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JANUARY 2014 - Berman
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Successfully Navigating Fee Negotiations: What You Want to Know

by Sharon Berman

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 with clients.  

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.
 
Remember, 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.

Sharon Berman is principal of Berbay Corp. Marketing and Public Relations. The website is www.berbay.com. She can be reached at berman@berbay.com.

 

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