Posted by Michael Porter, a director of Legal Futures Associate Legal Mentors
Competing on price is a race to the bottom
The most expensive and valuable purchase that the majority of people make in their lifetime is their home and yet law firms compete increasingly for conveyancing work by lowering their price.
Competing on price is a race to the bottom. There will always be providers wanting to undercut you, albeit that the service offered may well be inferior to your offering and standards. The difficulty is that the client cannot see your service levels from the outside unless, that is, you can find ways to show clearly your commitment to the client, spell out clearly what is involved and how you will work in their best interests at a price that is fair value. Clients need to be able to understand ‘value’.
As a lawyer you will know of the things that can and do go wrong. ‘Cheap’ will lead to very fine profit margins (indeed on occasions no profit margin at all), which in turn will likely lead to the cutting of corners. There is an old retail adage: “If the price is too good to be true, it probably is.” Horsemeat anyone? Not for your firm, I am sure.
So selling conveyancing cheaply has the potential for problems, sometimes identified early on by the new owners such as a boundary dispute but other issues that may arise only on the subsequent sale transaction some time, even years, later. The highest premiums for professional indemnity cover are for conveyancing. Insurers know what can, and does, go wrong, because they see the claims.
In considering your pricing, you must take into account the element of premium you are paying on your insurance and cost this in accordingly. Your premiums are high enough already, so you cannot afford to cut corners that may lead to a claim which in turn will increase your future premiums even more.
Conveyancing should not be seen as a commodity – it is a service of real value. Thirty or so years ago the banks introduced free current account banking. Banking became to be seen by the public as a commodity and free banking as their right. The banks quickly understood the problem they had created for themselves and for years have been trying to re-establish charging for their current account services.
Solicitors need to understand how to sell their services at a price that the client perceives is fair value. To do so you need to ascertain in discussion with your client what exactly is their requirement/issue/problem, their time frame etc, and then agree a price that both parties are happy with. This may well be a fixed price, as often now in the case of conveyancing, including any disbursements, or some other arrangement.
Charging an hourly rate for their work may have been the norm for solicitors but is increasingly unacceptable to clients. Your hourly rate based on your costs plus a mark-up has no relevance to your client – your costs are your issue and need to be managed accordingly. Clients are looking more and more for certainty of price at a value they perceive as fair.
Law firms need to introduce processes to their work to ensure they maintain their profitability and use best value service providers such as ETSOS for your online property searches. There are many tasks in any transaction that can be done by paralegals and support staff rather than a fully qualified lawyer, although, of course, supervised and reviewed to ensure the appropriate outcome in the interests of both parties. Conveyancing is such a service line.
On your website and marketing materials promote value rather than quote prices; state that you are not the cheapest but believe your charges are fair and represent good value. By telephone you could say: “If it’s a cheap job you want, then we are not the right solicitors for you. You should understand that a poorly executed conveyance could potentially cost you hundreds and, more likely, thousands of pounds later. Would you like me to send you a copy of our leaflet, 21 things that can wrong with a cheap conveyance?”
In doing so you will avoid the ‘tyre kickers’ looking only for the cheapest quote. Tell your clients and prospects how you work and what they can expect from you. Tell them your support staff will keep them informed of progress, they are welcome to call them or come into the office at any time to see your support team to see how things are progressing or update you on any developments on their side.
The solicitor can then concentrate more on the legal stuff seeing clients at the appropriate stage ensuring best value all-round and satisfied clients. Satisfied clients are likely to be your best source of referrals and will use your services again in the future, provided you maintain contact with them.
For law firms to remain in business and profitable against the new competition they need to provide great service at a price that is fair to both parties. Providing legal services, be it conveyancing or other advice, on the cheap is not a long-term strategy for success. Pricing is a skill that can be learnt and lawyers should seek to work on their pricing skills.
Conveyancing – high value, low cost or high value, fair price? It’s your choice.
Nationwide offers borrowers free conveyancing if they agree to use a solicitor from its panel managed by LMS. How can any independent solicitor compete with that offering?