Practice Management

Discounting At Law Firms

By Brian J. Ritchey

I received an email from Brendon Carr, foreign legal consultant and host of the Korea Law Blog, regarding a recent post of his, “I Don’t Care What You Charge; Whatever It Is, It’s 15% Too Much”.  The post discusses a request from a new client for an across-the-board 15% discount for his services. 

In my experience working with law firms, discounting is the most difficult thing to change.  Where mark-downs to work performed can be addressed internally, discounting becomes an entitlement to a client.  The only ways to recoup the loss in value is to increase rates at a higher percentage than other clients, pad your hours by billing for things you may otherwise not charge to a client, tie the discount to high volume, or tie the discount to fast payment of invoices  The first two are not conducive to a positive trust relationship with the client.

In my opinion, discounting should be avoided at almost all costs - the exceptions being:

•  In return for high volume of business that compensates for the reduced value of your time.  There is nothing shameful in requesting from a client who asks for a discount to provide estimates of business it will provide and tying the discount to their ability to provide that level of business.  Then you can agree to the discount, but will provide it once the threshold business the client sends you is met. 
• In return for fast payment of invoices.  This encourages fast payment and thus a positive effect on cash flow.

When in a situation such as that of Mr. Carr, several questions come to mind:

• Is asking for a discount up front damaging to the relationship between attorney and client?
• Does mandatory discounting encourage mark-up of hours?
• If it becomes known that your firm discounts, does it create a perception by clients that your firm expects rate negotiation and thus overcharges for its services?

What do you think?  Add a comment below to share your thoughts.

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Full post as published by More Partner Income on April 09, 2008 (boomark / email).