“What can you do for me on the fee?” she asked. The lawyer, hungry for a new client, wanted desperately to close the deal.

The discount discussion comes up in two contexts in the attorney-client relationship. In one situation it’s an appropriate, albeit unwelcome conversation. In the other–well, in the other situation, you’ve already screwed things up.

The wrong times for a discount discussion

You’ve been representing this client for a while. Or–and this is even worse–you finished the case some time ago.

The client owes you money.

You are now like a hostage tied to a post in the basement. The client owns you.

This is a mess and it never should have happened. You shouldn’t have let the client owe you money. You’re not a bank. You’re not a loan shark. You don’t even know how to break somebody’s fingers.

There are two ways most of us let this happen. Both are ugly.

First, when you do business like a bank

You are a bad business person. You do business like a bank, but you’re not a bank. You’re more like a barbershop.

Banks have leverage. You don’t. They’re often smart enough to get a security interest in collateral. They try not to loan money they might not get back.

You aren’t even trying.

The client walks in and hires you for a big case. You explain that you bill monthly and the bills are to be paid within thirty days. Why not just put a big “Kick Me” sign on your back?

Then, when the client doesn’t pay, you act surprised. Seriously? This is a surprise? Half the time you’re representing the client who doesn’t want to pay someone else and then you’re surprised when they don’t want to pay you? Are you also surprised at the end of the movie when the hero gets the girl?

Sadly, this is the way you do business. You’ve got policies and procedures in place (dumb policies and dumber procedures). Maybe you run a credit check on your clients or check references when you take on someone new. Your system is to bill at the end of each month and write something like “Net 15 days” or whatever on the bottom of the bill. The client might as well cross that out and write “bad business person” in its place.

A barbershop has some leverage. Those guys have razors and they spend time near your neck. You aren’t even as good at this as barbers, so maybe you should stop giving away the store for free.

Please let me rant about this for another moment

We all know the lawyers who bill at the end of the month without taking a deposit for their fee. They’re often representing businesses, and we figure we’re different because we ask for retainers in advance. But our business practices are just as bad as what I’ve described above.

We take on new clients knowing they don’t have the funds to finance the case. We take a $5,000 deposit for a $10,000 case. Or we take $10,000 for a $100,000 matter and we’re proud of ourselves and feel superior to the monthly billing lawyers.

Then, sixty days later, the money is spent on billable hours, and the client is running up a balance and failing to replenish the trust account. Now how smart are we?

We ask for the money knowing they don’t have it. Some of them tell you they can’t pay. You get some sad stories. They explain that it’s difficult to come up with the required cash in the middle of the crisis which is their case.

They explain that the equity line is tapped out or tied up. They explain that their credit cards are maxed out and the 401(k) loan has reached its limit. They tell you that their friends and family aren’t willing to step up and help and that they visited their banker, who denied their request for a loan.

What will you do? You’ve extended credit to a client who clearly isn’t creditworthy. If anyone else trusted them, these clients would have been able to obtain the funds somewhere. Even their family members refuse to loan them money. Why? Because they know better.

Don’t give them credit. Walk away. That’s the right thing to do if the rules of professional responsibility allow you to get out. Don’t get sucked in. You’re a lawyer, not a banker. Don’t loan your clients money.

Second, you neglect to break their fingers

The second way we get stuck with outstanding fees is neglect. You haven’t been billing on time. Or, you have been billing on time but you haven’t been paying attention to whether those bills are being paid. Regardless, the client now owes you money and you don’t want to upset the possibility of getting paid by cutting them off. Now, they get to decide when to pay and your “Net 15 days” stamp just inspires giggles.

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Discussing discounts with clients who owe you money isn’t really a discussion of a discount. You’re a hostage in the basement negotiating for your own release. This never ends well, because you have no power in the relationship. They own you, my lawyer hostage friend. You blew it.

Once the services are delivered and the money is owed, in the absence of a security agreement, you haven’t got much leverage. Sure, you can sue the client and invest more of your valuable time in the chase. But the client already knows you lack attentiveness, persistence, and determination to protect yourself. They’ll likely hire another “discount” lawyer to defend against you, and they won’t pay that lawyer either.

What do you do with a client who offers to pay you less than they owe? You take the deal. But be sure it’s a good deal.

The client will offer to make payments, over time, of an amount less than owed. Don’t even think about it. Don’t engage in payment plan negotiations with people who don’t pay their bills.

Accept your fate. You have minimal leverage. Take a lump sum and call it even. If they were going to make payments in a reliable manner you wouldn’t be having this conversation, because they’d already be making payments. These discussions amount to negotiating with deadbeats.

Don’t negotiate anything that doesn’t happen right now, so that you can ensure completion. They pay what they’re going to pay and you compromise the rest. Get it off the books. Be done. Get it over with.

When is the right time to negotiate a discount?

What I’m talking about today is that moment when a client asks for a discount at the outset of the case, when fees are initially discussed. It happens all the time. You quote a fee, or you require a deposit to the trust account. The client has an argument for paying less–usually they try to convince you that their case will be really simple and easy. My favorite story is that it’ll be resolved with one letter from the wise and powerful, ie, you. What do you do with this discount request?

You can take one of two approaches. First, you can offer a discount if some element of the service is removed. You’ve outlined a plan for the case. If the client is willing to forgo some element of the plan, then you can reduce the fee accordingly. Likewise, if the client is willing to have the work done by a less experienced associate, then you can reduce the fee.

If the client wants to pay less, they should be willing to accept less.

If you charge $2.00 for a 16 ounce Coke and I offer you $1.00, you’ll probably respond that you’ll happily provide an 8 ounce Coke for $1.00. If you don’t have a small cup, be creative: fill the big cup half way. There are many possibilities. The key is to hold the line on the fee unless you negotiate a different service than was originally anticipated.

The best response to a discount request

The other approach is to simply say “no.” Prospective clients, especially difficult prospective clients, like to test limits. The fee discussion is one such test. Be tough. Sometimes it gains you respect–does any client really want a lawyer who won’t even stand up for themselves? If the client is overly difficult at this stage of the game, you may be better off without this client.

Years ago, I had a fee discussion with a client in front of a new lawyer in my firm. The purpose of the meeting was to discuss the fee, but more importantly, the new lawyer needed me to demonstrate how to discuss a fee as a training exercise. I said everything more forcefully and more dramatically than usual because I knew he was watching me, and I wanted to make a point. The client asked for a discount. I said “no” and explained that I didn’t negotiate and that the fee was the fee. I told the client “there would be no quibbling, no dickering, no negotiating.” In fact, I behaved as if I was agitated that any question of my fee had even occurred, and I made it clear that I might not be willing to accept the case.

The client, by the end of the meeting, was begging me to take the case at the fee I quoted. Even I was surprised at the effect I’d had on the client. My goal of teaching the other lawyer was solidly accomplished. And the client was grateful that we were willing to do the work.

Hold the line on your fee. Don’t compromise unless the client decides to compromise the services they require.

Get the fee right the first time–be confident

You’re an expert in your legal arena. You know what’s involved in your matters. You know what they cost and what you should charge. When you set the fee and quote it to the client, get it right.

Knowing that you are charging the right amount for the right client gives you the confidence you need to hold the line and stick with the number you’ve provided.

I knew a lawyer who told me his response to a request for a discount. I’ve actually used it a time or two, but this older country lawyer delivered the line far better than I ever could.

He’d look straight into the eyes of the client who was asking for a fee concession, and he’d respond in a slow, country drawl: “I’m a simple country lawyer. I can worry about your case or I can worry about my fee. I can’t worry about both.” Mostly, he got the fee he quoted.

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