Clients Pay Their Highest Rates to These Law Firms–and They Are Worth It

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Clients are slimming down the list of firms to whom they pay their highest rate. This can help explain why the top rate hasn’t budged in 3 years—at a lofty $2,000 an hour. And, only 56% of clients say these firms are truly worth it.

Clients pay the highest rates when they need deep insight, understanding, and unflinching confidence in the ability to deliver. This presumes the firms bring unique knowledge and understanding of the risk. The following firms stand out above all others for: 1) Being identified as the firm clients pay the highest rate; 2) Clients sharing this high rate with BTI; and 3) The firm was well worth this highest rate.

The Highest of the High

The above firms are part of the BTI Client Service 30—the law firms clients single out for delivering the best client service.

Garnering Super-Premium Rates

The firms below also enjoy their clients’ highest rates—but not quite as high and not quite as many clients as the firms above. Please join us in congratulating:

Follow the Money

It is no coincidence one of the largest spending industries tops the list of highest rates paid. These rates are averages of the highest rate paid reported in each industry:

Life Sciences
Insurance
Banking
Transportation
Chemicals
High Tech
Manufacturing
Professional Services
Utilities
Retail
Media
Energy
Consumer Goods
Telecom
Financial Services

$959.17
$882.65
$869.06
$863.18
$863.13
$857.78
$838.89
$836.72
$830.83
$828.75
$823.75
$814.25
$812.93
$808.89
$773.75

 

We live in a world where top legal decision makers are relentless in wringing maximum value out of their law firms. These firms are living proof of value being delivered at the very top of the rate spectrum. The firms who enjoy these rates gain their credibility by:

  • Dropping everything and showing up—or making it seem so

  • Showing up with piercing questions and a plan

  • Pivoting with ease—as in changing the plan when facts, circumstances, and/or goals change

  • Mobilizing quickly—and never discussing resource issues in front of their client

  • Bringing bigger teams on their matter—there IS safety in numbers—top dollar is not lean and mean

  • Being ready to talk budget right then and there

  • Speaking unequivocally in their thoughts and recommendations

  • Having one person clearly accountable

  • Exuding a certain calm

As more clients pay more law firms their highest rates, their expectations will soar along with these rates. As complex work grows, look for clients who want you to look high-rate ready—especially since more and more matters are morphing from complex to bet-the-company midstream. Every relationship partner can start adopting the top-rate behaviors at any time—this will give you practice for when the big day comes—and just might get you happier clients at premium rates.

You can see the list of all firms earning the highest rates in our newest report BTI Highest Rate Firms 2018. Order your complimentary copy here.

MBR

*Based on BTI research conducted between September 2017 and January 2018. BTI conducted more than 360 independent, individual interviews with top legal decision makers at large organizations with $1 billion or more in revenue.

5 New Trends Point to Big Changes

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The ink isn’t quite dry yet on our most current research. But, we see clear signs of subtle change with big impacts. We just finished in-depth interviews with more than 300 top legal decision makers—here is what we are learning:

Complex Work is Morphing into Bet-The-Company Work Mid Matter

Matters starting out as complex are growing into bet-the-company matters. Top legal officers report the newly bestowed bet-the-company status is a direct result of increased financial exposure. Litigation matters start out contained—then grow and attract regulators, other plaintiffs, and a growing list of securities litigators if the company is public.

This trend is bad for clients but gives law firms real opportunity to join the exclusive bet-the company club for firms who are looking for entry. It is also causing serious damage to law firms who don’t realize they are now handling bet-the-company work.

Clients Have Less Patience than Ever

The value of a client’s time is increasing as the complexity of their matters remains at peak levels. Clients are spending more time managing risk and strategizing—leaving less time to track down attorneys, matter details, budget status, and other issues which steal precious time from your client’s main mission. And the more valuable a client’s time—the less they have for nonvalue-added tasks. Law firms are losing serious work because they don’t provide comprehensive and timely status reports. This reporting is just as important as the legal strategy.

Large firms are in their 4th year of outspending other law firms in client development—and keep winning more work than other firms.

Much is being made of the largest law firms growing much faster than other firms. 2018 marks the 4th year in a row these largest firms spend 1/3 more on client development than all other law firms. This is the reason they are winning so much new business—they have been spending more and working harder to get it.

