How to Take Advantage of Law Firm Growth Initiatives in Order to Reduce Your Legal Fees

We have advocated that clients broaden their search for law firms to be more inclusive and to consider more alternatives to their existing firms. Perhaps the major reason behind considering a broader variety of law firms is that law firms have a variety of internal strategies and initiatives that dictate their pursuit – or avoidance – of specific clients, industries and markets.

Law firms rarely publicize these strategies, or at least publicize them adequately, but most firms have one or more of the following initiatives and strategies in order to build out their firm, generate revenue and present a more complete offering to the market. Your goal is to uncover the firms with strategies that are more in line with your law firm preferences and better able to solve your short- and long-term legal challenges in a more cost-effective fashion with high quality and superior client service skills.

In short, there are hundreds, if not thousands of capable law firms that want your work. But because law firms do not telegraph these strategies, it is up to you to uncover the firms that most want to work with you:

1. Relationship Building with New Clients. Most law firms will offer reduced fees to potential clients or for matters with existing clients that are likely to cause the client to seek other options. This is a strategic move to establish relationships with new clients, particularly in lucrative or emerging markets.  Most law firms are in growth mode, and it is common for them to price their services aggressively for new clients, or for new buyers within their existing clients, particularly if other firms are attempting to sign the same clients.

2.      New In-House Legal Leadership at Your Client. Law firm partners are – or should be – sensitized to new leadership at their clients. I recall speaking with a long-time Fortune 100 tax client at one of my former firms, within the confines of a client feedback interview. This general counsel had been a client of the firm for nearly three decades…and she conveyed three interesting news items: first, she was retiring within six months…and hadn’t informed our partners. Second, that she knew who was taking over for her and the timing. Third, this other attorney had his own law firm preference and would likely engage another firm for their tax work. Because the firm hadn’t performed their legwork or networked to retain the business, they had to offer a significant discount to retain the client.

3. Relationship Building with Existing Clients. This can take many forms, but it begins with clients proactively seeking discounts or other fee modifications. If a client is facing financial difficulties, the firm may adjust fees to accommodate their circumstances while still providing necessary legal services. Law firm partners typically want to build long-term relationships with valuable clients and should offer reduced fees as a gesture of goodwill to ensure continued business, particularly if the clients have not made this request in the past.

4. Competitive Pressures. In a competitive market, firms may lower their fees to attract new clients or retain existing ones who might be considering other options. I once conducted a client feedback interview with a Chief Legal Officer, and as always, my final question was “If you could convey one thought to our firm’s CEO, what would you tell her?” The client didn’t hesitate and replied “I would tell your CEO that your competition is calling on us every day. And I don’t mean four days a week.”

5. The Firm may want to invest in a specific practice group. After a successful trial settlement against a Fortune 100 company, the long-time litigation practice group leader retired from a large regional law firm in order to become a judge. The firm then lost half of their trial litigation team. In order to recoup clients, they aggressively priced their services for clients that intended to go to trial. This is more common than you may think. In every firm, there are a few practice groups that are outperforming the others…and a few practice groups that are underperforming their peers, sometimes by considerable margins. I recommend that you test the partners at your firm by asking them about specific practice groups outside of their own practice group. One interesting phenomenon lies in law firm partners that refer business away from their firm to other firms…even if their firm offers that specific service. I’ve had quite a few partners over the years tell me that they wouldn’t refer their own partners in certain practice groups. If a firm has experienced upheaval in a practice group, they may want to invest in the group either by hiring additional lateral attorneys or reducing rates, or both.

6. Discount for a New Practice Group.  The main difference between this point and the above point is that your law firm will have added, very publicly, a new practice group with new capabilities. Firm leadership will want to exhibit the new group’s expertise and will want to ensure a steady flow of opportunities to the new practice group. Your firm – or another firm – may offer reduced fees to potential clients or for specific cases. This is a common strategic move to build relationships, particularly in lucrative or emerging markets.

7. Industry investment. Similar to discounts that garner market share for practice groups are industry-targeted investments. A common method for a law firm to build their brand and expand their circle of contacts is to invest in specific industries. You may wish to take note of the law firms that have a clear affinity for businesses in your industry, particularly if they begin to show up at your industry gatherings or trade association meetings. Those are the firms that face real challenges in gaining traction in specific industries and are likely more willing to invest in new client relationships to build their industry-specific client list.

