It’s beyond me why attorneys are so fond of discounting their rates. I don’t get a discount for quick payment from my doctor or my hairdresser and I pay on the spot. My veterinarian just got $660 out of me at time of service, and I still don’t know what’s wrong with my cat. Arguably, [...]
It’s beyond me why attorneys are so fond of discounting their rates. I don’t get a discount for quick payment from my doctor or my hairdresser and I pay on the spot. My veterinarian just got $660 out of me at time of service, and I still don’t know what’s wrong with my cat. Arguably, these business people understand the value they bring to their clients, the cost of providing their services, the need to maintain healthy cash flow, and the importance of collecting their fees at the point when the client is likely to be happiest with the results of the service.
So, why do so many attorneys feel compelled to write down their fees on a regular basis, even when the client hasn’t disputed the fees or asked for a discount? The reason I hear most often is “I discount to encourage prompt payment of my bill.” Huh? I’m paying the professionals mentioned above on the spot – and you can’t get much more “prompt” than that; yet, I get no discount. I’m merely honoring the payment policy that I agreed to when I requested their services.
Attorneys state their payment policies in their written fee agreements . In your agreement, you’ve explained your expectation of payment, and given notice of the potential actions to be taken if the client fails to honor that obligation. The client’s signature on that document is the seal of approval of all that is contained in the fee agreement. Given that, then why reward the client for doing what he or she has agreed to do? If you discount to encourage quick payment, do you charge the full price if the client pays the day after your discount deadline? How’s that workin’ for you? How does the client feel about paying full fare when you offered him a discount only yesterday, or last week?
Before you whip out your pen and start slashing your bills, think about the impact of a discount on your revenues. If your overhead consumes 50% of revenues, and you discount your fees by 10% to encourage quick payment, you must increase your revenues by 25% to maintain the same gross profit after the discount. A 15% discount requires an increase in revenues of 42.86% to maintain the same gross profit. Can you really afford to discount for no good reason?
I sometimes hear the argument that “discounting is a widely accepted practice in other industries.” Which ones? Certainly not professional services, as demonstrated above. If you’re comparing your billing practices to those of your local widget maker or grocer, you’ve overlooked one (of many) major difference in your products. You can’t make up a discount through volume sales. You can only bill one client at a time for hours worked, while the widget maker and grocer will sell their products to potentially hundreds or thousands of customers.
If you want to resolve a fee dispute by discounting, that’s a different situation. In this case, be my guest. Something is always better than nothing. On the other hand, be aware that habitual discounting for no apparent reason may be sending your clients the wrong message. Clients tend to look at frequent discounts as an acknowledgement on your part that your fees are too high, or that it took you too long to complete a task. After awhile, the discount becomes meaningless to your client and, in fact, becomes an expectation. Before you write down your next bill, think about what that discount really means to your practice, and to your clients. Sometimes discounting says more about how you value your services than it does about your fees.
Aren’t you worth full price? Discounting makes no cents!