Pricing

Will Legal Pricing Software Make Your Pricing Team Redundant?

Firms from the UK, US, Canada, Germany, France, Ireland, Spain, Portugal and Australia have been asking for demonstrations of our market leading pricing software, Virtual Pricing Director® over the last few weeks, particularly following the announcement that we are one of only six companies that Slaughter and May invited into the 2024 Collaborate cohort, their amazing and extraordinarily generous program for promising legal tech start-ups they see as having huge potential.

And yet we have at times over the last 12 months since we released the latest version of VPD to the market, sensed a degree of reticence on the part of some senior pricing and commercial finance professionals in these firms. The light bulb went on for us recently when one of these professionals who we work closely with was open and honest in expressing a concern that VPD was so good that it might do them out of a job. In other words, VPDs functionality would cannibalise their role. Read more...

Legal Services Pricing: Science Or Art?

Legal services pricing is both an art and a science, blending systematic approaches with intuitive decision-making. This dual nature arises from the complexity of legal work and the diverse needs of clients.

𝗧𝗵𝗲 𝘀𝗰𝗶𝗲𝗻𝗰𝗲
From a scientific standpoint, pricing can be quite methodical. Law firms may use historical data, cost analysis, and time tracking to determine the most efficient way to price their services. Techniques such as detailed analysis of billable hours, fixed costs, and the outcomes of similar past matters provide a data-driven foundation for setting fees. Additionally, technological advancements in software tools allow firms to analyse large datasets to predict the resources needed for various types of legal matters, enabling more precise pricing models. Read more...

Detailed Scoping - Why Bother?

We demonstrated our pricing software – Virtual Pricing Director® - to a large international law firm recently, and although they were extremely impressed, a comment was made about how our software produces a much more detailed scope (phases in tasks) than most of the firm’s lawyers would currently produce.

It wasn’t intended as a criticism but equally, it didn’t seem to be a compliment. There ensued an interesting discussion between various members of the firm about the significance of this, with some preferring little more than a bullet point summary and others extolling the virtues of more detail. Read more...

32 Ways to Trash Your Pricing and Profitability Program!

In the last week, I have had 2 starkly different requests...

1. "𝘊𝘢𝘯 𝘺𝘰𝘶 𝘤𝘰𝘮𝘦 𝘪𝘯 𝘢𝘯𝘥 𝘳𝘶𝘯 𝘺𝘰𝘶𝘳 𝘱𝘢𝘳𝘵𝘯𝘦𝘳 𝘱𝘳𝘪𝘤𝘪𝘯𝘨 𝘮𝘢𝘴𝘵𝘦𝘳𝘤𝘭𝘢𝘴𝘴𝘦𝘴 - 𝘸𝘦'𝘷𝘦 𝘩𝘦𝘢𝘳𝘥 𝘨𝘰𝘰𝘥 𝘵𝘩𝘪𝘯𝘨𝘴 𝘢𝘣𝘰𝘶𝘵 𝘺𝘰𝘶𝘳 𝘱𝘳𝘪𝘤𝘪𝘯𝘨 𝘴𝘰𝘧𝘵𝘸𝘢𝘳𝘦 𝘵𝘰𝘰, 𝘣𝘶𝘵 𝘸𝘦 𝘮𝘪𝘨𝘩𝘵 𝘵𝘩𝘪𝘯𝘬 𝘢𝘣𝘰𝘶𝘵 𝘵𝘩𝘢𝘵 𝘭𝘢𝘵𝘦𝘳."

