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Get used to creative pricing

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The cushy, stable and safe legal profession is a thing of the past. With corporate clients holding the purse strings and exercising their right to derive the most value from their budgets, law firms will increasingly need to fight for new business.  Many companies are overhauling their relationships with law firms and even changing their procurement processes, which now require legal services providers on their panel to bid for every piece of work.

To be profitable in such circumstances, an in-depth understanding of the cost of producing legal work is required. This in turn will give law firms the capability to develop creative pricing to ensure profitability. However, devising new and value-based pricing proposals (away from hourly billing), requires a change in mindset. Steeped in the cultural mindset of many law firms is the view that law is an art form, a creative process that cannot be industrialised. The reality though is that the majority of the work is repetitive and automating those processes can help reduce the cost of service production, while allowing the lawyers to focus on the truly unique aspects of the individual cases they handle.

Fees charged must be accurately based on expected duration of tasks, level of personnel best suited to matters (i.e partner, associate, para-legal, etc.), combination of fee models to maximise budgets, discounts offered, outsourcing costs;  and so on. This requires developing a pricing structure that best meets the needs of customers and optimises the law firm’s resources to deliver services profitably in a way that mainstream enterprises do.

Legal process management (LPM), a discipline that applies project management skills to legal matters, offers such a best-practice framework encompassing scoping, planning, devising profitable permutations and combinations of varied pricing schemes – in addition to supporting execution, monitoring, management and completion of legal matters.

Overtime, such an approach provides visibility of the type of pricing that is more profitable than others, the areas where organisational processes need to be fine-tuned and where new methods need to be devised. This kind of information will enable firms to conduct more forward-looking price analysis and stay-ahead of the curve of evolving pricing models, identify new types of costs and upcoming business trends to stay competitive.  To customers, it offers complete transparency on pricing.

With clients actively questioning law firms’ fees in the face of tight budgets, elementary to developing innovative and yet profitable pricing is the complete understanding of service delivery processes and the cost of service production. In addition, firms must have processes in place to ensure that the work secured is delivered to plan and within budget, making modifications and improvements along the way to meet the service and profitability goals. LPM and business intelligence strategies facilitate this.

About the Author:

Stu Gooderham leads client engagement for LexisNexis Enterprise Solutions' ERP solution LexisOne in the UK and US markets. Consultative in style, he works closely with law firms to support their decision-making process for the adoption of LexisOne; and remains personally involved in projects from inception through to go-live and beyond. The implementation of LexisOne at Fieldfisher is the most recent example.

With a focus on the Top100 law firms in the UK and the AMLAW 250 in the US, and thriving in client-facing roles, Stu continues to play an instrumental role in educating the legal market on the business benefits of ERP. He was the founding member of the LexisOne Future Insights Group, which saw senior representatives of the Top100 law firms come together to brainstorm and articulate the dynamic nature of demands that clients had of their law firms in the 21st century. He has used the insight gained from this forum to convincingly illustrate to the market how LexisOne is well-placed to overcome many of the common problems faced by law firms – including continuous improvement in customer service levels, client retention, driving new business and always being operationally optimised.

Stu joined LexisNexis Enterprise Solution, following the company's acquisition of Redwood Analytics, a business intelligence software provider.

Prior to these positions, Stu worked at Oracle, selling the Oracle 11i ERP system to the legal market. He is an engineer by training and also has experience in the manufacturing sector.

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