Thoughts on ways to improve the management of professional services firms

Friday, July 21, 2006

Professional services - pricing, positioning and service areas

I finished my last post by commenting: Even in a single professional field like law, there are considerable variations between customer types and fields of law in areas like pricing, the pattern of WIP creation, write ups, write offs and billings. These need to be understood and accommodated.

Because I am still mulling these issues over in my mind, I thought that I would make a short supplementary comment, taking law as an example.

To begin with, there is considerable variation within law as to the extent of fixed price quotes. This varies between customers, law firm practice and fields of law.

Some customers demand fixed prices, others require firm estimates, still others are prepared to accept conventional time based billings. The willingness of law firms themselves to accept fixed prices varies. It is common in some fields of law - estate or conveyancing for example - for service offerings to contain a mix of fixed price and time based elements.

There is also considerable variation in customer payment patterns. Again, this varies between customers, law firm practices and fields of law. Some firms bill monthly, some against milestones, some at the end of the job. There are some fields of law - estates and conveyancing are again examples - where there can be quite long lead times in translation of WIP to billings.

Each firm needs to analyse and understand its own business, taking current and prospective clients into account as well as any variations between fields of law. From experience, particular problems can arise where the firm operates in several different fields with different patterns.

The most common problem is simply failure to recognise the differences, leading to the application of firm wide policies and procedures that do not properly take variations into account. This can be a particular problem where firms are moving into new fields of practice.

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