Law Practice Management Asked and Answered Blog

Category: Fees

Nov 17, 2015

Law Firm Fee Increases – Should We Increase Our Fees?


I am the partner in charge of finance at our 12 attorney litigation boutique firm located in downtown Chicago. For the past two years our profits have been down and we are considering raising our rates but we are concerned that we may lose some of our corporate clients. We welcome your thoughts.


Raising fees is one approach you might consider. Clients are starting to push back more and more concerning legal fees. If you are at the high end of the rate scale I suggest that before charging off and raising rates you step back and conduct a process review by using an approach similar to the following:

  1. Pull a random representative list (by timekeeper and type of matter) of matters that have been concluded during the past six months. Say 10-20 matters.
  2. Calculate the effective hourly rates for each matter overall as well as by timekeeper class. (partner, associate, paralegal)
  3. Compare the calculated effective rate to your internal standard time billing rates as well as to external benchmarks. (Other firms from published survey data) How do they compare? What did it cost to staff the matter?
  4. Review the time detail for each of these matters and ask questions. You might want to flow chart and document the work flow. Is the firm working smart? Is time being dumped on these flat rate matters so that a timekeeper's hours look good on the production reports?  Is the firm using the right mix of paralegals and attorneys to staff the work? Is there wasted or duplicative effort? Is technology being used? Can work steps be eliminated or reduced? Should the firm consider a "limited representation" unbundled option?
  5. Pilot test a few new approaches and measure the impact upon profitability.

Keep in mind that raising fees is one way of improving profitability. There are other ways as well. In today's competitive environment. Working smarter, efficiently, and more effective is another.

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John W. Olmstead, MBA, Ph.D., CMC

Sep 08, 2015

Law Firm Profitability – Increasing Fees & Risk of Losing Business


I am the managing partner of a 14 attorney estate planning firm in Lexington, Kentucky. We took a hard hit in 2008 when the recession hit and have just been recovering over the last couple of years. Business is up but profits are still flat. We have not raised our hourly billing rates for several years for fear that we will not be competitive and will lose out on business. However, we believe that we must increase our billing rates and are concerned. What are your thoughts?


I would bet that you are leaving money on the table and you should in fact increase your billing rates. Often I find that law firms are more concerned about their rates than their clients are. You must remain competitive for the value package (including your experience, expertise, and reputation) that you are delivering. This does not mean being the cheapest estate planning firm in town. Some of my most successful estate planning firms are those charging the highest fees. 

Here are a few thoughts:

  1. Do some research on the going rates in your market area for estate planning law firms of you caliber.
  2. See if there is data available from your professional organizations such as The Academy of Estate Planning Attorneys, The Academy of Elder Law Attorneys, etc. 
  3. Determine if your competitors are using other than time billing fee arrangements.
  4. Explore alternative billing arrangements for estate planning matters. Many of my client law firms are using flat fee arrangements for estate planning.
  5.  Since your clients are individuals and typically single matter clients (at least initially) experiment (pilot test) with new prospective clients with increased rates and determine whether there is "pushback" and to what extent your prospect/client conversion ratio is being impacted.
  6. Offer prospective new clients more than one option.
  7. Initially leave your old rates in place for existing clients with open matters.
  8. Measure and evaluate impact.

You may find that clients are not as concerned about your fees as you are. 

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John W. Olmstead, MBA, Ph.D, CMC

Feb 04, 2015

Law Firm Financial Performance – Billable TIme and Fees


I am the managing partner of a four attorney (all partners) estate planning firm in Tulsa, Oklahoma. We are all working hard but I do not believe that we are making the money that we should be. Last year our fee collections were $600,000 and our net income $250,000 which was the total amount that was available for partner compensation. Thus, we each made $62,500.00. Each of us have been practicing for over 20 years and I believe this is totally unacceptable. We appear to be busy and have plenty of work. I would appreciate your thoughts.


I agree that the firm should be doing much better. Regardless of practice area (unless you are an insurance defense firm) and where you are located I believe you should be averaging $300,000+ fee collections per lawyer. You are averaging $150,000 per lawyer. You expenses of $350,000 ($67,500 per lawyer) is actually low and not the problem. You need to dig into the numbers and look into why the revenue numbers are not higher. Usually the culprits are lack of business, inadequate billing rate (or effective rate for flat fee matters), not putting in the hours, or poor time management and time keeping habits. Each attorney should strive for 70% of worked time to be billable (client production) time. Lexis has published a couple of studies on billable hours that you might find useful - Billable Hours Survey Report, Non-Billable Hours Survey Report and Where Do all the Hours Go

I find that many estate planning firms that do much of their work on a flat fee basis often are not realizing effective rates anywhere near their target time billing rates.

Look into the numbers and determine the culprit or culprits and then develop a strategy for dealing with each one – marketing to improving work ethic and time management and time keeping habits.

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John W. Olmstead, MBA, Ph.D, CMC

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