Monday, July 31, 2006

Fixed Pricing is Obvious. . . So Why Doesn't Everyone Do It?

One of the most amazing things about Exemplar's fixed-price model is that everyone finds it to be so intuitive. It is so obvious that customers prefer it (even lawyers -- just google the words "billable hour" and see what you get. . . everyone hates it. If you find a positive comment on it let me know!) that everyone asks me why everyone is not already doing it. I have had the pleasure of speaking with many attorneys in practice under the "old" model and I consistently hear them say "well, I just don't know how long it will take." Curiously, I ask them how much time they spend at the very beginning thinking about how long it might take so they can give their clients some guidance and most say "well, none really, because then I would not have the time to get the work done and plus, I can't bill them for my effort!" I don't know about you, but that sounds pretty lazy to me (not to mention a feeling of entitlement to get paid for every single minute of time spent on an activity). What kind of statements does that make about our industry? What does this say about how service minded we are if we operate under that model? Do you think I would ask you questions I did not know the answer to already?

The next most frequent response I get is "what if it gets out of hand or the project goes in a different direction. . . I can't price something if I don't know where it might go." This is where I take the axe to the linear thinking log and remind them that customers do not expect their attorneys to have a crystal ball and tell them the future. They are not asking us to put a price on all of the uncertainties. They DO expect a price on the things that are certain and even likely to happen. They would not be hiring you unless there was at least a certain amount of legal work that is certain or likely to happen. Therefore, there is no excuse for being lazy and billing by the hour when you know that a certain amount of work will occur, and you need only care enough about your clients to actually take a moment to tell them how much that will cost (it is the least you can do, really!). Then, there are no surprises. If the work goes outside the scope of what is known, your customers will understand that more action needs to be taken at an additional charge. With good communication and clarity as to the work being performed, you can give your customers what they deserve (clarity) and free yourself from counting every 6 minutes of your life. Exemplar Law Partners has not had a single customer ask us to bill them by the hour (that is telling) and our people certainly enjoy focusing on building relationships rather then building a timesheet.

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