Friday, March 22, 2013

16 Ways to Avoid a Haircut, Post 8

This is the final installment in an eight part series on how to resist price concession requests. Each two new tips will be posted each weekday for eight days.

When discounts are inevitable, reduce their impact using these tips.

15. Negotiate the contract term. Companies routinely request contract terms of two and, more frequently now, three years with terms and conditions expected to be locked in throughout the extended term. Ask for the contract term to be reduced to a one year term in order to allow for an appropriate learning curve and the experience in working together.

16. Negotiate discount escapes. Discounts are a reward for mutually beneficial working relationships. The moment the balance tips away from one party, the terms of the relationship necessarily should be reviewed. When bills are paid late, are suspended for what ends up being unwarranted review, paid partially or otherwise slow or obstruct cash flow to the law firm, the discount will be voided. The agreement should make it clear that certain reasonable or validated billing issues will not subject the company to the void of discounts, but other circumstances within the control of the company’s timely payment of bills will.

It goes without saying, if you would like to talk about training your lawyers in resisting pricing concessions, please give me a call. It costs nothing to talk.

Thursday, March 21, 2013

16 Ways to Avoid a Haircut, Post 7

This is the seventh in an eight part series on how to resist price concession requests. Each two new tips will be posted each weekday for eight days.

Sometimes giving discounts is inevitable. The following tips can help you reduce the impact of those discounts.

Attorneys want to start a new relationship on a positive note and feel certain that they can manage the work profitably. Often attorneys fear the client relationship will be discounted if a price concession is not given. In those situations, discounts may be unavoidable. In these cases it is best to minimize the impact of the discount. Here’s how.

13. Negotiate the lifetime value of the discount. Most company relationships with outside counsel last for several years. The discounts negotiated today form the basis for pricing discussions in future years. Often, a discount in year one is compounded by a similar discount percentage in year 2 and beyond. When a discount is inevitable, ask for a renewal of the engagement in the second year without the discount. This cuts in half the discount amount over the two year period.

14. Negotiate the rate increase instead of a rate discount. Law firms routinely increase their hourly rates on an annual basis. Clients, aware of this, often ask for both a discount and a rate freeze, significantly increasing the value of the discount. Counter rate discount requests with a choice of either a rate discount or a rate freeze.

It goes without saying, if you would like to talk about training your lawyers in resisting pricing concessions, please give me a call. It costs nothing to talk.

Wednesday, March 20, 2013

16 Ways to Avoid a Haircut, Post 6


This is the sixth in an eight part series on how to resist price concession requests. Each two new tips will be posted each weekday for eight days.



Studies show that 74% of price cuts are started by sales people, not customers. In legal services, that percentage may be much higher! Lawyers agree to discounts on their hourly rates, often without a hint of a prospect’s objection to the hourly rate. Here are some proven strategies for resisting discounts and increasing profits.
11. Use uncertainty to your advantage. Ask to delay price concessions until a sufficient track record of work has been recorded. Clients are equal partners in controlling the costs of legal services. Some clients are efficient, make decisions quickly, produce documents on time and give consistent direction. Other clients are a drag on the efficient production of work. Variable costs are what erode profits, not fixed costs. Without the experience of how the client and you work together, any price concession is a crap shoot. And, if your margins are truly tight, this piece of knowledge is critical.

12. This clause states that the law firm will adjust Most Favored Nation (MFN) clausesrates to the lowest level enjoyed by the law firm’s comparable clients. These clauses are notoriously poorly defined and vague. Only companies with significant market power in the form of consistently high volumes of legal work can demand and receive MFN status from their outside counsel.

MFN status should not be granted for the following reasons:

1. Pricing decisions and the profit analysis is too fluid and dynamic to apply equally to every client in a class.

2. Because lost profits from MFN agreements have to be made up through pricing increases on other clients of the firm, MFN agreements place an unfair tax on smaller or one time clients of the firm.

3. MFN agreements require additional monitoring and paperwork which further reduces the efficiency of the delivery of legal services. Finally,

4. MFN agreements can only be validated with certainty through the sharing of the contract terms of other firm clients, potentially an anti-competitive and/or unethical stipulation for all parties.

It goes without saying, if you would like to talk about training your lawyers in resisting pricing concessions, please give me a call. It costs nothing to talk.

Tuesday, March 19, 2013

16 Ways to Avoid a Haircut, Post 5


This is the fifth in an eight part series on how to resist price concession requests. Each two new tips will be posted each weekday for eight days.



Studies show that 74% of price cuts are started by sales people, not customers. In legal services, that percentage may be much higher! Lawyers agree to discounts on their hourly rates, often without a hint of a prospect’s objection to the hourly rate. Here are some proven strategies for resisting discounts and increasing profits.
9. Use the client’s success to your advantage. Most large, successful businesses have set price structures that are rarely altered. Study the pricing philosophy of the prospect and adopt the philosophy in your response. Often you’ll find that the company simply does not discount their prices on average volume orders. And in most cases, the projections of work for your firm will not be extraordinary large and, in this context, not warrant a discount.

10. Your firm negotiates dozens, if not hundreds, of Use fairness to existing client engagements every year. Furthermore, the firm’s top, longest-held client relationships typically have among the group a population of clients which do not receive a discount. It’s unreasonable to expect a law firm to extend discounts to all of its clients. Discounts to new clients put firms in compromised positions when they have to defend that discount to long standing clients. Your firm recognizes that the industry is too small and client relationships are too important to run this risk. Put the onus back on the prospect by asking them to explain how you can give them the discount and continue to earn the respect of your top clients. Here’s how to word it. “I assume your company values the integrity of its business partners the way we do. Does pricing services below the rate given to loyal clients constitute a level of integrity that would pass muster with your company?”

It goes without saying, if you would like to talk about training your lawyers in resisting pricing concessions, please give me a call. It costs nothing to talk.

Monday, March 18, 2013

16 Ways to Avoid a Haircut, Post 4

This is the fourth in an eight part series on how to resist price concession requests. Each two new tips will be posted each weekday for eight days.

Studies show that 74% of price cuts are started by sales people, not customers. In legal services, that percentage may be much higher! Lawyers agree to discounts on their hourly rates, often without a hint of a prospect’s objection to the hourly rate. Here are some proven strategies for resisting discounts and increasing profits.

7. Offer value added incentives in place of price concessions. Access to special or customized services can tip the balance in some decisions. Instead of cutting price, offer more value in the firm of specialized research projects, customized software or other value added services. Often, what you do to win the client can be leveraged to win other prospects as well. One firm I know addressed pricing pressure by offering access to a proprietary study of wage and hour decisions in district courts throughout the country. The analysis was useful in setting case strategy in each district and proved to be a significant value added service that pushed the prospect to engage the firm.

8. Make price concessions too costly. Price concessions are negotiations. All terms are in play, most importantly those that have already been offered. The costs of providing services are always the fully loaded costs of those services. This means that terms such as late fees, interest on outstanding balances, research fees, unbilled services or meetings, the mix of attorneys and other elements of the original proposal are fair game to re-negotiate.

It goes without saying, if you would like to talk about training your lawyers in resisting pricing concessions, please give me a call. It costs nothing to talk.