With the Validatum Pricing Espresso® we aim to bring you your pricing 'shot' - some of the most interesting, thought-provoking and informative material we can find globally which will be of interest, relevance and help to you in your firms' pricing challenges.
Planning For a Pricing Dilemma Not Seen for 40 Years
Inflation. Can anyone remember what that looks like? We have been living with historically ultra-low inflation for what seems like forever. We must go back to 1980 to see anything like what is currently being experienced in the US with the highest inflation in 40 years. And the UK not far behind with the highest inflation since 1990.
Today (12 April 2022), the Financial Times reported that US inflation has hit 8.5% with the UK at 7% and gaining.
While agreeing charge out rates that will remain in force for several years is less of a problem when inflation is low, few remember the bad old days when inflation really did take a chunk out of your buying power over time. Read more...
Our Competitors Are Lying – Should We join Them?
When we are working with firms on pricing strategy and professional development of partners, it isn’t long before we are regaled with anecdotes about having lost work to a competitor who massively underquoted, only to ultimately bill the client more than what the first firm quoted.
Again this morning, another tale of woe. We are pricing jobs like this sensibly at £70,000 but a reputable competitor has told them they can and will do them for £40,000. They can’t possibly make any money at that. It’s plain dishonest.
Such vignettes are usually punctuated by unrepeatable expletives. The exasperation is palpable. Do we just accept it, or do we adopt the ‘if you can’t beat ‘em, join ‘em’ attitude? Read more...
Virtual Pricing Director partners with Thomson Reuters and Aderant
SaaS legal pricing startup Virtual Pricing Director – the tech solution from pricing experts Validatum and costs consultancy Burcher Jennings – has entered the technology partner programme of both Thomson Reuters Elite and Aderant Expert, paving the way for joint practice management system bids, we can reveal.
Thomson Reuters doesn’t have a native pricing solution, but it is now common for law firms going out to market for a new PMS to include pricing requirements in their RFPs. Speaking to Legal IT Insider, VPD chairman Richard Burcher said of Thomson Reuters: “They have accelerated us into their partner programme. They don’t normally take start-ups; you normally have to be around for a really long time to be considered, but they have seen huge potential in us, and we have a great relationship with the global head of strategic alliances.” Read more...
Successful AFAs: How to pick the appropriate fee structure
The hourly rate has long been the pricing of choice for legal work which, at times, can make it difficult for you to forecast and manage your legal spend. However, in the current climate where cost certainty, transparency and value for money are becoming increasingly important to clients, pricing legal work now requires greater emphasis on selecting ‘alternative fee arrangements (AFAs)’.
AFAs allow for more innovative and flexible fee structures to be applied to well defined scopes of work. Whilst the level of risk sharing between the client and the firm varies, having the appropriate fee structure in place for the right project can deliver greater value for money, whilst ensuring lawyers to adapt their delivery of legal services appropriately. Read more...
Judge finds ‘no justification’ for firm charging £1,100 an hour
US firm which tried to claim more than £1,100 an hour for a top fee earner has been scolded by the Court of Appeal.
Cleary Gottlieb Steen & Hamilton LLP had accepted the sums claimed were well in excess of guideline hourly rates but told the court this was ‘almost always the case in competition litigation’.
Lord Justice Males, ruling on the costs issue in Samsung Electronics & Co. Ltd & Ors v LG Display Co. Ltd & Anor, said this was ‘no justification at all’ for charging such high amounts. ‘If a rate in excess of the guideline rate is to be charged to the paying party, a clear and compelling justification must be provided,' he said. Read more...
Caveat Biller: A GC’s Five Tips to Billing Partners
While expertise and skill are key attributes of the engagement decision, and fees rank as the foundation of a law department’s economics, the process of billing forms a key part of the experience of working with a firm.
Like most private-practice lawyers, I believed that we are principally hired for our expertise and skill. And that’s true. And certainly every law firm partner knows that clients are sensitive to fees. Now, as a general counsel, I can attest to that too. But I also now see that law firm partners implicitly assume—incorrectly—that apart from fees, the billing process is mere white noise to the lawyer-client relationship. They think of legal bills as the profession’s equivalent to the absurdly long drug-store receipt that we crumple up as we leave the store. Read more...
'Astronomical' Rate Increases Have GCs and Judges Alike Frustrated With Firms
"It’s not what I imagined with my long-term relationships," said one GC feeling the impact rising fees.
In-house lawyers are denouncing steep fee rate increases from their legal advisers, labeling them “astronomical” and “out of kilter with reality.”
