In response to today’s rocky economy, law firms are desperately seeking ways to bring in new business. One solution they’ve created is to offer a ‘loss leader’ and it seems that price wars have broken out among large law firms.
Legal business consultant Jim Hassett writes at Legal Business Development Blog that he learned of the price wars when he threw in a “loss leader” question in an alternative-fee survey of AmLaw 100 firms. He included the following question on just 15 surveys, and all 15 firms responded that they had seen the price wars, he writes on his blog.
“There is a lot of price pressure these days, and some say it is leading firms to bid on projects as loss leaders in a way that is not sustainable. Have you seen any examples of this?”
“Some firms will do all of the discovery in a case for free, and then take the case on a fee basis from there, or will charge half of their hourly rate for the first phase of the case,” the firm manager reported. “We’ve also heard about some firms that have actually said that they will do [motions] for free, or they will do the motion work at 30 percent, or some other drastically discounted rate like that, because they’re really hungry to get work.”
How can firms win the ‘Fee Limbo’ without totally destroying their bottom line? How can they do this without offering their services at hourly rates that shout, “We’re not worth what you’ve been paying us!”?
There is a simple solution: Maximize the appropriate utilization of properly trained paralegals and include in their marketing materials that paralegals are utilized as a cost-saving benefit for the client. Give these points some thought:
- Since the hourly rates of paralegals are always much less than that of the attorneys and most associates, all of the work they do is a cost savings to the client. In fact, this is the primary reason for utilizing paralegals in the first place.
- According to the 2008 Salary Survey by the National Association of Legal Assistants (NALA), paralegal hourly billing rates average $97 per hour, depending on the expertise of the paralegal and the geographic area of employment. This is significantly lower than the attorney’s hourly rate.
- The paralegal’s hourly billing rate is usually much higher his or her hourly rate of pay, often at least three times as much.
- So long as they work under the direct supervision of an attorney and the attorney assumes the responsibility for the final work product (after thorough review, of course), paralegals can do anything an attorney can do except:
*Form the client relationship
*Exercise legal judgment
*Appear in Court
Here are six ways (and there are many more) that attorneys can tap into the strengths of paralegals that will result in reduced costs to clients:
1. Paralegals can handle much of discovery, including the drafting of interrogatories and summarizing of depositions and medical reports;
2. Paralegals can draft a majority of the required pleadings and correspondence;
3. Paralegals can conduct witness interviews and assist with preparation of witnesses for trial;
4. Paralegals can locate expert witnesses and provide them with the materials they need to assess the case;
5. Paralegals can assist with preparation of trial notebooks and jury selection;
6. Paralegals can handle much of the communications with clients and others related to the case, including both telephone and e-mail communications.
If law firms properly utilize paralegals, taking full advantage of their training and their strengths, they will be able to offer quality services to their clients at reduced costs to the client without drastically reducing their own hourly rates to attract those clients.
© 2009 Vicki Voisin, Inc.
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