11 ways to turn your fee and billing policies into a competitive advantage

friday, 18 april of 2008

11 ways to turn your fee and billing policies into a competitive advantage

by Trey Ryder

One important purpose of marketing is to show that your services are well worth your fee.

You want prospective clients to conclude that you have such in-depth knowledge, skill, judgment and experience that they would be foolish to hire any lawyer other than you.

Whether someone hires your services boils down to the value/price equation, which says: A prospective client will hire your services as long as he believes that the value he receives from you is (1) greater than the price he pays, and (2) greater than the value he would receive from another lawyer for the same price.

Value is not a fact; it’s a perception. If your client thinks he’s getting value from you, he is. If he thinks he isn’t, he isn’t. Truth and fact have nothing to do with value. It’s all in your client’s mind. How your client perceives value can differ greatly from how you perceive it.

When a client opens your invoice, his value/price radar is at full alert. If he doesn’t have a good idea of the amount you’re billing, he can do little more than hope for the best and prepare for the worst.

You’ve heard people talk about near-death experiences, reporting that their lives passed before their eyes. For some clients, opening your invoice is akin to a near-death experience. As your client slits opens the envelope, he replays in his mind all the things you have done for him during the latest billing period. As he nears the final number at the bottom of the page, he asks himself one last time, “Is the amount I benefited from my lawyer more or less than the amount I owe?”

You always want your client to feel that the value he receives from you is greater than the price he pays.  Part of how your client perceives your value -- and responds to your invoice -- is based on how you bill.

Here are 11 ways to turn your billing policies into a competitive advantage:

way 1:  When possible, offer your client his choice of fee and billing options.  Clients often believe your fee is one area that is completely beyond their control.  When you allow clients to choose the way you calculate your fee, they are usually happier and more comfortable with the outcome because they took part in making the decision.

way 2:  Show your client what your fee could be under the various methods you offer.  Then help your client see which method benefits him most.  The more you explain your fee and your client’s options, the more your client sees that you are trying to help him make the decision that suits him best.

way 3:  Provide a detailed description of the services you performed by each entry on your invoice.  A direct relationship exists between detail and credibility.  The more facts you include that describe what you did, the more credibility you give to your invoice.  In the alternative, the less information you provide, the less credibility your bill has, which increases your client’s skepticism.

way 4:  Don’t charge for everything you do.  Your client really likes to see N.C.s on your invoice.  They may reflect a quick e-mail response or a quick question you answered on the phone.  Whatever task you performed, the N.C. helps balance the figures that appear for the more time-consuming services.

way 5:  Bill for in-office incidentals only when your client exceeds his monthly allowance.  Charging clients for what they believe is routine office overhead always results in bad feelings.  Specifically, clients see photocopies as the flag bearers of inflated charges.  While many clients won’t raise the issue -- for fear of being labeled cheap or unfair -- copies are usually a sore point because nearly everyone knows what photocopies cost.

When your client sees a bill for photocopying, he thinks:  At my down-the-street copy place, I can make a self-serve copy for five cents.  Yet my lawyer charges me 50 cents per copy.  This is clearly unfair.  It’s the same complaint people lodge against hospitals.  I can buy an aspirin at the store for ten cents.  But on my hospital bill the charge for one aspirin is $4.

Here’s the greater problem:  When your client sees a charge that he thinks is excessive, he can’t help but think your other fees and charges could be excessive as well.  It’s like when a lawyer catches a witness in a lie.  No matter how small the lie, it puts that person’s credibility in question.  If you ordinarily charge for incidentals, try this instead:  Set a monthly overhead allowance for each client based on the amount of fees you expect to collect from that client.  This allows you to absorb routine overhead up to the maximum you set, without having to foot the bill for excessive costs.

way 6:  Bill for rapid delivery only when the fast service is at your client’s request and not the result of your tardiness.  A lawyer once charged me for a Federal Express shipment because I told him I needed the documents in a hurry.  The problem was, he had promised the documents to me two weeks earlier and FedEx would not have been necessary had the lawyer finished the work on time.  When I brought this to his secretary’s attention, she gladly removed the charge.

way 7:  Bill outside services at their actual cost.  I started this years ago and clients regularly mention how much they appreciate it.  I tell clients that when they hire me, they have full access to my suppliers and business contacts at my cost.  I don’t mark up any outside services.  Since many marketing and advertising consultants mark up outside services by 100 percent or more, my at-cost policy adds value to my services.

way 8:  Proofread every bill.  Clients expect that you prepare your invoice with the same care and attention that you use to perform legal services.  A mistake on your invoice arouses suspicion that you might also make mistakes in their documents.  In item #6 above, where my lawyer’s delay resulted in FedEx charges on my bill, my lawyer had actually billed me twice for the same FedEx shipment on the same invoice.  This lawyer was very smart, but when I saw how little attention he paid to my bill, I could not risk continuing to use his services.

way 9:  Always discuss fees and charges in advance, before prospects hire you.  Fees are always a sensitive issue, even if your client doesn’t bring up the subject.  Show every prospect that you want to be up-front about fees and how you bill.  Start by explaining everything in advance.  Give your prospect a written schedule of fees and charges.  State everything in a positive, supportive way.  Help your prospects see that hiring you is a good business decision.  How you charge should be one of your strongest competitive advantages.  If you find something about your invoice or billing method that clients don’t like or don’t understand, change it so clients see how your billing practices work to their benefit.

way 10:  Always discuss potential problems in advance.  If something unforeseen happens -- or causes an unexpected increase in your client’s bill -- take a few moments to call and explain it to your client.  If you can offer your client different ways of handling the matter, make that clear as well.  The last place your client wants a surprise is when he opens “the envelope.”  If you think your client might perceive your invoice in a negative way, call him and discuss it.  Explain what you recommend.  Ask if your client agrees with your solution, or if he would like you to review other options.

way 11:  Invite questions about your invoices.  Make sure prospects and clients know that you are eager to explain anything on an invoice they don’t understand.  Admit that you might make a mistake and that you welcome the opportunity to review any invoice that raises a question.  If you don’t willingly discuss fees, one day you may find that your client leaves you without explanation.  And, truth be told, the reason may be because he thought you always overcharged him -- or because he never understood your invoices.

You can gain a competitive edge over other lawyers by (1) calculating fees and charges in ways that favor your clients, and (2) discussing those methods openly and in advance. Lawyers who hesitate to discuss fees may discover that their clients look elsewhere for legal services. But lawyers who discuss fees and explain how they charge add value to their services and seize yet another major competitive advantage.


© Trey Ryder

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