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Defending Your Rates

Altman Weil’s annual Law Firms in Transition survey is always an interesting read. In taking the temperature of managing partners and chairs of hundreds of the country’s biggest firms, Altman provides valuable information for in-house as well as outside counsel. In this year’s survey, for the first time in many years, firm leaders were buoyant. “Lawyers are busier,” report Thomas S. Clay and Eric A. Seeger, the authors of the survey report. “Firms raised their rates more aggressively than in previous years and clients paid the increases.” Unlike previous years, however, when fewer than half of firms would cop to aggressively increasing billing rates to boost profitability, more than 80 percent of the 500 biggest firms in the U.S. fessed up this year. Interestingly, Altman tacked on a new question this year that elicited responses that likely raised some hackles with the CLOC crowd. “If challenged by a client,” they asked, “how would you justify your firm’s most recent rate increases?” The report categorizes the responses and ranks them by frequency.

  1. Our costs are up. “Firm costs continue to increase each year and many clients now have third-party vendors ‘auditing’ our bills (often unfairly) which has significantly reduced profitability.”
  2. We're delivering greater value. “Our rates might be higher, but the bills to the client might not be because of increased efficiency.”
  3. We are cheaper than competitors. “As a regional firm, we compete against large firms with substantially higher rates but can provide the same quality of sophisticated services at significantly lower rates.”
  4. Our increase is in line with the market/peer firms. "We adjusted rates higher recently because we were well below our competitors.”
  5. We need to maintain our profit margins. “Increases are a necessity since a significant number of our clients just want an ever-increasing discount.”
  6. Demand for our services is high. “We continue to charge rates that are in the range for elite firms like ours and there remains high demand for our services.”
  7. It's time. “Rates have not been increased in ___ years (insert whatever the case may be).”