Yesterday, I received an email from my insurance company—one whose name I’ll withhold to protect the greedy. Let’s just say they have the financial means to sponsor stadium naming rights, so they’re far from struggling.
The email informed me that my home and auto insurance premiums are increasing by 50% this year. This comes despite the fact that I haven’t filed any claims, and no justification was provided. Unfortunately, this seems to reflect the current state of affairs in America in 2024.
For over a year, we’ve witnessed prices skyrocket—at restaurants, grocery stores, and particularly in housing costs like rents and mortgages. It feels like everything has become unaffordable, a sentiment best captured by the metaphor of a frog in a boiling pot.
Even lawyers, like other professionals, aren’t immune to these rising costs and must sometimes adjust their fees. Yet, many struggle with managing this process effectively, leading to discomfort for clients.
Is It Time to Raise Your Fees?
A common scenario among lawyers is that they haven’t reviewed or adjusted their fees in years. Understandably, many lawyers are hesitant businesspeople—they engage in commerce out of necessity rather than passion. As a result, critical but non-urgent tasks, like fee adjustments, often get overlooked.
The start of a new year offers the perfect opportunity to revisit your fee-setting practices. With a thoughtful approach, you can avoid the mistakes my insurance company made and implement changes more effectively.
Here are four steps to help guide your fee analysis:
Step 1: When to Adjust Your Fees
Schedule a systematic annual review of your fees, ideally in December, to implement changes in January. For firms handling short-term clients, fee increases can happen annually. For firms with long-term clients, consider raising fees every two years to minimize disruption.
Step 2: Determining the Increase Amount
Opt for modest percentage-based increases rather than round numbers. This approach:
- Aligns fee adjustments with inflation and expense increases.
- Reduces the risk of pricing yourself out of the market.
- Eases the psychological barrier for raise-resistant lawyers.
Start with small increases—2–3% annually or 5% every two years—to ensure your rates remain fair and sustainable without burdening clients.
Step 3: Monitoring Client Response
To assess how clients tolerate the increase, track these metrics:
- The percentage of prospective clients scheduling consultations.
- The retention rate of clients after initial consultations.
If these figures drop significantly, it might indicate the increase was too steep.
Step 4: Communicating the Change
For long-term clients, clearly and sensitively communicate rate changes. Consider grandfathering in existing clients temporarily to ease the transition. For some clients, budget constraints may require exceptions, but ensure any changes align with your firm’s overall financial health.
A Word on Ethics
While lawyers must avoid charging excessive fees, many undercharge for their services. If you’re unsure, consult a professional responsibility attorney to confirm that your rates are both fair and ethical.
By making modest, regular adjustments, monitoring data, and treating clients fairly, you can ensure your fees remain competitive while keeping pace with inflation and market demands.
