Legal fees rising to vomit point
According to NALP, 14% of law school graduates earn $135,000 (now $160,000) starting compensation. 42% earn $55,000 or less.
This is consistent with statistics that show experienced lawyers earning less than the public believes lawyers earn: 50% at less than $100,000 and 25% at less than $50,000!
Thus, lawyers are "between a rock and a hard place!" The public believes that figures reported in the Wall Street Journal of August 22nd to the effect that lawyers are now charging $1,000 per hour is the norm or standard. Yet, only a few lawyers are commanding that fee level, and then only in the "bet the company" kind of cases. Commoditized work cannot command that rate. Even in extraordinary matters, that rate approaches what one New York law firm partner said is clients’ "vomit point."
If one were to peel back the curtain, I believe one would realize that the fee is merely a number, as one lawyer mentioned in the WSJ article. It is more symbolic and ego driven than it is driven by inflationary costs for law firms, partly because most lawyers don’t know their true costs of operation and partly because well-known lawyers keep looking over their shoulders to ask what other well-known lawyers are charging and don’t want to be second in this "race." This reminds me of the baseball and basketball sports figures whose contracts provide that their team must give them $1 more than the highest paid player in the sport. The analogy works when one looks at the high earnings of many ball players … and many CEOs who are paid millions of dollars to leave a company after lousy performances. Why shouldn’t lawyers be better paid? In fact, why shouldn’t the teachers of our youth be better paid?
This discussion, though, misses the point. What is the value of the lawyers’ service to the client? In most every other profession and trade, value to the customer is a factor to consider when setting fees/costs. Lawyers generally fail to address this factor. Further, when looking at fees from the hourly perspective, and the number inflates to such a high level, there is a total disregard of the collaborative and partnering approach to the practice that is required to keep the loyalty of the client … and the client returning for all of their legal services.
Charging less, with lower marketing costs for new clients that results from partnering with clients, will go a long way to increasing both the net income for lawyers and the loyalty of clients.Tags: Cash Flow - Finances, Marketing