Overcoming the Challenge of Asking for a Billing Rate Increase

Billing rate increases are a challenge for almost all law firms and lawyers. There are a number of factors that affect a client's decision to grant a rate increase or not. Some of these factors include the perceived or real value of a firm's existing offering, a client's financial health, internal client initiatives that may impact legal spending decisions, competition and the comparative levels of existing rates.

In my experience, firms that follow these best practices are more apt to operate in the higher end of the billing rate spectrum.

• Perform a critical review of the firm's existing services to the client. Determine if the firm's present staffing mix provides optimal client value. Firms that understand the value of staffing matters correctly enjoy a long term competitive advantage even if their billing rates are higher.

• Determine if the firm's offering measures up to the competition in key areas including staffing, overall cost of service, responsiveness, result and professionalism. This information may be gained from clients directly as a result of a candid conversation about the firm's performance.

• Determine where the firm's current rate levels are on the client's rate spectrum for similar services. This may be tough to accomplish, but it can be done. This does not have to be a precise measurement; knowing whether the firm's existing rates are in the lower or upper quartile or around the median is adequate.

• Firm's should have a clear understanding of the profitability of a client's account before deciding to ask for a rate increase.

• Build the case for the rate increase and write down the compelling reasons that the firm's services are worth more.

• Remember that most of the time rate increases must go up a chain of command. Be careful to provide client contacts with a concise argument for presentation to their superiors.

• Ask for permission to ask. Using an open-ended questioning technique, ask clients about the process for making a rate increase request. The important aspect about this part of the process is that it is not the actual rate increase ask. To make clients less defensive, only seek information about the process and not about the rate increase itself.

• Ask for something reasonable.

Confidence will come from this analysis, which will make asking clients for rate increases or justifying existing top rates much easier.