Overcoming Barriers to Fixed Fees

Hello. I'm Sue Edwards, the MD of law hound. And for the past 25 years, I've been helping professional service providers improves their client attraction and client retention rates has an employment law specialist. I understand the challenges legal providers face and share the techniques I've used in creating an online business model with others. Let's get straight into discussing overcoming barriers to fix fees. Legal services have faced a wealth of change over the last 10 years, particularly with regards to clients attitudes as to costs. The use of fixed fees continues to rise on dis so soon, likely to be the normal way of charging for legal services, as opposed to a supplying an hourly rate. Now, traditionally, solicitors in firms of all sizes have operated on the basis that they sell their knowledge in their skills or their time based on agreed hourly rate. Client could easily compare cost for our level of expertise and experience across many firms, so there was little to be gained in shopping around on cost. The buying decision was made on the treatment of the client from the first inquiry on meeting with the lawyer. However, we have seen these great changes in the arena of legal costs. With the removal of all but limited legal aid. Various types of freak fear make arrangements and fix fees where the final costs to be paid by the client are agreed by the businesses they start working together. A statistics show that there is a move away from the Agree down the rate, particularly businesses offering services to consumers. In fact, statistics provided to us by the S. R. A. Show that around 50% of legal services to consumers are on a fixed cost basis, and hourly rates now account for less than 10% of transactions, with those areas on an hourly rate being most commonly used in probate and employment work, where the around 20% of all transactions the SA raise research also found that fixed fee arrangements have continued to rise, with within five areas where fixed fees and most commonly used being will writing at 71%. Conveyancing that 66% power of attorney work at 65% immigration work, a 55% and family Laura, 45%. However, it's interesting to note that the high percentage of consumer legal services undertaken on a fixed fee basis isn't yet reflected in work carried out with business clients. The SRE point to clear benefits of fixed fee work to clients on particular consumers. Because fix these clear and transparent, they allow clients to compare costs and they removed clients concerns that costs will escalate beyond their means. However, it's often the smaller practices who struggle the most was fix things in research again undertaken by the S R. A. The small practices confirmed that 48% of the businesses of firms they regulate our small firms in that they have up to four partners members or directors, and a turnover often to 400,000. Speaking in J against J, the citation is gonna be shown on the slide. Mr Justice Mawston said that Ali building of best leads to inefficient practices worst it rewards and incentivizes inefficiency. Moreover, it undermines effective competition in the provision of legal services as it penalize is well run illegal businesses who systems and processes enable it to conclude matters rapidly. It also penalize is the able those with greater professional knowledge and skill as they'll tend to work it amore efficient rate in other words, only building fails to reward the diligent, the efficient on the able, its focus on the cost of time. A truly movable feast simply does not reflect the value of the work, and I think that's a really good summing up. So let's look at the barriers to fixed costs of professionals who were used to selling their skills and knowledge based on their time fix. These conceding daunting, although perhaps less so for those who have only recently entered the legal profession. They have been so many factors which have impacted on the provision of legal services, including free structures and out. I refer here to technological advances, increasing confidence of consumers, toe haggle over fees and set limits. Some fees. Spent. Accountants offering legal services. New channels to deliver legal services, including online services and virtual law firms. Document reviews. Templates, services, legal services. Subscriptions such as those offering hate charm and employment law services. Retail brands such as the cowl offering legal services alongside of those offered by credit card and insurance companies, which offer legal advice. 24 7365 On a huge range of legal subjects, very often a triage, just a phone call. Nevertheless, that's something that previously would have been absorbed by law firms. Price comparison sites were transparent fees and fixed cost bids and made from solicitors. Firms based on projects posted up by clients on these factors in themselves have created barriers for some professionals when it comes to fix fees. So, for example, on a simple economic basis a virtual law firm so one that doesn't have a physical location just won't have the overheads associate it with bricks and mortar. Therefore, when calculating their costs, that element of expense doesn't need to be considered as their operation model is much Lina and also those who offer legal services a part of something else. So, such as here we will think looking. It's accountants. So they're unlikely to view legal services as a sole income stream so that maybe there may be more flexibility in how they charge. For example, offering limited legal services is part of the largest services package, which they want to sell, which assists them in selling the legal service element at a much lower margin as it's offset in terms of costs against the higher margin accounting services they're offering larger businesses can dedicate more budget to invest in technology, which in turn is going to help them be more efficient and more cost effective. However, one major barrier to fix these is the concern about predicting in advance how much time you're going to spend dealing with the matter. That's no so much concern about calculating how long you the professional will take to perform a given task but has proved a professional serving clients. You must factor in the behavior and demands of those clients, which are outside your ability to control. So, for example, you take to clients who require similar types of work, and you provide exactly the same level of service to both of them. One client would be quite happy to be kept informed. While you won't renew, deem it appropriate where it's the other client might telephone email, Communicate with you try today. It's obvious that the time you've estimated that spending on the matter will be swallowed up far more quickly by the