Several general counsel have expressed frustration with the bigger bills, which in some cases are more than double what they were around a year ago. Read more...
Upticks in Partner Billing, Associate Rates Prompt Shift to ALSPs
Law firms are staffing more corporate matters with partners, a new report from Wolters Kluwer shows.
Since 2018, law firm partners have billed more hours to corporate legal departments than associates. The rift expanded in 2020, as partner billing jumped 5% to encompass 38% of average CLD billing compared to 30% for associates and maintained in 2021.
That’s according to a new Wolters Kluwer LegalView Insights report, which used the company’s e-billing tools to analyze $150 billion in ranked and unranked law firm invoices between 2020 and 2021. Read more...
Legal operations tips for controlling outside counsel costs
The strategic path to controlling law firm expenses often begins by getting the legal department’s affairs in good order first.
Outside counsel easily accounts for half of all corporate legal spending. This is why legal operations professionals often look there first when seeking to rein in costs.
While it’s possible to squeeze law firms to obtain a better price, that’s a tactical manoeuvre that puts clients and firms at odds. There’s a more strategic way to control costs – built around alignment and a shared vision for the outcome. Read more...
Lack of progress on innovative pricing ‘deep rooted issue’ for legal profession, new research finds
Thomson Reuters report calls for renewed effort by legal departments and their outside counsel to collaborate more effectively.
Efforts to adopt innovative pricing structures appear to be waning due to the ‘persistent frustrations’ of both law firms and their clients, according to new research which has found that 75% of matters are still billed on an hourly-rate basis.
That is a key finding of the Thomson Reuters 2022 State of Corporate Law Departments Report, which calls on in-house legal teams and their external counsel to renew efforts to collaborate more effectively. Read more...
Forget billable hours, new crypto law firm will take equity instead
A new web3 and cryptocurrency law firm is eschewing the traditional billable hour model favoured by existing law firms. Instead, Perth-based Stirling & Rose will consider taking equity stakes in early stage tech companies in lieu of payment, as managing director Natasha Blycha warns the industry is failing to keep pace with emerging technology.
Blycha tells The Australian Financial Review lawyers need significantly more time to research new tech and the changing laws, and the billable hour model is prohibitive to cash-strapped startups. “So they don’t advise on emerging technology, right at the time they could use legal advice the most.” Read more...
For Law Firms and Clients Alike, It's Time to Start Taking Billing and Collections Personally
Law firms and clients frequently tout their close, trusted relationships. So why should topics like billing and collections be taboo?
The age-old debate in law firm billing and collections has been whether to make getting paid the responsibility of the individual partners or a dedicated accounts receivable department.
While the latter approach has been credited as “cleaner”—shielding partners from sometimes uncomfortable conversations and even confrontations with clients—there is mounting evidence that a more personalized approach, beginning with the bills themselves, may be the wiser course of action. Read more...
Legal Project Management Q & A
Legal Project Management Q and A: five of the most common questions I get asked about legal project management (LPM), along with my suggested answers.
Often there is no definitive answer to these questions, but I hope that this short Q and A provides some food for thought. Read more...
Quinn Emanuel Is Willing to Take on Fee Risk. But Hourly Billing Still Dominates
Managing partner John Quinn discusses with Burford Capital CEO Chris Bogart how the firm approaches innovation.
Quinn Emanuel Urquhart & Sullivan may have a reputation in the legal world for taking on more risk than most firms. But founder and managing partner John Quinn believes that’s not entirely justified.
In a recent conversation with Christopher Bogart, the CEO of litigation funder Burford Capital, Quinn acknowledged that his litigation-only firm relies more on alternative-fee mechanisms, such as contingency work, than most of his rival full-service firms. That’s still a fairly low bar, however. Read more...
As Billing Rates and Client Pressure Collide, a Turning Point Looms
The tension could alienate clients, cut into law firms’ profits and force talent out the door.
With sky-high demand and expenses beginning to rise, the conventional wisdom on rate increases in Big Law firms last year was straightforward: Get it while the getting is good.
Standard rates grew about 5.7% across the industry in 2021, according to Wells Fargo. More than 80% of the Am Law 100 increased billing rates by over 3%, according to this year’s report, and a similar proportion intend to do the same for 2022. Meanwhile, worked rates—the rates that firms actually agree to with particular clients for work on given matters—grew 3.9% across the industry and 5.6% in the Am Law 100 specifically, according to Thomson Reuters. Read more...