Negotiating Better Prices With Clients

By Christine S. Filip.
Laughing all the way to the bank has become less humorous. As firms have raised
associate salaries, merged, and then purged low performing partners, their expense structures demand increased fee structures, and probably shedding marginally profitable
clients.
This article addresses how to raise, and then maintain, fees, which, for the sake of this
article, I am going to call prices, not because I wish to be abstruse, but because the
word fees connotes an arbitrary price level in the clients mind; they may be used to
hearing it, but they are accustomed to negotiating prices in their business and personal
lives. I believe it helps to use customary language particularly for difficult conversations.
Fees connotes an arbitrariness in price setting that may detract from a negotiation. For
example, when my dentist, lawyer or accountant says my fee, without more, for that
procedure is $15,000, I think:
Kids in college
New Benz
Alimony
IRS problems
Trophy spouse
Beach house
Not necessarily in that order. Do you think your clients are different?
Being prepared for what may be a challenging conversation with a client regarding
pricing is hardly the stuff of law school curricula or many CLE presentations. Yet, many
lawyers are partially prepared: the give and take of the adversarial process, ADR training
and other sources of negotiation skills attainment, all provide a foundation in the
approach to difficult conversations with clients.
One area, however, that is usually absent from the foregoing sources of training, is the
application of economic value analysis (EVA) to the negotiation of prices. EVA is a
system of negotiating prices grounded in principled negotiation strategy and has been
shown to achieve improved pricing results in the commercial world.
Three step process
Using EVA to negotiate and raise price levels is a three step process.
The first step is creating a rational, objective basis for your price (fee level), such as
discussing average or known price levels for hourly or project rates in your geography.
Language such as, If youve done some research or, You probably know from

experience that $400 per hour is an average price for this kind of work. The use of an
objective proof source, such as a survey of rates, is the best evidence.
Establishing this first average competitive price level is an important intellectual peg
because it establishes a basis level from which the negotiation continues. Without this
step, the price you eventually settle upon has no validity in the clients mind, and is
subject to discounting. The client is thinking kids in college, new Benz, alimony, etc.
The second step is to differentiate your fees by explaining and demonstrating the valuable
differences you or your firm bring to the table. These differences allow you to present a
fee higher than the average competitive price. Demonstrating your advantages or differences can be shown by clients served, credentials that are perfectly on point with the
clients needs, such as specific cases or matters, or your publications or speaking
engagements on the subject.
By far the most believable proof source is another client; a referral, which may have
preceded the first interview, is such a third-party proof source. In the absence of a
referral, having the prospective client speak with a present client is persuasive, and rarely
done, which makes the opportunity twice as potent: once for connection to a real client,
and secondly for the advantage of being unique in a way that is valuable to the
prospective client.
The third and last step in the EVA process is to minimize the difference between your
second step price, which includes price increase based on your competitive advantages,
and the final proposed price level. However, your final (third step) price level should be
above the average competitive price.
There are a number of rationales you can use for this last step, which is often called
moderating the risk of a decision, that being hiring you. Some language to explain this
last step:
I know this is an expensive proposition for you so I am going to decrease my rate.
You have been a great client and Ill reduce my price because of your history (or volume
of work) with us.
You have not used me (or my firm) before so Ill reduce the risk by moderating our
rates.
Id like to work for you in the future.
To make that reasonable for you, I am going to reduce my rate/price.
Supporting higher fees
How does using EVA support the plight of the post merger firm with financial strictures
that require higher fee structures? Or, the firm with a salary structure that needs to be
funded? There are two pathways. Negotiating with a first time client using EVA will
prove to be a far more efficient process than you have experienced before less time
elapsed start to finish, less shopping around and fewer objections. You will also end up

with a price level that is a cut above the competition and your own pricing history,
specifically because it is based on your unique advantages brought to the fore in step two.
In the case of negotiating new prices with existing clients, the first step in the process is
to select those clients with whom you should, and more importantly, should not, have a
renegotiation discussion. Those in the first category, clients who merit renegotiation, may
be brought to the negotiation table for a number of reasons:
A juncture in their work, such as at the end of a matter or,
Incident to a client interview or evaluation of the working relationship.
Regarding those clients with whom you should not negotiate or renegotiate your prices,
just do as Nancy Reagan said, just say no. By far one of the most important marketing
strategies that firms should adopt, but few do, is the imposition of an active DNR (do
not resuscitate) on bad clients. We all know who they are.
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