needy client who wants more regular on some might say excessive communications. You don't always know this when you take on a client for the first time you learned over over time. Obviously, what's up? So the client, they are so in overcoming barriers for professional selling, any type of service, it's worth reminding ourselves of the basics, which is profitable. Fixed fees mean clearly defining the scope of work included, realistically calculating the time that you will need to spend on that matter based on a profitable rate. Forming that calculation on managing the expectations of the client, which will in most cases mean setting service levels or a response times frequency. I'm making it clear over communicating will incur additional costs outside the fixed fee agreed on this all means that you need to have a carefully designed process for calculating and setting your fixed fees. This is against a background of current precious for low pricing, such as websites, which allow you to sell your services by providing mental quotes. Thes have encouraged potential clients to believe that the lowest price is always the best, and it's all too easy to get swept into bidding low. To bring in income, however, you can end up working at a loss or buying in work cost on such sites. Another factor is that the service element, which is ingrained in busy professionals may be underestimated in the rush to get out. Quote. Unfortunately, factors such as these all mean that desire to get out fixed The quote. We may not always devote sufficient time to calculate the true cost of handling the case. So let's remind ourselves that the things we need to take into account, which will help overcome the barriers to was starting a fixed cost quote in business. So what you need to be aware off Well, when you're charging, you're selling your time. And whilst fixed fees are not about charging and hourly rate anymore, you do need to start with a few core essentials. So you need to be absolutely clear. And everybody needs to be clear how much it costs you to work for a unit of time, such as an hour. And how much of those hours how much time you need to spend on the matter contingency amounts so that you'd be looking here. I would suggest that percentage to allow for unforeseen elements within a case. So it its simplest if you think in case a matter, for example, drafting an agreement is gonna take you five hours, your fixed costs will be five times the rate you need to make a profit when you work for an hour. Therefore, if you spend five hours or less, there's no issue. But when you spend more than five hours, you're working it a loss, which is going to cause problems. Now, whilst it's obvious you need to be sure that you've properly calculated your current only profitable rate to account for everything by way of an expense to achieve the level of profit that you plan for. Most businesses do this exercise fairly irregularly. So do it often enough to account, for example, changes in expenses that you where you might have incorrectly estimated rises such as insurance premiums or technology software wraps things like that that need to be added. So you need if you doing fixed cost. You need to be looking at the numbers a lot more frequently than perhaps she would have done where you working on an hourly rate on any charging all of those? I was to the client, and then we're looking at scope on managing expectations and fixed fees required to outline the scope of work really clearly on. Keep on doing that throughout the lifetime of of a case. So even to the point of how many letters and other communication points such as e mails and calls are going to be included now, you need to make it really clear what is and is not included. As you establish fixed fees with clients. Not only does that help you meant manage expectations, it also means that you need to a dear to what you've agreed with very perm, firmly and politely reminding your client and you yourself on a regular basis very often in the desire we have to return to retain the client, we end up with Project Creep. So by that I mean that the extra letters dealing with queries on Lee can you just requests that come from clients? Take us off kilter when we're looking at are fixed the model on whilst it's the balance between the professional obligations, your desire to deliver a quality service and run a profitable business. If you've business fails because of financial reasons, you'll no longer be in service anyway. On the contingency amount I mentioned earlier makes it easier to deliver the odd outside scope element without appealing. Churlish when you remind the client you cannot do anything else outside the agreement because you you you do have this. It's a finite model. Wears an hourly rate, isn't these fixed fee relationships make it easier also, to sell other services to your clients? For example, your fixed fees for a debt matter include work up to and including drafting and submitting a claim. Eso that that she fixed fig on that. After that, they're on their own, so they're much more likely to come back to you if when if and when the defense's files, because you can then after them, additional services from the additional services. But costs from a marketing perspective may land when the client is most eager to remove that pain point on, so they're much more valuable to them to resolve by way of using your services, which means that you your fix fee for the next tranche of the services will carry a premium for that work, including higher costs for delivering quickly. So, for example, you offer one price for seven working day turnaround for dealing with the defense on another much higher price for a 48 hour turnaround. Well, look next to Tom bundling. And traditionally, lawyers have dealt with cases from start to finish. However, clients increasingly want more control over how, when the access legal services, they want to be able to deal with problems themselves up to a specific point, sometimes with or without support or access advice only in the areas where they see that they want till they need to. Onda also control costs within their budget. This is particularly obvious with legal solutions such as money claims online on McCool becoming mawr increasingly easy to access on their aimed at assisting somebody to deal with the process themselves. So, for example, the client may not want any help lodging the claim until they receive a defence and counterclaim the clients wanted and bundle service where they cherry picked the elements. They see the value off instructing a lawyer to help with increasingly easy to access. Other rained attain assisting Simba to deal with the process themselves. So, for example, a client might not want any help whatsoever at lodging a claim until such