Mid-size Firms Living Large in Mid-size M&A

Mid-size and smaller firms are carving out preferred relationships with the largest law firms to handle the small deals larger firms don’t find economical. The largest firms are all chasing large deals and private equity. It’s a great market with great clients. But these large firms can’t do small deals—and don’t want to. A clever group of mid-size firms, think 100 to 400 attorneys, are making a nice living developing preferred relationships to handle these smaller deals and service the daylights out of the clients and larger law firms.

This adds to the already established trend of mid-size firms having an especially strong position with non-US-based companies for making US-based acquisitions.

AFAs are Back

Client interest in AFAs is gaining new momentum as complex litigation grows faster than budgets are increasing—and is squeezing the routine work. Top legal officers are finding AFAs and settlements are 2 powerful tools to manage budgets and squeeze more litigation money out of the budget for the more expensive and complex matters.

Spot and Ride the Trends

The fast movers are grabbing clients while other law firms aren’t even looking as they take advantage of these trends. It is 1 the most effective tools to develop business and build enduring relationships.

Partners in a continuing dialogue with their clients are the first to learn these trends—clients will have shared them through words and behaviors. You can also predict and anticipate these trends through well-crafted and executed client feedback. Your chances of picking and using these trends to your advantage are directly linked to the frequency and depth of your client feedback. They are also linked to knowing exactly why clients bring you in and if the reason they bring you in changes. And, one thing is as sure as death and taxes—client needs will change.

MBR

Winning the AFA Game

Learn the 6 steps law firms take to win the AFA game in this week's Mad Clientist Minute.

You can view the video below, or on YouTube directly here: https://youtu.be/NO5cIfWOsV4

You can view the first video in our AFA series—Spending Under AFAs Soars, Are Your Clients Using Them?—here: https://youtu.be/-fTAcgjdMjw

And the second video—The Benefits of AFAs for Bet-the-Company Work—here: https://youtu.be/5iDtaRm_lTc

We’ll be releasing videos here on The Mad Clientist blog every Tuesday. Subscribe today (in the box at the upper right of your screen) and be sure you don't miss a single one.

The Benefits of AFAs for Bet-the-Company Work

Companies with Bet-the-Company work are searching for ways to deal with these matters while not getting any additional budget for them. See how introducing AFAs to your clients can save them money to help cover the Bet-the-Company matters.

You can view the video below, or on YouTube directly here: https://youtu.be/5iDtaRm_lTc

You can also view the first video in our AFA series—Spending Under AFAs Soars, Are Your Clients Using Them?—here: https://youtu.be/-fTAcgjdMjw

We’ll be releasing videos here on The Mad Clientist blog every Tuesday. Subscribe today (in the box at the upper right of your screen) and be sure you don't miss a single one.

Spending Under AFAs Soars, Are Your Clients Using Them?

Clients, by and large, don't want to put the effort into understanding your AFAs, yet spending on AFAs is soaring. See what makes the biggest difference in client's use of AFAs.

You can view the video below, or on YouTube directly here: https://youtu.be/-fTAcgjdMjw

We’ll be releasing videos here on The Mad Clientist blog every Tuesday. Subscribe today (in the box at the upper right of your screen) and be sure you don't miss a single one.

7 Deadly Sins: Billing Practices Killing Client Relationships

Your bill: the one communication clients are going to be invested in reviewing and understanding thoroughly.

Bills are the only factor every attorney has in common when delivering work to clients—regardless of which clients you are serving and what practice areas you are in. 

In the first installment of BTI's newest video feature—Client Relationship Lab: Webisodes with The Mad Clientist—we take an in-depth look at how to perfect billing practices to help set the right tone for the future of your client relationships.

You can view the video below, or on YouTube directly here: https://youtu.be/3gSQq-rEtB4

With this series we’ll be taking an in-depth look at a wide range of client relationship best practices. We’ll be releasing Client Relationship Lab webisodes on our blog every month—subscribe today (in the box at the upper right of your screen) and be sure you don't miss a single one.

The 22 Law Firms Best at AFAs

Top legal decision makers identify 22 of the 650 law firms serving large and Fortune 1000 clients as absolutely best at developing and implementing alternative fee arrangements*, and shared 6 reasons these firms stand out:

  1. Partners have authority to enter into an AFA quickly. These partners do not have to wait for committee meetings or partner reviews of agreements. The negotiating partner also knows the parameters the firm will accept and approval is all but assured, and swift.
     
