This article first appeared in the Australiasian Law Management Journal. We have summarised the key insights on this page. You can read the full article in the journal.
What the research says
- Actions taken now have the greatest impact on who wins and loses in the next decade
- Around 50 percent of major buyers of legal services are renegotiating agreements with firms and asking for discounts
- More than 30 percent of Managing Partners interviewed at leading US law firms said they would offer additional discounts in response to COVID-19
The Impact on Partners & Financials
- Many partners agree to discounts because they’re concerned about keeping up their team’s utilization rates
- However, too few partners comprehend the impact of discounts on profits and therefore, partner remuneration. For example, a firm with a 40 percent net profit margin will decrease its profits by 25 percent, simply by offering a 10 percent discount.
- Once rates are discounted, it’s hard to push them back up
How to Engage with Clients
- Demonstrate empathy with your clients and show that you care about their business and financial position
- Help them understand the constraints your firm has in terms of finite resources that could be sold to other clients
- Negotiate a solution that works for both parties. The aim is to support clients while protecting rates
- In doing so, you strengthen relationships, rather than behaving in a submissive or dismissive manner