Toby Brown, Chief Practice Officer at Akin Gump, has built pricing and project management programs at three AmLaw 50 firms. He is also the founder of LMA’s Client Value SIG. On June 17, he gave a presentation that covered the current state of law firm profitability and pricing.
Toby began his presentation with a review of ways in which firms measure profitability. He then talked about the importance of discussing pricing with both attorneys and their clients. He noted that, when clients are asking for discounts, it’s critical to determine what is driving this request – do they need predictability, have a cash flow problem, or want a fixed fee? Once their “pain” is determined, a budget can be built, which Toby recommends creating from the top down (i.e. starting with a budget number). He also addressed the increasing role of procurement at many companies and how that is impacting pricing, noting that it is important not to ignore the role but, through asking questions, determine what the procurement team wants to achieve.
Further, Toby discussed the fact that clients are starting to segment their work into three tiers – 1: Bet the Company, 2: Mid-Level Risk and 3: Nuisance. He noted that many firms are pursuing the Tier 1 work, which is shrinking, and suggested that firms consider Tier 2 and 3 types of work as opportunities to deepen client relationships, which is a strategy employed by the Big 4 Accounting Firms.
Finally, Toby suggested that professionals who are involved in pricing, including the marketing and business development teams who are the first line when reviewing RFPs and pitches, partner closely with the firm’s finance departments, as they have valuable information to share about profitability.
Want to learn more about pricing strategies for law firms? Toby is the co-author of a book on the topic and has an award-winning blog:
Law Firm Pricing: Strategies, Roles, and Responsibilities
3 Geeks and a Law Blog
By Aileen Hinsch, Knapp Marketing for the July/August 2014 Issue of the Capital Ideas Newsletter