  2. Confidence, comfort, and enthusiasm in pursuit of the AFA. The firm’s enthusiasm and commitment to AFAs is contagious.
     
  3. Flexibility. The firms who stand out listen to the objectives and offer to change the approach as the objectives evolve and are agreed upon by all concerned.
     
  4. Willing to take some risk. The outstanding AFA firms have convinced clients they have skin in the game. Clients love the idea of risk sharing they can see and understand.
     
  5. Focused and efficient. The best firms have learned to make a beeline for the client’s goal. Much of the strategizing and planning has been done as the fee is negotiated—clients see their law firms operating like an Olympic swimmer—no wasted strokes.
     
  6. Stick to the agreement and never complain. The law firms don’t go back and ask for changes and live with whatever outcomes occur. Apparently many law firms ask for changes when things don’t go well—the best don’t. And the best have tight project controls to ensure they don’t need to ask.

Please join me in congratulating the following 22 firms who clients say are best at AFAs:

Armstrong Teasdale
Baker Botts
Bartlit Beck Herman Palenchar & Scott
Blake, Cassels & Graydon
Covington & Burling
Fish & Richardson
Foley & Lardner
Homburger
Husch Blackwell
Kirkland & Ellis
Lee Tran & Liang
Littler Mendelson
McGuireWoods
Morgan Lewis
Orrick, Herrington & Sutcliffe
Quarles & Brady
Schwartz & Ballen
Seyfarth Shaw
Simmons & Simmons
Thompson Hine
Valorem Law Group
Wilson Sonsini Goodrich & Rosati

These are the firms corporate counsel find are best at making AFAs the successful cost control tool they were intended to be—bringing improved client focus, predictability in budgets, a more streamlined approach to the work, and double-digit savings.

You can download a complimentary copy of BTI State of Alternative Fee Arrangements 2016 here for the complete list of law firms best at AFAs, as well as data detailing corporate counsel spending on AFAs.

MBR

*Based on BTI research conducted between March 2015 and September 2015. BTI conducted more than 300 independent, individual interviews with CLOs and General Counsel at Fortune 1000 companies and large organizations.

AFAs Soar to an All-Time High

The votes are in. Clients are loving AFAs. And we’ve got the data* to show just how much:

Alternative Fee Arrangements (AFAs) now account for $21.3 billion of outside counsel spending in 2015, up from $13.1 billion in 2013. AFAs are the biggest growth market around—registering a 19.8% compound annual growth rate for the last 3 years.

 
 

Outside counsel spending under AFAs jumped to 35.6% of total spending in 2015 up from 21.7% in 2013. The surge is coming primarily from larger spending clients.

 
 

The number of companies using AFAs shrank to 68.4% from 72.4% in 2013, as a smaller number of clients spend substantially more on AFAs. 

 
 

Top legal decision makers credit their new love of AFAs to improved client focus, predictability in budgets, a more streamlined approach to the work, and the savings—which remain well in the double digits. Clients using AFAs report savings of 13.9% in 2015 compared to 14.1% in 2013. These savings effectively add $2.7 million to the average client’s legal budget.

 
 

The AFA of choice is overwhelmingly the fixed fee. Clients like the simplicity of the agreement and goal. No other AFA even comes close in terms of preference. Fixed fees get to the heart of the matter—a clear goal and an even clearer budget.

 
 

The jump in AFAs explains how clients have been able to keep their outside counsel spending flat while they experience growth in new, more complex matters. AFAs have finally become the cost control tool they were intended to be.

Visit our next postThe 22 Law Firms Best at AFAs to see the law firms clients identify as best at developing and delivering AFAs, along with the release of our newest, complimentary report: BTI State of Alternative Fee Arrangements

MBR

*Based on BTI research conducted between March 2015 and September 2015. BTI conducted more than 300 independent, individual interviews with CLOs and General Counsel at Fortune 1000 companies and large organizations.

12 Steps to Charging Whatever You Want

The GC of a global giant shared this gem during a client feedback interview: “I have on my desk right now yet another invoice which will require interpreters and a Sherpa to decipher and see if I should pay.” 80.1%* of clients think like this GC—questioning the value of their law firm’s services—because they can’t easily understand what exactly they are paying for. And, once these GCs start spending their precious time deciphering the invoice they find unexpected entries and other surprises which makes most clients put the invoice aside until the law firm’s accounting department calls.

