I live near Wellesley, Massachusetts, a Boston suburb usually described with words like “leafy” and “tony.” (I get “leafy,” but I’ve never really figured out “tony.”) Think soccer moms in yoga pants and BMW SUVs. On the edge of town, where it is less leafy and tony, there is a small tailor shop. The owners are immigrants; English is not their first language. This is clear from the computer-printed signs on their windows and walls. My favorite sign is the one behind the register:
“YOU NEVER LOOKED SO EXPENSIVE!!”
(Unnecessary quotation marks and extra exclamation point included.) I’m not exactly sure what they were trying to say. Maybe expensive wasn’t the word they were going for. Good? Chic? Tony? I don’t know. But the amusing phrase has stuck with me, and with many of my neighbors. I’m not even sure of the name of the shop, but everyone knows what I mean when I mention the sign. It’s a tailor-shop meme.
And a good one. In fact, I’d like to see small-firm lawyers make a similar sign and tape it to their mirrors. (Yeah, I know. I’m not a mirror-message taper either. But indulge me here.) Because the tailor-shop meme might remind them not to make the single biggest mistake that small-firm lawyers usually make: pricing their services too low….
A good friend of mine recently left her successful practice working for an Am Law 100 firm to open her own three-lawyer shop. As a partner in the big firm, she used to bill at $700 an hour — pretty good for Boston. After she opened her new firm, I asked her what her rate was. (I also asked her why the hell she was billing hourly, but that’s a different discussion.) She told me, “$450.” So then I asked her:
“Have you gotten stupider since you left?”
(Tact isn’t my thing.)
But really. Did she forget the law when she crossed the street to Smallville? Do her twenty years of commercial-litigation wisdom only work when she has an army of paralegals at her disposal? And an office in Prague?
“But my clients want a discount alternative to the big firms,” she whinged.
Hmmm … no. Your clients want you. Maybe you won’t cause them to spend as much now that you’re at a smaller, more agile, hungrier firm. But why tell them that your knowledge is suddenly worth 36 percent less? How do you think that makes them feel? Most likely, it will make them feel like you were overcharging them before.
And what about new clients? The ones who didn’t know you when you were a big $700-an-hour muckety-muck? How do they assess how good you are? Answer: By your price. So when they learn that you bill at $450, they’re bound to think that the work they get from you is worth 36 percent less than that of your former peers at Biglaw.
In-house counsel and other clients say this all the time: “We’re not looking for the cheapest. We’re looking for the best value.” In fact, they almost never want the cheapest. Because buying the cheapest says something about the buyer.
This is why no one ever buys the least expensive bottle of wine on the wine list. Ever. Because no one wants to look like a cheapskate. Not in front of your date. Not in front of the waiter you just met and will never see again. (This is why restaurants make the most margin on the second cheapest bottle. They know that’s where you’re headed. Cheapskate.) Buying the cheapest says that you’re willing to settle for less. That you’re a single-ply-toilet-paper kind of person.
You would never buy a tuxedo from a store that had a sign in the window advertising tuxes for $69. (Saw just such a sign in Boston awhile back. The store closed a few months later.) You would never buy a lobster dinner for $6.99 (the McLobster doesn’t count). And you would never get a will from a lawyer charging you $99. You just wouldn’t. It could be a terrific tux or lobster or will. But it probably isn’t. And the price tells you that.
How we price our legal services is the most important tool for a would-be client to assess the value of those services. Pricing them too low sends the wrong message to clients, and makes them lose faith in the quality of what we’re offering. Sometimes we do it because we think clients are looking for discounts. More often we do it because we lack the confidence to command what we’re really worth.
So man up, boys and girls. Charge what you’re really worth. And remember:
You never looked so expensive! Or tony.
Jay Shepherd has run the Boston management-side employment-law boutique Shepherd Law Group for the past 13 years. Jay also founded Prefix, LLC, which helps lawyers and clients value and price legal services. He writes the ABA Blawg 100 honoree The Client Revolution, which focuses on reinventing the business of law, and Gruntled Employees, a workplace blog. Follow Jay on Twitter at @jayshep, or email him at email@example.com.