Law firms don’t know how to price their knowledge, which is the actual thing they sell. Instead, they end up billing for their activity after the fact. They charge for the few hours of activity instead of the years it took to gain the knowledge and experience. This causes enormous problems for both firm and client.
The problem for the firm is that there’s no real way to differentiate clients, projects, and time spent; it’s all covered by the same rate, depending only on which timekeeper is doing the work. This means that the firm has no way to ensure that its lawyers focus on the more-profitable, higher-margin work. Instead, the current business model (created in 1919 by Hale and Dorr) bluntly rewards lawyers for the sheer mass of hours worked, without regard to the profitability (or even quality) of the work.
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Professionals should price their knowledge rather than billing for their time. Learn more
- Learn about pricing in the App Store
- Pricing is difficult, in any field. Pricing professional services is so difficult that most professionals don’t even do it, choosing instead to bill their time. But this problem isn’t just limited to professionals. Software designers and app developers face the same problem. Which makes sense, if you think about it, because software is just knowledge [...] Read more – ‘Learn about pricing in the App Store’.
- 11 innings vs. 11 years
- Longtime readers know that I’m a big Boston Red Sox fan. So whenever I can use the Sox to make a point here, I will. Whatever works. The Red Sox were supposed to be the team to beat this season. Almost all the pundits predicted them to win the American League pennant this year, given [...] Read more – ‘11 innings vs. 11 years’.
- Billable showers
- Vanessa is a senior litigation associate at a large Northeast law firm. She is a hard worker, a good writer, and a very intelligent young woman. She bills at $575 an hour. She carefully tracks her time. One afternoon, she is working on a summary-judgment brief. She is focused on a tricky jurisdictional issue that [...] Read more – ‘Billable showers’.