Money, Small Law Firms, Solo Practitioners

Do Discounts Encourage Problem Clients?

Conventional wisdom counsels against discounting, but what is the case in favor -- and how can you possibly avoid the issue altogether?

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Most standard law practice management programs counsel against discounts. When given up front, they accustom clients to bargain rates, and if applied at the end of the project, they show a willingness to settle for less than what’s owed, thus setting in motion a tradition of haggling for future cases.  And now, a recent study suggests that there’s a correlation between discounts and collections problems, thus further reinforcing that discounting fees is a bad idea.

But Devil’s Advocate John Toothman, a lawyer who’s built a career on legal fee management, is appalled by advisors who diss discounts. At his blog, Civilian’s Guide to Lawyers, Toothman argues that the reason that many firms wind up giving discounts to begin with is because they never offered clients an estimate of the likely fee to begin with:

For clients, any firm should be willing to give you an estimate, but many do not. Reliable estimates would avoid the largest cause of later fee disputes: The bills exceed what the client can afford, but the client doesn’t find that out until the bills grow or the result is disappointing, or both. Having a serious estimate, or flat fee quote, would help the client figure out if they can afford the lawyer in the first place. Discounts and writeoffs are a healthy sign of fee management by the firm and, if the client bothers to follow the bill, of client oversight, which it is the client’s right to do.

I agree with Toothman on this point. Many of my colleagues who wind up writing off fees typically refused to give an estimate up front, citing too many variables. That’s still no excuse, because lawyers can give a high/low estimate or in some instances assess a flat fee instead. Though there are some clients who will complain about fees no matter what, prevention is the best cure — and the best prevention is a fee estimate.

Toothman also argues that discounts are important because most firms can’t afford to turn away clients who ask for discounts and that many clients can’t afford full-fare fees.  That’s a less compelling argument in my view because some lawyers’ business models hinge on charging top dollar for top-of-the-line services, and not making exceptions even if it means that the lawyer handles fewer cases. Still, for lawyers who haven’t yet reached a point where they have the luxury of turning down lower-paid work, the solution in my view isn’t a discount on fees, but rather, a limitation on the scope of work to be performed. So for example, after evaluating a file, you might estimate the cost of a case as X dollars, but on the assumption that you’ll depose only 3 witnesses. Or that you won’t pursue a particular cause of action that has minimal reward and would be complicated to present. You can also see if clients are willing to do some of the legwork involved in a case, such as compiling documents or completing forms, to keep costs down.

What’s your experience with discounts? Post your comments below.

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Carolyn Elefant has been blogging about solo and small firm practice at MyShingle.com since 2002 and operated her firm, the Law Offices of Carolyn Elefant PLLC, even longer than that. She’s also authored a bunch of books on topics like starting a law practice, social media, and 21st century lawyer representation agreements (affiliate links). If you’re really that interested in learning more about Carolyn, just Google her. The Internet never lies, right? You can contact Carolyn by email at elefant@myshingle.com or follow her on Twitter at @carolynelefant.

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