One of the more novel concepts that appeared at this year’s FirmFuture conference in Boston was that of “knowledge pricing.”
Jay Shepherd, who ran a profitable employment law practice until he became a successful author and pricing consultant, appeared at the conference, telling lawyers that they are selling “knowledge” and not “hours.”
Shepherd’s new service, PrefixLLC, is on a mission to help lawyers to set a value on their professional services that will capture clients while optimizing profitability. He argues convincingly that clients have no interest in purchasing someone’s “time” but instead want to purchase a product or result based on perceived value vs cost.
The seller of services, on the other hand, wants to have predictability and profit associated with his work.
The solution, according to Shepherd, is to come up with a price for any given legal project that takes into consideration all of the factors valued by both providers and purchasers of legal services, such as:
- The importance and urgency of the project;
- The relative rarity of the lawyer’s expertise based on supply and demand;
- The past costs for similar projects;
- The outcome or likely outcome, and the degree to which the lawyer is willing to “put skin in the game” by using contingency fees, etc.
Many other factors can be relevant, depending on the situation, as well, but the bottom line is that clients are eager to explore alternative pricing models and they embrace lawyers who can so, according to Shepherd.
Given the slow but persistent increase in alternative billing arrangements over time, and the continuing movement toward more in-house legal personnel to avoid uncapped hourly billings, the message seems timely.
For more on what Shepherd calls the Client Revolution, check out his blogs: