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Price Communicates Your Value with Jay Shepherd – 029

January 20, 2015 by Kirk Bowman Leave a Comment

Price is more than a number. It is part of how a lawyer communicates value to the customer. To unpack this principle, Jay Shepherd, an employment litigation attorney, compares how a customer perceives an hourly rate vs. a fixed price. He says knowledge instead of activity is more valuable to the customer. Value pricing enables the customer to purchase what he wants in a manner he truly enjoys.

http://traffic.libsyn.com/artofvalue/029-Your-Price-Communicates-Your-Value.mp3

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Hourly Billing in the Legal Profession

  • What is the most important thing you can share about pricing?
    • Intentional pricing vs. accidental pricing.
    • You (the professional) and the customer intend to do the work at a certain price.
    • Hourly billing is the worst kind of accidental pricing.
  • What types of pricing are found in the legal profession?
    • Mostly hourly billing.
  • Why is hourly billing not good for the customer or the professional?
    • Customer – Hourly billing creates a conflict of interest between the lawyer and the client.
    • Professional – If you are good at what you do, you are leaving money on the table.
    • Three things determine hourly rates in the legal profession: Location, number of attorneys and years of experience
  • How do you answer the question, “What is your hourly rate?”
    • I do not have one. (An hourly rate is not a price.)
    • A price should answer the question, “How much is this going to cost?”
  • Why do you think hourly billing is insane?
    • Professionals use an hourly rate because of fear.
    • We suck at estimating how long something will take.
    • If you write off hours, then the value is not in the hour.

Practicing Value Pricing in Law

  • How do you price for the uncertainty in legal matters?
    • The subjectivity of setting a price requires experience.
    • The more experience you have, the better you price.
  • What are some practical steps to transition to value pricing?
    • Get comfortable with the concept of value by studying it (mental shift).
    • Do a pilot or trial program with new customers to gain experience.
    • Stop tracking time and set prices for everything (burn the ship).
    • Collaborate with others when setting a price (pricing council).
  • How do you approach having a value conversation with a customer?
    • I need to get information about the client, their business and the problem.
    • One, what is it worth to the customer to solve this problem? (You have to help the customer figure it out.)
    • Two, what is it worth to you (the professional) to do the work (profit, likable client, interesting work, etc.)?
  • What are some of the questions you consider during a value conversation?
    • Is this someone with whom I want to spend a lot of time?
    • Do they have experience working with lawyers or not?
    • How important is this matter to the customer?
    • How hard is it to find expertise in this matter?
    • Do I have previous experience with the customer?
    • How much do I want to do this work?

Subjectivity and Pricing

  • The price helps educate the value of your work to the customer.
    • Attorneys have to use judgement (subjectivity) to practice law. Apply the same skill to pricing.
    • Prices sell knowledge. Hourly rates sell activity.
    • Three types of legal knowledge: Substantiative, procedural, judgement
  • What is the best value you have created for a customer?
    • I was able to settle a non-compete case in three phone calls because of my knowledge, network and expertise.
    • You cannot capture the value of knowledge in any increment of time.

About Jay Shepherd

Jay Shepherd is a Senior Fellow at the VeraSage Institute and a recovering attorney (trade secret and employment litigation). He operated Shepherd Law Group for a 15 years, and “shepherded” the firm through a transition from hourly billing to value pricing. He is the author of Firing at Will.

  • Jay's Website: JayShep.com
  • Jay on Twitter: @jayshep

Filed Under: Episodes, Legal, VeraSage Tagged With: Attorney, Hourly billing, VeraSage

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