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3 Ways Lawyers Undercharge for Legal Services

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By Casey C. Sullivan, Esq. on August 05, 2015 12:57 PM

A seasoned criminal defense attorney might be able to charge $500 an hour with a $20,000 retainer, but there's only so many murdersome millionaires to go around. A recent law school grad, without an established reputation for success, won't be able to bill at anything near the same rate. Does that mean she should drop her rates to the bottom of the barrel? No way.

Setting fees means finding the going rates in your area, then positioning yourself somewhere within the acceptable range -- the Goldilocks spot allowing you to cover costs, make money, and attract clients. Go too high and you won't have many clients. Go too low, however, and you could find yourself severely undercharging for your legal services, even if you're still able to put food on the table.

1. Miscalculating Your Expenses

Lawyers and firms just making a name for themselves are often tempted to offer lower rates in order to bring in clients. That's fine, unless those rates are based off a miscalculation of what it costs to run the business. Then, they can be fatal.

When you're setting rates, make sure you include all the costs associated with your legal practice. That means delving deeper than just the price of malpractice insurance and office space. You'll want to account for benefits like health and life insurance, utilities, accountancy fees, retirement payments, support staff, and the like -- everything you can't bill to a client individually.

2. Undervaluing Your Expertise

Don't let a lack of confidence undermine your ability to make a living. Even if you've never represented a client before, you have the expertise (and license) to justify charging at or near market-rate. Your dedication, expertise, and know-how are valuable and that value should be reflected in your rate. After all, there's a reason clients are seeking out your services instead of just downloading a form off the Internet.

3. Working for Free

Comping some services is a great way to keep clients happy. No one wants to be nickle and dimed for every three minute phone call or six minute email. Not billing your client for that one set of photocopies you made is a fine practice.

But, like everything, it's best in moderation. If you offer the occasional complimentary service, make sure there are limits. Find yourself writing off too many billable minutes and you'll soon notice that you've undermined your going rate.

If you find out you're undercharging, however, don't worry too much. You can always raise your rates.

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