Chuck Chandler, partner and chairman of the legal consulting practice for Valeo Partners in Washington, D.C., helps clients determine optimal pricing structure for law firms and corporate counsels. According to Chandler, there are several key components in determining hourly rates. Firms must look at costs, profitability measures and projections, and needs, and then put that price formula out in the market.
“That’s when the magic of the market happens and that’s when the negotiation begins,” says Chandler. “The formula itself is pretty much the same. The dynamic is actually what happens in the marketplace after that in terms of what rate they can get.”
Firms and legal counsel should take into account the total process. “Not only do you look at the hourly rate of each person, but you look at the engagement,” says Chandler. “How you are staffing the engagement.”
Chandler says the idea of a standard hourly rate is a myth. “It’s a planning number,” he says. “It’s not a real number.” He cites from his data an example of a partner with 10 different clients and 10 different hourly rates. The differences are because of negotiations and the flexibility of the rates.
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