The impact of pricing on profitability
Produced in partnership with Richard Burcher of Validatum (UK) Limited

The following Practice Management practice note produced in partnership with Richard Burcher of Validatum (UK) Limited provides comprehensive and up to date legal information covering:

  • The impact of pricing on profitability
  • Pricing in law firms
  • Pricing governance and policy
  • Pricing analytics and reporting
  • Pricing skills, resources and pricing execution
  • Undertaking a pricing stock-take
  • Price and service transparency

The impact of pricing on profitability

Businesses are constantly looking for ways to improve performance and effective pricing can be instrumental in improving the bottom line. This Practice Note provides an introduction to pricing in law firms and contains guidance on some key considerations for any firm wanting to move towards a more sophisticated pricing model.

Pricing is an area worthy of focus in any business—the link between pricing and profitability recurs both anecdotally and in more detailed analysis. Although the results of improving pricing strategies and tactics will vary enormously, one study suggests that pricing has two to four times the potential to influence profitability relative to other business levers.

Firms that identify and actively pursue pricing as an important part of their strategy typically outperform industry peers that do not have a pricing focus across a number of key financial metrics, eg return on equity and net profit. Firms that are working towards pricing improvement are also proven to benefit significantly compared to peers that are not, even if the pricing program they are undertaking is still a work in progress.

Pricing in law firms

When thinking about improving pricing, managers often look at this purely from the firm's perspective and envision being able to charge a higher price for their services, which will in turn drive greater revenue and profitability. This usually equates to charging clients

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