The Client Revolution

In-house help: How to save 20% on your outside-counsel spend

Listen up, in-house lawyers: There are three — and only three — ways to lower your spending on outside counsel:

1. Use less outside counsel.
2. Use lesser outside counsel.
3. Use open-price outside counsel.

I covered these in more detail in a post last year: "The only three ways to lower outside legal spending." And if you're a new reader, open-price lawyering is how I describe fixed fees — that is, the opposite of hourly billing's hidden prices. (See "An alternative to "alternative billing.")

Basically, if you want to save 20% on your outside-counsel spending, you can try to decrease your usage of outside counsel by 20%. But this usually means increasing your in-house-counsel work, which doesn't make your life any easier. Or instead of less outside counsel, you can use lesser outside counsel — discount shops who can't charge as much as the elite firms. But you usually get what you pay for.

Or you can save 20% (or even 30%) by going with a firm that uses open pricing. By basing their prices on the client's value on solving a problem and by setting those prices up front, open-price firms work more effectively without all the waste caused by hourly billing and its related systemic problems.

How much savings are we talking about here? Well, according to Hildebrandt's 2009 Law Department Survey of 231 companies, spending on outside counsel averaged 0.22% of total revenue. But that survey is heavily weighted toward Fortune 500 companies, where legal expenses are a much smaller percentage of revenue. A more realistic calculation for "normal"-sized companies is total legal expenses averages about 1.2% of revenue, and outside-counsel expenses make up 60% of that number.

How does that work out for your company? Figure it out for yourself. Embedded below is a minispreadsheet from the geniuses at InstaCalc. Just type in your company's revenue in the first cell. Feel free to abbreviate with m (million) or b (billion) or even k (thousand). You'll get an instant answer for the amount of savings — both 20% and 30% ("even better"). You'll quickly see that we're talking about real money.

[Note to email and feed readers: I don't know if this thingy will work for you. If it doesn't, go to the original post online here.]

Play around with it a bit, and see how much you can save with open pricing. Then call an open-pricing firm and start enjoying that savings. Having trouble finding one? Call me, and I'll help you find one.

• • •

A note on the title of this post: spend is a verb, not a noun. But current corporate jargon often involves nominalizing verbs, like using invite instead of invitation. ("Thanks for the invite.") We end up talking this way because it becomes kind of an insider's code. (See "Abandoning jargon 'at a high rate of speed'" over at Gruntled Employees.) Outside of corporatespeak, people would call it "spending." We should too.

Just saying.

What lawyers can learn from an Office Depot commercial

So ironically, the best commercial I watched this evening — Super Bowl Sunday — wasn't even during the Super Bowl. Instead, it came during the new CBS show "Undercover Boss," which had the coveted post–Super Bowl slot. (So coveted because people tend to be too brain dead to turn off the TV after the game ends, as we were.)

Unlike the Super Bowl ads, this commercial featured no pantsless office workers, screaming chickens, or sadistic Doritos-loving dogs. Just a barber, a voiceover, and a sign (from Office Depot, natch). And a lesson for lawyers on how to price and market their services.

The commercial features Dan, who owns a small barbershop. To his alarm, a large haircut chain moves in across the street, featuring six-dollar haircuts. Dan can't compete at that price. Instead, Dan goes to Office Depot, where he buys a sign:

WE FIX $6 HAIRCUTS

Soon, the large discount chain has gone out of business. All (presumably) because Dan was smart and didn't try to compete on price (and went to Office Depot to buy his sign).

You and I are Dan. We provide a quality service that people will pay for if they understand its value up front. If Dan tried to fight a price war against a huge chain, he would end up like all the little five-and-dime stores across the country that evaporated once Walmart got to town. Or the mom-and-pop hardware stores once Home Depot arrived. Or the little stationery stores once Office ... oops. (Awkward.)

Dan (yes, I know; Dan's not real. He's a character in a commercial. But work with me here. It's like a parable) knows that he can provide something that the discount chain can't. In this case, higher-quality haircuts. Instead of trying to fight a battle on his competitors' terms, Dan wisely changed the game and fought on his own terms. And he knew his customers would appreciate that value, and would pay for it.

Don't compete on other law firms' terms. Figure out what you can do differently from your competitors, and then buy a big (proverbial) sign. Be like Dan.

You can watch the ad here.