Five Initial Steps to Raising Your Hourly Rates

This is the first in a series of posts about one of the most important and impactful decisions a law firm can make: how to increase your hourly rates. Law firms and other professionals that charge by the hour often leave thousands if not millions of dollars on the table by not having a strategy for determining what hourly rate to charge and how and when to communicate them to clients. Too many professionals rely on “Happy New Year! We’ve raised our rates” notices. There is a better way.

Five Initial Steps to Increasing Hourly Rates


  1. Start With New Clients

The easiest way to think about increasing your fees is to focus first on what fees to quote to new clients. Raising fees for existing clients is more complicated because you must deal with their expectations, the history of how you’ve dealt with them in the past, and other factors. Thus, the fastest way to increase your fees is to quote a higher fee to the next new potential client with whom you communicate.

  1. Resistance to Your Fees is a Good Thing

Before delving into the details of how to increase fees it’s important to have the right mindset about your fees. Although lawyers tend to have a reputation for being confrontational, the reality is that many lawyers approach the process of talking to potential clients about fees with the attitude that they should avoid disagreement at all costs. Trying to minimize objections is not wise. If you spend a whole year or more without any potential clients objecting to the fees you quote, you are almost certainly not charging enough for your services. Your goal is to generate just enough objections to know that you are not leaving lots of money on the table. It is of course possible to have too much resistance. If, for example, half of your potential clients object to your fee or fail to sign a fee agreement it is certainly possible that you quoted too high a rate. But in our experience the opposite is much more likely to be the case.

  1. Quoting Higher Fees Can Make You More Attractive

Too many professionals assume that potential clients are looking above all to spend as little as possible on their services. That worldview is derived in many ways from notions of traditional economics in which humans are solely motivated by financial considerations. But the reality and psychology of how potential clients decide to retain lawyers and other professionals is much more complicated. Because professionals provide services that are perceived to be important, it is a mistake to assume that potential clients are always looking for the cheapest alternative. And the more what you do is perceived to be important, the more attractive it is to quote a higher fee. Consider the extreme example of the loved one who needs lifesaving brain surgery: Who is going to go home and report to their significant other that they found the cheapest surgeon in town? In general, the less the potential client can fully evaluate what a professional does, the more likely they are to conclude (not without justification) that someone who quotes a higher price might be a higher quality provider.

  1. The Psychology of Negotiations

There is an important additional factor that comes into play when deciding what initial hourly rate to quote to a potential client. Not only are higher fees potentially attractive in and of themselves, but most negotiations allow you to quote a higher initial rate and then reduce it if you must. Thus, for example you can start by quoting 695 an hour and then seal the deal by agreeing to reduce the rate to 675 an hour. But it’s very hard to start low and then substantially increase your fee during the course of a single negotiation. Thus, if you initially quote $325 an hour, and then find out that your potential client is used to paying much more, you will be stuck with the fee you first quoted.

  1. Resist Quoting a Rate Too Soon

The most common mistake that lawyers make is when communicating their fee is to disclose it before they collect enough information to put their fee in context. Every hourly fee that is quoted can sound pricey if devoid of context. Given that the federal minimum wage has for approximately 20 years been $7.25 an hour, every hourly rate quoted by every lawyer can sound ridiculously high. Is $500 an hour expensive for an experienced lawyer? Is $295 an hour a lot for a paralegal? These questions are unanswerable on their face. To know whether a fee or hourly rate is high or low you must be able to compare it to something. Moreover, it’s especially important that the potential client be put in a position where they can compare the quoted hourly fee to what is at stake for them or some other measure that they understand. Thus, if the CEO of a company looking to acquire a $10 million competitor is quoted $500 an hour that rate might sound like a bargain given what the lawyer is helping the client accomplish. There are differences in what different clients expect in terms of practice area and geographic location. But as a starting point, wait until you and the prospective client have discussed the context for what the lawyer will try to accomplish for the potential client.

The Importance of Mindset

What do all these steps have in common? They all relate to a mindset in which the lawyer has confidence and exhibits patience.  When a lawyer approaches the prospect of discussing a fee with anxiety and trepidation they tend to rush through the process, thereby undercutting their value. To be sure, it can be difficult to maintain calm especially when economic times are tough, and you feel desperate to obtain a new client. But if you want to raise your rates, slow down the process by collecting more information, and most of all trust that you are worth the rate that you quote.

There’s an old maxim in sales–that the first sale that you make is to yourself. And that is especially true when lawyers quote fees.  If you don’t believe you’re worth it, neither will your potential client.

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