Many of us have aspirations of starting our own business. We strive for the financial independence and satisfaction of turning our vision into a marketable product or service. A common stumbling block is knowing what to charge for your services. I had worked for several years as an attorney at a law firm when I decided it was time to start my own practice. I found a good location at a price I could afford, hired a secretary to keep my books and client files organized, and consulted with an accountant to make sure I had the proper record keeping to meet my tax reporting requirements. Having all of the pieces in place, I was ready, or so I thought, to open up shop. I had always been comfortable with the problem-solving component of my business, but what I was wholly unprepared for was determining the appropriate amount to charge for my services.
I did value my services, but I did not want to drive away potential clients by being overpriced. I fashioned a list of reasons why it made sense for me to discount my services. First, most people are cost conscious when they are deciding to purchase a service or product. Think about how we choose gas stations. Unless we are loyal to a particular brand, we almost always go to the station that is a few pennies cheaper. Since I was not an established brand, I needed, at least initially, to be cheaper than my competitors to build my clientele. Second, since many of my competitors were more seasoned business owners, they probably knew more than I did which would make their services more valuable. Third, if one of my objectives was to be affordable to the people who needed my services, I should charge lower fees.
Throughout my career, I have had the opportunity to successfully operate several small law firms and am currently working in a law firm with over 100 attorneys. What I have learned is that none of those reasons justify the practice of charging less than what your services are worth. Over the years, I have developed the following five principles for pricing my services.
First, throw out the notion that there is only one price that people are willing to pay for a product or service. Think about the wide range of prices charged for a cup of coffee at gas stations, convenience stores, fast food restaurants, or specialty shops. The prices vary as do the needs and desires of the customer.
Secondly, as a starting point, first determine the bare minimum cost you need to provide your product or service. This figure must include both your direct and indirect costs. Your business is not a charity. If you don’t charge a sufficient amount to cover your business and personal living expenses, you won’t stay in business very long.
Third, identify your brand. When a client or customer recommends your business to someone else, what will he or she say about you? People recommend your service or product because they believe it has value. When you identify that value, you will identify your brand.
Fourth, target the customers who are attracted to your brand. If personalized service is your calling card, it will not be effective to market yourself to individuals who are only concerned about cost.
Finally, and this is probably one of the most important factors especially when you are starting out, package your services to provide potential customers or clients with a range of services that are variously priced. As a small business, the sales process tends to be relationship based because a good number of your customers or clients will come through recommendations. By providing potential clients or customers with a range of services, they can focus more on which option best serves their needs and less on pricing, which will increase the likelihood that they will retain your services.
Instead of focusing on pricing, I strive to build a rapport with my clients by getting to know them, identifying their problems and proposing viable solutions to their problems. If people perceive that your service has value, they will be much more willing to pay for that service. The following is an excerpt from a note I received from a client.
“I’ve enclosed a check for $XXX to pay for the consultation we had this morning. … In those 45 minutes, you helped me understand my legal situation more than three lawyers have done in the past three years. … How refreshing to dialogue rather than being made to feel like I was under a hot lamp. … Your conciliatory manor, helpful advice and empathetic comments are very much appreciated!”
When the perceived value of your service generates that type of response, clients and customers will be much more willing to pay you what you are worth.
ABOUT GREGORY JOHNSON
Gregory P. Johnson is a principal with the firm of Offit Kurman, P.A. in Bethesda, MD, where he assists businesses and individuals with financial planning and debt management issues. He taught for five years as an adjunct professor at the Catholic University Law Center and the University of the District of Columbia School of Law and has been a frequent lecturer for federal, state and local bar associations. As a co-host for a Prince George’s County public broadcast television program entitled “Dollars & $ense,” which focused on money management issues, Mr. Johnson was a recipient of a Telly Award and a Second Place Programming Award from the National Association of Telecommunications Officers and Advisors. He can be contacted at email@example.com.
ABOUT OFFIT KURMAN
Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 120 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our eight offices serve individual and corporate clients in the Maryland, Delaware, New Jersey, and Northern Virginia markets, as well as the Washington DC, Baltimore, Philadelphia, and New York City metropolitan areas. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.
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