Inflation may be hitting your clients hard, but we know that it is hitting you, too. How can you ensure that your firm stays profitable? One way is by increasing your efficiency. Another way is to increase your rates. But, how do you justify a rate increase to yourself and your clients? 

If you feel uncertain about increasing your fees or unsure how to communicate that increase to your clients, we covered all you need to know in last week’s tip.

We also had this conversation recently in our Practice Accelerator Coaching group. The group includes lawyers from across North America and beyond. Every single member has seen increases in their overhead due to inflation. Plus, because of the tight labor market, they’re also paying more for support staff and junior lawyers.

This week’s tip is to know your numbers. That includes your rates, overheads, profits, and day-to-day expenses.

It is both interesting and informative to hear the different points of view on increasing rates, so we’ve decided to share how some lawyers in our Practice Accelerator Coaching program are thinking about inflation and the rising wage costs:

•  One lawyer decided to raise rates for new clients while keeping old clients at their old rates. New clients are more likely to pay new rates as they don’t know the previous rates, resulting in less pushback reading fees.
•  Another advocated for sticking to your fees based on the value you know you’re providing.
•  A suggested strategy involves increasing little by little over some time, so people are less likely to feel the burden of a high increase.
•  Given the increase in both personal and professional expenses due to inflation, raising fees is a matter of necessity for many.
•  If you don’t want to shock clients with a big hike in fees, it can be helpful to stick to flat fees and charge extra based on the variables of each case. For example, in the case of estate administration, your fixed fee might increase with the size of the estate you have to administer.
•  Consider that wages have increased and more people may be able to afford the increase in rates. By way of illustration, a LifeWorks survey revealed that Canadian salaries exceeded 2022 projections and are expected to grow in 2023.

Your action item this week is to review your financials for the last 12 months and determine how much your overhead costs have increased.

It’s a great exercise at the end of the year and can help you make informed decisions, one of those being building any increase in overhead into your rate increase. It also helps you to set financial goals for the year ahead.

When it comes to difficult decisions and industry-specific questions, it's good to have a network of people to bounce ideas off of and get advice.  That’s just one of the many benefits you can expect if you join our Practice Accelerator Coaching program. Check out this recent blog to learn more and hear what other lawyers had to say about the program.

Look out for next week’s Tip of the Week on building a profitable and productive law practice.