2. "𝘞𝘦 𝘩𝘢𝘷𝘦 𝘩𝘦𝘢𝘳𝘥 𝘢 𝘭𝘰𝘵 𝘢𝘣𝘰𝘶𝘵 𝘺𝘰𝘶𝘳 𝘱𝘳𝘪𝘤𝘪𝘯𝘨 𝘴𝘰𝘧𝘵𝘸𝘢𝘳𝘦. 𝘞𝘦'𝘷𝘦 𝘧𝘰𝘳𝘮𝘦𝘥 𝘢 𝘸𝘰𝘳𝘬𝘪𝘯𝘨 𝘨𝘳𝘰𝘶𝘱 𝘵𝘰 𝘭𝘰𝘰𝘬 𝘢𝘵 𝘪𝘵. 𝘊𝘢𝘯 𝘸𝘦 𝘢𝘳𝘳𝘢𝘯𝘨𝘦 𝘢 𝘥𝘦𝘮𝘰 𝘱𝘭𝘦𝘢𝘴𝘦. 𝘞𝘦 𝘩𝘢𝘷𝘦 𝘢𝘭𝘳𝘦𝘢𝘥𝘺 𝘥𝘰𝘯𝘦 𝘢 𝘣𝘪𝘵 𝘢𝘣𝘰𝘶𝘵 𝘱𝘳𝘪𝘤𝘪𝘯𝘨 𝘵𝘳𝘢𝘪𝘯𝘪𝘯𝘨 𝘴𝘰 𝘸𝘦 𝘥𝘰𝘯'𝘵 𝘯𝘦𝘦𝘥 𝘺𝘰𝘶𝘳 𝘮𝘢𝘴𝘵𝘦𝘳𝘤𝘭𝘢𝘴𝘴𝘦𝘴, 𝘫𝘶𝘴𝘵 𝘵𝘩𝘦 𝘴𝘰𝘧𝘵𝘸𝘢𝘳𝘦." Read more...

Last Year the UK Top 50 Wrote Off - £5 Billion in Billable Time

This was my opening line at our most recent Validatum® Pricing Forum kindly hosted by HFW in their new City offices.

👨‍💻 Let’s deal with the ‘where on earth did you get that figure from?’ question. The revenue of the UK top-50 is a known figure. We have worked with a broad cross-section of 43 of the UK top-100. We know that those 43 firms average 86% realisation against agreed rates (it’s markedly worse against standard rates but that’s another blog).

So, we made some assumptions, extrapolated and voila, £5 billion. Now you may take issue with the ‘back of a napkin’ methodology, but for the purposes of this post, let’s just agree that it’s a lot of money. Read more...

iManage and Virtual Pricing Director ® Partner

🏆 We have always admired iManage as an organisation. From great products/solutions to brand strength, messaging, and market dominance.

And now we can vouch for how professional, courteous, and helpful they are to deal with.

💥 Virtual Pricing Director® has just been approved as an integration partner with iManage which is going to provide firms with some exciting new functionality and insights. Read more...

Sorry, It's Now Unavoidable: Value-Based Pricing #1

This is the first in a series of short posts about value pricing that we hope will frame a discussion that will take us all in the right direction. We begin with ‘𝘸𝘩𝘢𝘵 𝘪𝘴 𝘪𝘵 - 𝘳𝘦𝘢𝘭𝘭𝘺?’ The first thing that we all need to understand is the taxonomy and where exactly value-based pricing sits in the pricing universe.

💡 It is one of three fundamental pricing paradigms as shown in the diagram. It will be obvious to all readers that the legal profession’s historic approach to pricing is firmly rooted in the first two paradigms – cost-plus and market-driven. Value-based pricing has just been too hard. Read more...

Another excellent piece from Michael Rynowecer.

It's all about trust if you want a grown up relationship between clients and outside counsel.

𝘠𝘰𝘶 𝘤𝘢𝘯 𝘢𝘭𝘴𝘰 𝘴𝘬𝘪𝘱 𝘵𝘩𝘦 𝘮𝘢𝘯𝘥𝘢𝘵𝘰𝘳𝘺 𝘳𝘢𝘵𝘦 𝘤𝘶𝘵𝘴, 𝘙𝘍𝘗𝘴, 𝘦𝘭𝘢𝘣𝘰𝘳𝘢𝘵𝘦 𝘳𝘦𝘱𝘰𝘳𝘵𝘪𝘯𝘨 𝘱𝘳𝘰𝘵𝘰𝘤𝘰𝘭𝘴, 𝘴𝘵𝘳𝘪𝘯𝘨𝘦𝘯𝘵 𝘰𝘷𝘦𝘳𝘴𝘪𝘨𝘩𝘵, 𝘢𝘯𝘥 𝘮𝘪𝘤𝘳𝘰𝘮𝘢𝘯𝘢𝘨𝘦𝘮𝘦𝘯𝘵 — 𝘢𝘭𝘭 𝘰𝘧 𝘸𝘩𝘪𝘤𝘩 𝘢𝘳𝘦 𝘵𝘩𝘦 𝘵𝘺𝘱𝘪𝘤𝘢𝘭 𝘳𝘦𝘢𝘤𝘵𝘪𝘰𝘯 𝘵𝘰 𝘤𝘰𝘴𝘵 𝘤𝘰𝘯𝘵𝘳𝘰𝘭. 𝘛𝘩𝘦 𝘥𝘢𝘺𝘴 𝘰𝘧 𝘥𝘳𝘢𝘤𝘰𝘯𝘪𝘢𝘯 𝘤𝘰𝘴𝘵 𝘮𝘢𝘯𝘢𝘨𝘦𝘮𝘦𝘯𝘵 𝘢𝘳𝘦 𝘰𝘷𝘦𝘳 𝘧𝘰𝘳 𝘯𝘰𝘸.

