This is the third and final installment in my series on using Business Intelligence and Competitive Intelligence to optimally price legal services.
Pricing fundamentals and the considerations unique to law firms are discussed here.
The three types of pricing and their dependence on Competitive Intelligence and Business Intelligence are covered here.
Putting it all together
This calculation is based entirely on data from the firm’s financial systems [Business Intelligence] and therefore very accurate–at least once the politics around various allocation assumptions have been resolved. (This is represented by “Profitable Work” in the following graph.)
Historically, firms have often told their clients that they cannot offer fixed prices because they can’t anticipate how much work will eventually be entailed. This excuse is increasingly falling on deaf ears as clients respond that they are being held to budgets, and a firm claiming to have deep experience should be in a much better position than they are to anticipate costs, at least for each phase of a matter. So you’d better be able to forecast profit.
Sources of such data are readily available [Competitive Intelligence], and at the date they are published, generally accurate. Assumptions may be required to get to the specificity needed by market and practice, but the results should still be pretty accurate. (This is represented by “Competitor Rates” in the following graph.)