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Somewhere in a filing cabinet or a forgotten spreadsheet, most lawyers have a number they picked years ago, on a Tuesday, in a hurry. It was the rate that felt defensible at the time. Then the file loads grew, the rent went up, staff came and went, and that number just sat there. Unchanged. Quietly costing money every single billable hour.
I want to make an argument that some readers will resist: your hourly rate is not a fact about you. It is a decision about your business, and most lawyers make it badly, once, and then never again. Underpricing is not humility. It is a habit. And like most habits, it is invisible until you look straight at it.
The Rate You Set Once and Never Revisited
Think about how the number got there. Maybe a mentor told you what to charge when you hung out a shingle. Maybe you matched what your old firm billed for a junior, or you took the going rate at the courthouse coffee shop and shaved a little off so you would not seem greedy. None of those are analysis. They are anchors, and anchors are sticky.
The real cost is not the first year. It is year five, when you are doing more sophisticated work, carrying more overhead, and turning away files because you are full, all while billing at a rate you set before you knew what you were doing. Being fully booked at the wrong rate is not success. The money keeps coming in, but every hour you bill is worth less than it should be, and the shortfall compounds over years.
Note. Being fully booked is not proof your rate is right. It is often proof your rate is too low. Demand at any price tells you nothing except that you priced below what the market would bear.
What Your Rate Actually Has to Cover
Here is where the guesswork ends and the arithmetic begins. Your rate is not pocket money. It is the only lever that has to cover everything the firm consumes and still leave a profit. Run the honest list.
- Your target income, the amount you actually want to take home.
- Overhead: rent, software, insurance, staff, professional dues, continuing education.
- Non-billable time, which is most of your week if you are honest about admin, marketing, and reading.
- Write-offs and slow payers, because your effective rate is always lower than your posted one.
- Time off, since you do not bill on vacation, when you are sick, or when a matter goes sideways.
Divide the whole cost of running your life and your practice by the number of hours you can realistically bill and collect, not the hours in a year. The gap between your posted rate and what you keep is enormous, and it is the difference between realization and collection that quietly eats the margin. If you have never watched that gap, start with your work in progress before you touch the rate at all. Reading a WIP report and acting on it will tell you whether your problem is the number on the invoice or the discipline behind it.
Your posted rate is what you charge. Your effective rate is what you collect, and it is almost always lower than you think. Marc Lefebvre
Reading the Market Without Copying It
Now, the market. You cannot ignore it, but copying it is lazy and usually wrong. The lawyer down the hall billing less than you might be subsidizing a bad rate with volume and burnout. The one billing double might be selling reputation, speed, or a niche you do not have. Neither number is your number.
What the market gives you is a range and a story about positioning. A firm that competes on price sits at the bottom of the range and lives on efficiency. A firm that competes on expertise sits near the top and had better deliver it. Most small practices float in the middle by accident, charging like generalists while doing specialist work. Decide where you actually sit, then price for that position on purpose. If you want to test whether you are underpriced against your peers, our note on setting and reviewing hourly rates walks through the same discipline from the collection side.
Tip. Do not benchmark against the cheapest lawyer you know. Benchmark against the one whose clients you would happily take. That is the rate you are competing for.
The Conversation About a Rate Increase
This is the part that makes good lawyers flinch. You have decided the number needs to move, and now you have to tell people. The fear is that clients will leave. Some will. The ones who leave over a fair, well-communicated increase were rarely your best clients anyway, and they were often the same ones stretching your aged receivables and testing your patience on every bill.
Keep the message short, direct, and free of apology. You are not asking permission. You are informing a business partner of a change, the way your accountant, your landlord, and your software vendors inform you every year without a second thought.
Effective the first of next month, my rate will move from its current level to reflect the experience and scope of the work I now handle. Your existing matters will finish under our current arrangement, and the new rate applies to work started after that date. I am glad to talk it through if you have questions.
Notice what that message does not do. It does not grovel. It does not over-explain. It does not blame inflation as if you were a helpless bystander. Clear billing narratives train clients not to question the invoice, and the same principle applies to a rate change: confidence is contagious, and so is uncertainty. If you brace for a fight, you will invite one.
Reviewing Rates on a Schedule, Not a Whim
The reason rate increases feel dramatic is that lawyers only do them when they are angry or broke. That is the worst possible trigger. A rate you review on a schedule stops being an emotional event and becomes routine maintenance, like a trust reconciliation or a month-end close.
Pick a date. Once a year, before you set next year's budget, you look at the number cold. Not because a client annoyed you, not because you saw a bigger invoice on someone else's desk, but because it is the day you look. Bake it into the same cadence you already use for the rest of your financial housekeeping.
| Trigger | Reactive (bad) | Scheduled (good) |
|---|---|---|
| What sets it off | Frustration, a cash crunch, a comparison | A calendar date you set in advance |
| How it feels | Personal, defensive, overdue | Neutral, expected, professional |
| Client reaction | Surprise, pushback, suspicion | Acceptance, because it is predictable |
| Size of change | Large, because you waited too long | Modest, because you never fall behind |
Small, regular adjustments beat rare, jarring ones every time. A firm that nudges rates a little each year never has to spring a shocking increase on a loyal client, and never spends years quietly bleeding margin while it works up the nerve. The tools help here too: when the numbers live in one place, a system like A1 CMS makes it easy to model a new rate against your realistic collection rate before you commit to it. Whatever you use, keep the review on the calendar and keep it honest. You can see how the same rhythm plays out in a month-end billing routine.
Your rate is one of the very few decisions in your practice that you control completely. No court sets it, no opposing counsel argues it down, no rule of civil procedure constrains it. It is entirely yours. So stop treating it like a number you inherited and start treating it like the business decision it has always been. Set it on purpose, revisit it on schedule, and defend it without apology. The lawyer who does that keeps more of what they earn, and, oddly enough, tends to attract the clients who respect the work most. If you want the fuller picture of your practice's financial health, our thinking on billing and trust is a good place to keep reading, and you can find more of my writing on the author page.
