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Taking the power back - how to push back on law firm pricing

If you quizzed corporate clients and law firms on their least enjoyed aspect of working together, you'd likely get the same answer, and it isn't lunches. Law firm pricing has always been a contentious issue. Neither party love it, but as yet no suitable alternative has been created.

The culprit is the combination of a lack of consensus and trust. Corporate clients are used to doing more with less, so any unanticipated complexity, ie additional cost, feels like a dagger to the heart. And for law firms, any time spent disputing bills is time not spent working productively towards their billable target - which makes for longer days and grumpy partners. The result is a system that is unwieldy.

Lovers of the unconventional, Law Squared, have made it their mission to unpick some of the more irritating aspects of law firm life, boldly eschewing the billable hour for a fixed price costing model which enables them to deliver legal services with the clarity the market desires.

“Particularly from a costing perspective, we are seeing a bit of a disconnect between procurement teams and legal teams," says Demetrio Zema, Founder of Law Squared. "Procurement's way of understanding service value and comparing service providers remains very much based on hourly rates.

"Legal teams, however, are seeing a trend and shifting the market. They want to understand what their maximum cost exposure is because budgets are always being blown out by estimates from traditional law firms, or just law firms generally.”  

According to Zema, Law Squared is one of a few firms of their size to operate using this model. “We have no time as a metric for both financial performance for our team and also for billing our clients.”

There have been growing pains, including missing out on work from large clients because their model is so unique it cannot be compared to hourly rate-based proposals. But such clients often find their way back to Law Squared - usually after receiving their bill from traditional firms.

But any glitches have become learning experiences, giving Zema crucial insight into ways to have more control over law firm pricing. He says any changes must be driven by the market. “Legal teams need to set the price for these pieces of work, 'We believe the attached or attributed value is X.' It's then a matter of going to market on that value or asking legal teams to put forward proposals on that value.”

There is a considerably higher likelihood of widespread adoption if this change comes from the market, as the basic premise of a legal services provider is to service the needs of that market. And if the market wants fixed price billing, legal services providers will have no option but to adapt.

Zema believes wholesale application of the model is possible and says other professions are providing inspiration. “There shouldn’t be any surprises. Of course, there are adjustments or amendments, but we see professions outside of professional services managing to deliver services at a fixed cost value.”

Law Squared's approach proves the benefits of the model, namely how it enables both parties to operate with a newfound degree of certainty. In-house teams are more positive because they are more involved in the process and, best of all, it is possible to avoid potentially relationship-damaging disputes over costs or scope of work.

Taking the power back is a sure-fire way to better navigate law firm pricing, but the model won’t change without a push from the market. Now could well be the right time to take the plunge.

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