“𝘐 𝘩𝘢𝘷𝘦 𝘤𝘰𝘮𝘱𝘭𝘦𝘵𝘦 𝘤𝘰𝘯𝘧𝘪𝘥𝘦𝘯𝘤𝘦 𝘵𝘩𝘦 𝘤𝘰𝘴𝘵 𝘸𝘪𝘭𝘭 𝘣𝘦 𝘳𝘪𝘨𝘩𝘵 𝘸𝘩𝘦𝘯 𝘐 𝘬𝘯𝘰𝘸 𝘵𝘩𝘦𝘺 (𝘰𝘶𝘵𝘴𝘪𝘥𝘦 𝘤𝘰𝘶𝘯𝘴𝘦𝘭) 𝘢𝘳𝘦 𝘥𝘰𝘪𝘯𝘨 𝘵𝘩𝘦 𝘳𝘪𝘨𝘩𝘵 𝘵𝘩𝘪𝘯𝘨. 𝘐𝘵’𝘴 𝘢𝘣𝘰𝘶𝘵 𝘵𝘩𝘦𝘪𝘳 𝘢𝘱𝘱𝘳𝘰𝘢𝘤𝘩 𝘢𝘯𝘥 𝘵𝘰𝘵𝘢𝘭 𝘤𝘰𝘴𝘵 — 𝘯𝘰𝘵 𝘳𝘢𝘵𝘦𝘴.” 𝘋𝘦𝘱𝘶𝘵𝘺 𝘎𝘦𝘯𝘦𝘳𝘢𝘭 𝘊𝘰𝘶𝘯𝘴𝘦𝘭, 𝘐𝘯𝘯𝘰𝘷𝘢𝘵𝘪𝘷𝘦 𝘏𝘪𝘨𝘩-𝘛𝘦𝘤𝘩 𝘊𝘰𝘮𝘱𝘢𝘯𝘺 Read more...

8 Steps to Pricing & Profitability Transformation

We have developed a law firm specific model which draws on the world-renowned work of John P Kotter, Konosuke Matsushita Professor of Leadership, Emeritus, at Harvard Business School. Professor Kotter is widely regarded as the foremost international authority on the topics of leadership and change.

While many law firms have over the last few years begun pricing improvement initiatives, many have failed to realise their potential and in the most disappointing and frustrating examples, they have eventually reverted to type entirely, losing all of the gains originally achieved. Read more...

Time Is A Management Tool, Not A Pricing Tool

‘Law firms have conflated using time as a management tool with using it as a pricing tool,’ said Richard Burcher, a pricing expert and chair of the Virtual Pricing Director platform.

And this goes to the heart of legal tech’s number one challenge: time vs efficiency. I.e. technology fundamentally does one thing, it creates efficiencies relative to the desired goal. Yet, legal work is priced mostly by time. QED, the two forces, one economic, one technological, are working against each other. Read more...

The UK's top 50 law firms wrote off £5 BILLION in billable time last year

I had an opportunity to share the stage this morning with Richard Burcher at a closed-door session for CFOs and pricing experts on what is driving this number and what firms can do about it.

Virtual Pricing Director and Lupl share the conviction that law firms have an enormous opportunity to transform their bottom line by empowering lawyers to do three things better:

1. Scope the work
2. Price the work
3. Manage the work Read more...

Largest Firms Continue Growing Market Share, as Hourly Rates Break Records

Risk-averse corporate legal departments view the potential hazards of switching from a trusted outside counsel as too great, according to Kris Satkunas, director of strategic consulting at CounselLink.

