Successfully Navigating Fee Negotiations: What You Want to Know
Marketing is about more than simply "getting the word
out” – it also involves strengthening your brand and reinforcing it in market’s
consciousness. To that end, pricing is a key component of marketing and
business development. Setting and getting your professional fees encompass a
range of qualitative and quantitative factors, and many lawyers in various
practice areas and industries find themselves in an uncomfortable and
unfamiliar position when it comes time to discuss the details of fee agreements
In our changing economy, it can be challenging to set
a fee for your professional services, and trickier still to actually enforce
that fee. Many professionals find themselves hesitant to ask for what they feel
they are worth because they don’t want to risk damaging nascent client
relationships or allow business opportunities to slip through their fingers.
But there is a way to reach a fee agreement that is beneficial to both parties,
by understanding the importance of negotiating skills, planning, and defining
and communicating value—both the value you bring to the prospect and how the
prospect perceives value in general.
Determining fee structures for legal work can be
highly challenging for those not accustomed to such potentially loaded
discussions. The discomfort both parties generally feel leads them to want the
conversation to be as brief as possible; yet in your desire to reach a resolution,
it’s important to tread carefully in order to avoid selling yourself short. Fortunately,
there are concrete ways to improve the outcome of fee negotiations and make the
situation less awkward and more easily navigable.
There are three phases in the negotiating process: Planning,
conducting, and closing. The first phase – planning – is often given
short shrift, but in reality it is the foundation of any collaborative
negotiation, and therefore the phase in which you should invest the most time.
To begin, it helps to determine how your prospective
client defines value. In order to gain a clear understanding, ask the client
for his or her unique perspective on what constitutes value in this business
relationship. They may not be
approaching the discussion from this perspective, so you may need to gently
probe to help them shape their answer.
This discussion will enable both of you to determine what you really
want in terms of the big picture, not just dollars and cents.
Frequently, a client’s biggest interests involve
reducing risk and increasing their ability to control – or at least predict –
cost whenever possible. In addition to learning about their definition of
value, ask the client as many questions as necessary regarding budget,
deadlines, process and any other information you may need to help you make a
sensible offer. You may be surprised by how willing and enthusiastic your
client is in the fact of such open and honest communication.
How you communicate with your client during this phase
depends on whether you have done or are currently doing work for the client, what
kind of relationship or rapport you have (if any), or whether you are on the
defensive by being pressured to reduce your fees. Some relationships are easier
to navigate than others.
As you move closer to the second phase – conducting
the actual negotiations –create a clear strategy for how you will undertake the
process or risk undermining whatever strength you have established in your
position up until this point. Before the conducting phase gets underway, decide
how flexible you can be. What is your bottom line? What kinds of concessions
are you prepared to make? Prepare yourself to answer such questions as how you
arrived at your price, what is behind your approach, and why you are willing to
make whatever concessions you have deemed acceptable. After you have offered
your proposal, just listen without interrupting. This allows the other side to
communicate their thoughts. Be open to altering your perspective if you hear
something that makes you rethink your position, but beware of committing to
anything on the fly that you may regret later. You can always tell the client
that you need time to think things over before responding one way or the other.
Before negotiations begin, consider as well the scope
of the project at hand. Perhaps your fee agreement covers routine and
predictable work, and you and the client agree to discuss pricing other work –
perhaps at higher fees – as it arises. This gives you a further opportunity to
strengthen communication and build a lasting relationship with your client, as
well as ensuring that you will be compensated fairly for your services.
Negotiations are, at their core, an exchange of
information. Clarify in your mind beforehand what information you are willing
to share, and what information you should not bring in to this exchange. For
example, if you are in need of the work because you have been less busy than
usual, you may not want to mention this fact during negotiations or you run the
risk of self-sabotage. Similarly, it’s important to know your own worth so you
know when to walk away from a negotiation. If the prospect has all the
negotiating power, that is a red flag, and while it can be hard to walk away
from business, you may actually be putting your business at risk if you lock
yourself into a position that may become untenable.
Finally, the bulk of the negotiations should ideally
be accomplished in person, via face-to-face meetings. However, once that
initial connection is established, you can choose to hash out smaller details
of the agreement via Skype, phone or email, if necessary. Once the conducting phase is complete, it is time for
closing, the third and final phase. Take care to close your negotiation on a
strong note, such as, "It seems that we’re in agreement. When do we start?”
Don’t hesitate to ask tough questions and give honest answers. Courage,
determination and fearlessness are admirable qualities in any professional, and
may help give you the advantage during a particularly tough negotiation process.
Determining fees via negotiations can be
uncomfortable, but it is entirely possible to develop the skills that will make
you a bridge-builder and a savvy negotiator. How you handle this subject’s
sensitive intricacies is a marketing differentiator and helps validate you as a
leading expert in your field. Since the goal of any marketing approach is to
generate leads and give you an opportunity to be in front of prospects, your
ability to effectively discuss pricing can make the difference between a
tremendous return on your investment or a series of setbacks and losses.
as a lawyer, the clients you want to work with are not looking for the lowest
rates – most likely they are looking for value: that tricky balance of
qualifications and professional fees.
Show your clients that you’re worth your asking price by tackling the
subject head on with grace: Plan carefully, negotiate openly, and close strong,
and you will be on your way to establishing a fee structure that is a true
win-win for both you and your client alike.