FINANCIAL MANAGEMENT
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Creating and Renewing
Client Relationships and Fee
Arrangements
by Keith Lipman of Prosperoware
Client purchasing behaviors have changed. Outside counsel
spending under alternate fee arrangements (AFAs) jumped to
35.6 percent of total spending in 2015, up from 21.7 percent in 2013.
Reporting this in their "State of Alternative Fee Arrangements 2016,"
BTI Consulting cited improved client focus, predictability in budgets,
a more streamlined approach to work and double-digit savings as
reasons.
The problem is that law firms rarely take a holistic, strategic
approach to their fee arrangements, instead thinking only about
one client at a time. To maintain profitability and work efficiency,
firms must standardize the process of creating and renewing client
relationships and fee arrangements.
The Rise of Discounts
While a large class of clients continue to use standard hourly
arrangements, those rates are habitually discounted. Discounts are
the least strategic approach to pricing change and yet are widespread.
According to the Altman Weil 2016 "Law Firms in Transition Survey,"
a median of 21 to 30 percent of all law firm fees came from discounted
rates in 2015. In larger firms, discounted fees accounted for a median of
31 to 40 percent of total fees.
Altman Weil states that a large majority of firms (88 percent)
report they are initiating conversations with clients about pricing and
budgeting and that nearly all firms (97 percent) bill at least some of
their work on a basis other than traditional hourly rates.
Ralph Baxter explains in his blog post "Straight Talk Between
Corporate Clients and Their Law Firms" that clients like their law firms
and would prefer to continue using them, especially since engaging
Creating and Renewing Client Relationships and Fee Arrangements