Record-setting hourly rates at the largest law firms don’t appear to be costing them any of their market share of legal spending, according to the latest reporting on rates by LexisNexis CounselLink.

At 61%, the difference in 2023 between the median partner billing rate at firms with more than 750 lawyers and that of the next size tier has never been wider in the 11 years that CounselLink has publicly tracked such data. Also in 2023, law firms with more than 750 lawyers grew their share of legal spend to 48.2%, up from 47.9% in 2022, according to CounselLink’s 2024 Trends Report. Read more...

Law Firm Partners Made BANK Last Year And There's Nothing Clients Can Do About It

Partners saw big increases in their rates last year. And got paid for them.

Every few years, law firms announce raises for their associates — usually on the order of about 5 percent — and clients collectively lose their minds. “This better not be passed along to me!” they collectively wail, knowing that it will absolutely be passed along to them and they’re absolutely going to pay it. The raises are almost always below inflation when you take into account the length of time between compensation bumps, but that doesn’t stop the complaints. Read more...

Time Tracking for Lawyers: Why Every Firm Needs to Track Time to Stay Profitable

The “how” of lawyer time tracking will fall in place once you understand the “why.”

“Tracking time is my favorite thing” said no lawyer ever.

When I retire, there are many things I will miss about my profession, and time tracking is not one of them. When I was getting started as an accountant, we had timesheets to submit every day from 9 to 5, Monday through Friday—plus busy season weekends—in 15-minute increments. Today, apps make it easier, but it amounts to the same thing: I let my partners know where I am, with whom, and why. Read more...

AI Will Ramp Up Intense Big Law Battle for Talent, Client Share

Law firm profit margins will decrease because “AI disproportionately impacts non-partner hours," the hours yielding the highest margins, noted a Law.com Pro Fellows report.

Law firms are still trying to grasp the implications that artificial intelligence will have on their business. But a new report this week helps paint a picture: decreasing revenue per engagement and declining profit margins, leading to even more intense competition for work and talent.

Specifically, according to a Law.com Pro Fellows report published this week, as lawyers increase their productivity with the help of AI and generative AI technology, there will likely be less work for non-business-generating partners and less demand for entry-level and junior associates. Read more...

Billing Rate Increases, Demand Gains Help Law Firms Double Their Revenue Growth in Q1

Billing rate growth "continues to be the primary contributor to revenue growth," with standard rates increasing 9% in Q1 2024, Wells Fargo said.

A Wells Fargo survey of law firm performance in the first quarter showed demand and billing rate growth, particularly among the largest firms, led to revenue gains that were more than double the size of growth in the same period last year, the bank said Wednesday.

Wells Fargo’s Legal Specialty Group tallied a 9.5% revenue increase across Am Law 200 firms in Q1, driven by an acceleration in demand and supported by a rebound of capital markets and large-ticket mergers and acquisitions work, plus countercyclical work continuing “apace.” Read more...

Biglaw Demand Still Flagging, But We Can Charge Clients Higher Rates So Let The Good Times Roll

Overall good news for firms. But don't get cocky.

As the economic recovery continues in full swing, law firms saw a much rosier outlook according to the recently released Q1 2024 Thomson Reuters Law Firm Financial Index. How good do law firms have it right now?

The LFFI is 59!

Which is a lot like telling someone the temperature in celsius. Is 31 hot? Because that seems like it should be cold. Have you considered a temperature scale that describes things in terms that matter to humans as opposed to water in a beaker? Read more...

New firm owners shun billable hour for all-round service

Two co-founders of a niche firm in the east Midlands say they want to ‘break the mould’ with a different approach to offering legal services.

Friends and former colleagues Shruti Trivedi and Iain Hibbert have launched Devello Group, a specialist planning and property development practice based initially in Nottingham and Lincoln.

Between them, they have more than 40 years’ experience working in private practice and previously led large teams in one of the region’s biggest firms, where they were equity partners. Read more...

Can Second Hundred Firms Gain Ground on 'Price-Insensitive' Practice Areas?

Smaller firms have more to lose when a client says, "You're not price competitive." That's forced them to keep focus on sophisticated work from mid-market clients and routine work for high-end clients.