times as they receive a defence and counterclaim. The clients wanted and bundle service where they cherry picked the elements. They see the value off instructing a lawyer to help with. Now. We certainly know from the comments made by consumer clients that using on bundled legal services makes them feel parts of things that this is an enhanced feeling of being included on generally empowered, particularly in certain cases such as family and immigration. Our solicitors obviously have to balance this with the duty to act in their client's best interests. On the concern is that the risks associated with them bundling, which could be subject to negligence, claims, however, the S R, a very firm that these could be managed by implementing a clear process and taking sensible steps. So to achieve this, you need to set boundaries and manage client expectations. Generally, the's process will take dedicated time to plan and implement with all the pieces and communications outlining and reminding the client what they're being given on what they asked for. It also involves you clearly agreeing the exact scope of the services and cost implications outlining what tasks are and watch isn't included, making it clear that the client responsible for certain things and will need to do certain things clear clarify implications, including costs of the client agrees a fixed costs costs but then asks for any additional work to be done on Be prepared at all times to refuse work. If you don't believe that on bundling is in the client's best interest or you have other concerns, for example, the client by in their efforts to get you to offer them the unbundle service is actually clearly withholding information or giving you inadequate information in the nephew just to save costs. So now we look at how long will it take you? So once you've established the scope of the work that you have agreed to do, it would be easier to establish how long it's going to take you to do that. The complexity of predicting how long a matter will take will take you depends on a variety of factors, including the type of work and who is doing it, including US. Mr. Justice Mosque in pointed out well illegal businesses who systems and processes enable it to conclude matters rapidly on those with greater professional knowledge and skill. Allow the sect setting of 1/3 price for the job, not just a cost based on an hourly rate, so it's time to turn this to your advantage. It also means can considering issues which make a difference to this time spent doing something. For example, changes in research is the more than one client involved potentially more communication, but also research across a applied across more than one matter on the same subject. Is there 1/3 party involved? You're gonna have to chase. Those is will be potential delays will be more work. Now we look at efficiency matters, so things like tools so using appropriate tills will make you more efficient if they utilise properly on. I'm not suggesting that you can cut corners or quality in any way, but rather that you take the time here to do understand the developments on technology and how they can impact on what you do. Eso is theorists a piece of software out there that could make your job easier. Can you create your own templates for work that you know is repeated on work within that process system, The assistance allow for easy time recording Andi. If not, what else can you do that can you use to help? So systems like toggle dot com create very easy time recording, which isn't going to mess up your audit trail if you're whilst you in test mode of this, that it has a very good reporting functions on the free or low cost versions. And you can anonima Eyes data. If you're concerned about data security here by just use a bit of a single file number number if if the storages have concerned, because it is cloud based tech for you to use. But that will give you a new indicator whilst your your bedding in theory early parts of of a fixed cost pilot. Eso who does the work well, the the types of steps will enable you to an examine exactly who needs to do the work. And small business owners will almost inevitably do the work themselves because of the cost involved in getting others to do it. And if this sounds like you, you need to ask yourself, When did you last examine your processes? Have you thought about outsourcing part of the work involved? Are you creating new letters, give or take for every new matter? Andi, are you working in a manage processed environment already, or you doing everything spoke because that's the way it's always been done. So if you do the calculations as a business owner, it's almost certainly that it costs you mawr to do the work yourself, because you don't have that time to focus on building your business and bringing you more work. Andi If it's a cash flow issue, then asking for payment obviously in advance for a least a chunky deposit of what you're about to dio on, then talk about direct debit and payment schedules with potential outsources etcetera so that everybody is in three. The that the same boat, and as people are paying you, it then trickles through if you're using on absolute service, looking at disbursements again. Obvious. But one which the S. R. A and research of consumers found has caused a lot of issues in the past, dependent on the legal services that may well be dispersement, such as court fees exception. And you need to make this very plain to clients at the outset, emphasizing much more than you probably would think. A normal person would need to hear it on more often, and then you may have considered, would be polite in the past on that's because it's very it's second nature to us, but it isn't on. People have a tendency to tune out. Unexpected expenses on disbursements have traditionally fallen into that category. So if you are charging, say, a £499 cost, then you need to remind them there's an extra 20% on top of that movie 80 if you're charging the 80 on on top, and also that there are additional costs of disbursements and you keep on doing that and you keep on reminding them where they are when they're likely to be paid so that they can bunch it. And of course, there's always a risk when it comes to fix costs, particularly in areas such as litigation, which even the most experienced professional could be difficult, confined, difficult to predict. But the S R. A. On this occasion, and this is a change from how they behaved in the past, firmly believes that these can be overcome, Andi, that the smaller businesses will successfully thrive on fixed costs and are doing so now. So thank you for your time and joining me on the short seminar. Please look at the other titles around this subject. Another practice management topics on the date of your website