The hidden dangers of discounting your fees

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Today’s post is a short rant about the practice and dangers of discounting your legal fees, followed by a useful collection of 20 questions I found earlier that you should be asking yourself if you are discounting your fees.

I’ll start off by disclosing that I hate it when lawyers discount their fees. I especially hate it when this is done without any request by the client – a far more prevalent practice than is perhaps admitted – or consultation with others in the firm (including the practice of discounting on other lawyers’ rates in your firm without even asking them if this is OK!).

While there are a whole host of reasons why I dislike the practice of discounting fees – not least of which is that you lose brand quality (both at the individual lawyer and firm level) doing this, probably the best explanation of why this is both crazy and counter-intuitive for law firms to practice is explained by Stuart Dodds’s “1-3-4 Rule“, namely that:

“a 10% discount reduces profit by 30%, which in turn requires 40% more hours at the discounted rate to maintain the original profit.”

If that’s not enough to put you off ever offering a discount again, then I recommend you read “Dangers of Discounting Your Price: 20 Questions Worth Asking”  on Marker Hunter’s Sales Hunter blog.

Each of these questions alone should help you to clearly see the dangers of offering your clients discounts. Collectively they should be the death nail of the practice!

Needless to say, if you are the type of lawyer who likes to offer you clients discounts, then I would like to recommend that you print out and pin to your office wall both Stuart’s “1-3-4 Rule” and Mark’s 20 questions before you next offer an unsolicted discount to your client!

-Rant over-

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* Dodds, who is currently Director, Global Pricing and Legal Project Management at Baker & McKenzie LLP, has just published ‘Smarter Profit, Smarter Pricing’ which is getting good reviews.

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