In the New York office of Ice Miller, a small number of trial and transactional partners only started charging four-figure hourly rates in 2023, a result of the firm’s efforts to pivot to practice areas that command higher hourly rates.

This strategy has allowed the Am Law Second Hundred firm to grow revenue nearly 10% to $270 million in 2023, despite billing fewer hours than in 2022. Read more...

Q1 2024 LFFI: Law firms ascend with record revenues and slower expenses

The Q1 2024 LFFI report illustrates a comprehensive improvement across all composite financial metrics, signaling a robust financial state for law firms in this period

As the large law firm industry advances into 2024, the Thomson Reuters Institute’s Law Firm Financial Index (LFFI) reveals a buoyant performance in the first quarter that is dominated by strong revenue factors and moderated expenses, suggesting a stable and positive trajectory for the industry. Read more...

High Billing Rates May Hasten New Era of Productivity

“The way the market is structured and has been structured for a long time, it’s not really a question of growing productivity, it’s how do we mitigate the contraction of productivity?" said Bill Josten, strategic content manager for Thomson Reuters.

Lawyer productivity in law firms appears to have plateaued around roughly 1,550 hours, down from its high-water mark in 2021, according to Wells Fargo data. But analysts don’t expect a wave of layoffs as a result of overcapacity and lower utilization.

That’s not only because demand accelerated in the first quarter of 2024, and some excess capacity began to be “absorbed” in some of the largest firms. It’s also because billing rate increases are allowing firms to carry on with a lower level of productivity, analysts say. Read more...

Solicitor who charged dishonest Grade A rate is struck off

A solicitor who charged grade A fees for work he had not carried out himself has been struck off the roll.

Pravin Jugdaohsingh, formerly with London firm RHJ Devonshire, endorsed a statement of costs presented to the Business and Property Court in 2019 which came to £85,000 in total, a figure which included his own hourly rate of £450.

But most of the work on the litigation dispute had been carried out and invoiced by a consultant solicitor collaborating with the firm, who had made an advanced fees agreement. She had raised an invoice two weeks before the costs hearing charging fees and disbursements worth around £28,500. Read more...

Pricing AI-driven legal services: It’s not a question of cost recovery

When determining how to price legal services that have been augmented by AI, law firms need to be careful to not get caught in the old ways of thinking

The legal market is rife with questions about how legal services will be priced as artificial intelligence (AI) becomes a more dominant force in how legal work is performed. Given the data that the Thomson Reuters Institute analyzes and our expertise in the economics of law, hardly a week goes by without someone posing the question: “What impact is generative AI (GenAI) having on law firm billing?” Read more...

Abolish your partners' billable-hour requirements

Associates are suffering from billable-hour demands, caused partly by the scarcity of available work. Billing targets for partners exacerbate that scarcity and waste partners' time and effort. Enough.

It’s time for me to air one of my longest-standing grievances about the way law firms operate. It is silly, pointless, and counter-productive for law firms to set billable-hour targets for their partners. As Generative AI infiltrates the legal sector, maintaining such targets will endanger firms’ viability. It’s past time to abolish these targets and put partners’ time and efforts to much better use. Read more...

Costs

Claimant spends £28k challenging an ATE premium worth £393

A costs judge has criticised the spending of more than £28,000 trying to secure documents to challenge the recovery of an after-the-event insurance premium worth less than £400.

The former client of personal injury firm Nicholson Jones Sutton Solicitors had sought details of communications with the insurer and a third party over potential commissions that might have been paid. They also wanted recordings of telephone calls concerning their initial claim as well as financial records.

The application followed directions from the Sheffield District Registry in 2020 for disclosure of the firm’s full file of papers. The claimant challenging the payment of the ATE premium said these directions had not been complied with. Read more...

Fixed costs in clinical negligence claims set for October

Fixed recoverable costs are on course to be introduced for lower-value clinical negligence claims from October, it has been confirmed.

Minutes from last month’s Civil Procedure Rule Committee meeting, published this week, show that the intention is now to finalise rule changes before the summer, in time for implementation in October.

The sub-committee handling the reform still needs to resolve issues before being in a position to present draft rules and a proposed pre-action protocol, the meeting heard. Read more...