At the same time, 19.9%* of clients look at their primary law firm’s invoice and think how shrewd they are for hiring their firm. The fee is a bargain—whatever the amount billed. These corporate counsel are convinced the value simply dwarfs the fee. It’s a no-brainer. And these coveted corporate counsel give their law firms higher rates, more work, and pay more quickly. 

The Secret to Your Value Dwarfing Your Fees

The savvy law firms serving the 19.9% embrace communications and knowledge transfer in a manner other law firms don’t. This knowledge transfer focuses primarily on process. From the start of a matter, through all the changes and surprises and right through the final invoice and more, the professionals who aren’t fighting to get their bills paid are putting in the time up front to make sure the client knows exactly what they are getting. This communication can be divided into 3 major phases:

Before the work begins:

1.       Share your detailed strategy for the matter at hand prior to commencing work.

2.       Discuss both the business and legal implications of the matter along with your recommended strategy.

3.       Outline the potential problems and obstacles likely to be encountered during the work—and how it could impact the scope, budget, and timing moving forward.

4.       Provide a budget before the work begins—and before the client asks.

5.       Review your version of the staffing plan with the client before making final work assignments.

6.       Articulate how the team is staffed with the best resources from across the firm given the specific nature of your client’s work.

Once the work has started:

7.       Provide regular updates on progress to your clients according to their communication preferences.

8.       Notify clients in real time when scope, circumstances, or fact patterns change—explain how these changes will impact outcomes, budgets, and timing along with your new plan of action.

9.       Provide the client with tools and updates to effectively and efficiently handle questions from their management team.

10.   When problems inevitably arise, bring the client into the process immediately and outline your recommended solution.

Before you submit your final invoice:

11.   Explain unusual or unexpected line items in the invoice before the invoice is ever submitted as final.

12.   Use client feedback at the end of the matter to ask your client how the outcome delivered exceeded the original expectations—and what you can do better next time.

The professionals who learn the art of communication and knowledge transfer enjoy more business and higher rates than all others. The rainmakers have turned this skill to an art form. You can start your path to providing increasing value to clients at step 1 and work your way through to step 12. Even if you never get to step 12, each step you take makes you more valuable to your client—and being more valuable makes invoices seem easier to read and smaller in amount—no matter what you charge.

MBR

* Based on BTI research conducted between March 2015 and September 2015. BTI conducted more than 300 independent, individual interviews with CLOs and General Counsel at Fortune 1000 companies and large organizations.

The Hitchhiker’s Guide to Profitable AFAs

Far out at the edges of unchartered space exists the mostly uninhabited planet of Profitable AFAs.

This isn’t science fiction comedy. Profitable AFAs do, in fact, exist. We partnered with our friends at Law360 to survey more than 750 attorneys. What we discovered is 22% of partners are prospering in what many consider a desolate land.

 

 

AFAs are old news. Clients demanding AFAs is old news. Turning a clear profit from AFAs is new.

Read More

How I Learned to Stop Worrying and Love AFAs

Skeptical Law Firm: Oh no… you want to talk about AFAs, again? We have clients who talk about AFAs all the time.

The Mad Clientist: I hate to break it to you: AFAs are not going away. Corporate counsel love the idea of AFAs—in 2013, spending under alternative fees rose to $13.1 billion, up 6.5% from 2012.

AFAs force law firms to be predictable in their billing, flexible in their approaches, and creative in the solutions they provide to clients.

Skeptical Law Firm: I hear you and agree, but like I said, we’ve had clients demand we use AFAs before. In the end, we couldn’t make it work for our firm and it didn’t really drive any new business.

The Mad Clientist: You’re playing defense. If you institute an AFA under pressure from the client, all you’ve done is conducted a rate negotiation under the guise of “using AFAs.” You’re reacting to the client’s demand, not establishing an arrangement on your terms. You need to be on offense.

Here's a game plan to get you started:

Read More

31% of Leadership Partners Report Higher Profits from Alternative Fees

Profits emerge from the murky waters of alternative fees. To the surprise of many, but not all, 31% of law firm leadership partners report making more money when using AFAs. Fully half of these are from AmLaw 100 firms. These larger firms are changing the value equation to their benefit while making more money.
Read More