8. The law firm may want to make short-term investments in a specific geography, particularly if they have either lost partners or opened an office. It is very common for a law firm to announce the openings of their new offices on every digital platform, trumpeting to the world that they are growing. What is less well known is that the new office is now on the clock to generate new clients, new matters and new revenue. A large firm that has opened a new office – or conversely has publicly lost partners in a location and doesn’t want to close the location – may want to attract new clients through attractive rates. Here’s a suggestion: if you’re in the market for legal services, contact the local leaders of an established law firm that has opened a new office in your area within the last two years. They will be well-motivated to build local market share.

9. The Firm may want to make long-term investments in a specific region. This is a bit more subtle and difficult to uncover than the prior reason. Here’s an example: while traditional law firms founded in Silicon Valley reaped great rewards, over half of the AmLaw 200 have offices within an hour’s drive of Silicon Valley. It’s well known that large law firms invested substantially in Silicon Valley clients and built very successful practices over the course of years, but that was primarily due to a long-term, conscious strategy on the part of the firm’s leaders. Many, if not most of the national firms with offices in Silicon Valley are opportunistic. There’s a lot of legal work to be had in Silicon Valley, and they will pick up what they can get, that’s the common strategy. A few firms, however, decided they wanted to be leaders in technology in general, and Silicon Valley in particular, and committed long-term resources to that market.

10. Firms that invest in a geographic region without an office. Separately, it's not unknown for firms to make a significant investment in a geographic area in which they do not have an office. I once worked for a Midwestern firm that specifically targeted clients on the coasts. They had 700 clients in California before they ever had a California office.

11. Invest in a Specific Lawyer. Your firm may want to invest in the knowledge base of a specific lawyer. Pay attention to firms who admit a new lateral partner from industry. They will be motivated to build his or her book of business. As a bonus, those partners will have insights that traditional law firm partners lack. Other lawyer investments are more subtle. I worked with a partner who billed 2,200 hours annually, but within six months, the general counsels at his two largest clients resigned. He needed to replace 1,400 billable hours as quickly as he could. So he nurtured minor expertise in corporate debt and bankruptcy in order to become the firm's go-to resource for those two areas.

12. Efficiency through an advantageous partner:associate ratio. Some law firms have high associate-to-partner ratios and can therefore delegate more work to less expensive attorneys and consequently price their work more competitively than firms with a less advantageous partner/associate ratio. This is particularly true for firms that appear to churn through associates. As an unfortunate corollary, many firms that lack advantageous partner:associate ratios instead route lower-level work to partners, or, in times of scarce work, the partners may hoard billable time for certain matters that should have been delegated to less-experienced – and less-expensive lawyers.

13. Efficiency through a better process/task approach. Some firms simply have a more efficient, more effective approach at executing complex legal strategies. I once worked with a law firm that executed a very high volume of M&A assignments for mid-sized companies, both on the buy-side and the sell-side. They had refined their process to the point that they actually started to lose work because clients did not believe that the firm could price their services so competitively. More than once, the firm was forced to make presentations to the corporate development and in-house legal departments to walk them through their process and satisfy client management that their M&A process was sound. Let’s face it…some firms are just better at executing certain matters.

14. Better Pricing Assessments. I was aware of a firm that did such a poor job of pricing IP litigation that an in-house counsel pulled their partner aside and said, in short, “you don’t know what you’re doing -- and it shows.” Essentially, they were pricing all new IP litigation all the way through to verdict in all cases, when IP litigation typically settles in advance of trial. When a case turns out to be less complex or time-consuming than initially anticipated – as they frequently do –the firm may reduce fees as a reflection of the reduced workload.

Almost all firms have sophisticated pricing mechanisms, housed within substantial pricing departments, led by pricing experts with multiple degrees and years of experience, trained by a plethora of external pricing experts; all designed to generate maximum law firm profits and legal fees from their clients.

15. Hire an Outsider. No, your team doesn’t have time to sift through hundreds, if not thousands of law firms to uncover those firms which have internal strategies and initiatives that are likely to benefit your company. It’s virtually impossible to know the majority of law firms at this level for two reasons:

First, law firms typically don’t market broadly at this level. While they may have internal incentives or strategies that will benefit your company, they rarely publicize those incentives and strategies on a firmwide basis. They leave the affected attorneys to market their services and secure the work. You will need to cast a wide net in order to find those firms seeking cost-effective work.

Secondly, there are legal procurement organizations that work closely with law firms that have those initiatives in place. It's best to work through these organizations in order to uncover opportunities that will allow your company significant legal fee savings.

“How to Take Advantage of Law Firm Growth Initiatives in Order to Reduce Your Legal Fees” is adapted from “Sixty-Three Strategies to Reduce Your Legal Fees” by James J. Stapleton. Mr. Stapleton has managed over 7,500 transitions between law firms on behalf of clients.