Sweet, Someone Who Can Clearly Describe the Problem with Under-Billing

I’ve posted before on the problem of under-billing here and here and for different reasons including several seminars I’ve been involved in of late have been thinking a lot about the problem of under-billing and what a practice killer it can be. I think a decent analogy would be the issue of pricing a house to sell. So my wife and I have a semi-regular ritual of watching TLC’s Property Ladder on Saturday mornings. It’s a program about renovating homes and then flipping them for a profit. And after watching many episodes one realizes the importance of pricing the home for sale after all the renovation is complete. Frequently the first-time flippers will make all sorts of mistakes and go over-budget and miss their timelines, ect., BUT, regardless of how well the flippers did on everything up until the open house (good or bad) if the home is priced improperly the flipper will often be in big trouble and not sell the house.

It’s similar to pricing your legal services. You can do everything else right such as actual lawyering, business management, even marketing and yet really not retain clients and build the kind of business you want if the price ISN’T right.

Trey Ryder’s weekly e-mail marketing newsletter did a great job of explaining this under-billing/under-charging problem (as an aside, the e-mail newsletter is a free sign-up and often quite informative).

Here’s a blurb that underscores the big problem…

ADVICE: I encourage my clients to charge on the high end. It’s much better to be the most expensive lawyer in town and have people appreciate your knowledge and experience — than to be the cheapest lawyer in town and have prospects question your skill.

Certainly, not every person in your city can afford you. But you don’t want everyone as a client. If only 30% of the population can afford you, then ask yourself if you can earn a good living from that 30%.

Not long ago I received a call from a tax and estate planning lawyer who was seeking high-income clients. He wanted as clients only people who had incomes in the top 5% of the local population. But he wasn’t sure enough of those people existed for him to launch a marketing effort. His market area has a population of 2,000,000. 5% of that number is 100,000. I explained that if he got only 1% of the top 5% as clients, he would still have 1,000 new clients.

And while 1,000 new clients seems overwhelming, it points out that the number of prospective clients in almost any target audience is greater than most lawyers care to handle.

No matter how narrow the audience you’re trying to reach, you can probably find hundreds of prospects in that target audience. The key is having a competent marketing program that can effectively identify, reach and harvest those prospects so they become your clients.