industry growth since the recession—especially if firms focus heavily on collections—it may also be a year in which firms recalibrate their budgets to ensure that they grow profitably. Read more...
2018 Chief Legal Officer Survey
Now in its nineteenth year, the Chief Legal Officer Survey provides insights into the state of in-house law departments from the perspective of their chief lawyers. The survey identifies long-term trends, highlights new and emerging issues, and explores the reasons behind the findings.
In 2018, Chief Legal Officers (CLOs) spend 37% of their time advising their organizations' executives, 22% practicing law, 20% on other corporate responsibilities –and just 18% of their time managing the law department. In our work with law departments, we have observed that when CLOs don’t have enough time to tend to all their duties it is often department management that suffers. However, despite the limited time allotted to the role, CLOs describe a growing expectation from CEOs that the law department will be run like a business unit. Read more...