������Ƶ

We were delighted to host a virtual event exploring how small law firms approach pricing strategies in an age where clients demand ‘value’ more than ever before.

Our lively session also tackled what the arrival of generative AI means for those running small firms- and why they shouldn’t be intimidated by its evolution. 

Moderated by Law Firm Strategy and Development Consultant Jon Whittle, our panel of experts included Alex Hamilton, CEO and Founder of Radiant Law, Shaun Jardine, Pricing Consultant of Big Yellow Penguin and Joanna Kingston-Davies, COO of MAPD Group.  

Read on for our key takeaways from the session…

How can small firms get flexible pricing right? 

In this first section, John Whittle kicked off the session by reminding us that only 8% of small firms still exclusively bill by the hour. This shift towards more flexible pricing comes at a time of immense pressure, both in terms of recruitment and growing client demands – with 80% of small firms investing in marketing to keep hold of clients, and three quarters of small firms intending to grow their headcount.

Our panel discussed whether the decision to abandon the billable hour is wise – and the key considerations to make when introducing flexible pricing models. Here’s what they found…

1. Adopting flexible pricing: crucial to address the perception gap 

As Joanna Kingston-Davies pointed out, “from a client’s perspective, it [billing by the hour] is absolutely not relevant at all.” For those paying for legal services, being billed by the hour can feel restrictive. In fact, according to a ������Ƶ poll, this contributes to a significant gap in perception between lawyers and their clients, with 80% of lawyers stating they perceived their service to be “above average” but only 40% of clients voting the same way. And with client demands only on the increase this year (with our Bellwether 2023 report showing that 79% of small firms are concerned about retaining them), we imagine this phenomena has stayed the course. Fixed pricing isn’t the answer for every area of the law your firm might cover. But by adopting a balance of fixed fees and hourly billing, law firms can address this gap.

2. Embracing value is key to success

Our panel agreed that embracing a value-based approach is key to any pricing strategy. Shaun Jadine, who set up his agency specifically to help law firms keen to let go of the billable hour suggested “we need to let the client choose – think gold, silver and bronze” in terms of packages. Flexible pricing shouldn’t work in isolation to the speed, delivery and other needs of the client in question – in fact, incorporating these elements is exactly where the value lies. Building a framework that allows firms to build a clear process around value-based pricing is important. 

3. Alternative fees – a cultural change

But embracing value-based pricing is not as easy as flicking a switch. As Alex Hamilton explained, it’s about a paradigm shift of attitudes, where lawyers should view their role in terms of the problem-solving skills and support they can offer clients, rather than time-bound transactions. Shaun Jadine noted that it’s often the smallest, most agile firms that are able to embrace these new structures. Younger lawyers and those newer to the profession, looking at it with a fresh pair of eyes may be at an advantage here too. Lawyers shouldn’t be afraid to test different pricing and take risks along the way. 

AI and small firms – an opportunity or a threat?

Our panel agreed that generative AI is undoubtedly advancing at a daunting rate. And with developments unfolding as rapidly as they are, the legal services industry won’t truly see its impact for the next 6 years. As it stands, tools such as Chat GPT aren’t designed to meet the needs of law firms. So while they open up a host of opportunities, they need to be handled with the appropriate level of .

Here are the panel’s key tips to navigate this changing landscape:

1. Be open minded – and don’t panic!

Joanna Kingston-Davies was keen to stress that above all, firms shouldn’t panic at the rapid development of technology. After all, the legal sector has been evolving continuously for decades, with the introduction of fax machines and the internet, followed by email. The dust has yet to settle, with many governments themselves still navigating their way through the opportunities, threats and implications of gen AI. Small law firms should keep an ear to the ground with this dialogue and debate.

2. Seek simple, actionable advice from your suppliers 

Small firms shouldn’t feel obliged to respond to every cold call and email they receive. Instead, having a conversation with their incumbent IT providers can be helpful – what technology-driven tools can they identify for your firm? They will know your firm, and the state of your current technological infrastructure, so should be well placed to make cost-effective recommendations.

3. Consider technology for client experience

Like the wider market, small and mid-sized firms can fall into the trap of only thinking about tech, and AI in terms of automating and speeding up costly processes. However, Joanna pointed out how firms can leverage automated sentiment analysis to understand clients’ emotional state at every point in the customer journey, identify pain points, and use genuine client feedback to improve service. 

You can watch the full webinar on demand .

Want to keep on top of the AI landscape from a legal perspective? Join the Lexis+ AI™ Insider programme to stay ahead of the curve, and get access to early product previews to discover how ������Ƶ can help you transform your legal work.