Law Firm
Strategic, Market-Based Rate Setting to Drive Profit Growth
11% in revenue growth, annual rate increases, timely cash collection, and reduced discounting
Consistent, Market-Based Rates and Billing Process
Maximizing realization from quote to cash
This law firm was facing significant challenges around market pricing, realization, and significant discounting occurring across roles, practices, and locations. There was a growing concern around how to increase realization and ensure pricing was in-line with market expectations and the company’s value. To address these challenges, INSIGHT developed a strategic pricing plan based on robust internal and external data to drive sustainable change across the organization through rate setting, realization, and the cash collection process.
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Situation
Driving Profitability with Decentralized Decision-Making
Pinpointing challenge areas and the optimal approach for growth
- Despite historical ~3% standard rate increases, lack of differentiation resulted in sub-optimal results
- High variability in rates across roles, locations, and practices
- Many unearned discounts being received by smaller clients
- Standard rates across similar roles did not align with market pricing
Quantitative Analysis
Identified opportunity to address rate variation across roles, locations, and practice area
Discounting Trends
As the business grew, so did the % of discounting across various avenues
Approach
Differentiated, Market-Aligned Rates
Leveraging market data, analytics, and processes to drive profitable decisions
- Built a gross-to-net waterfall to enable deeper, precise understanding of how standard rates translated to cash collected
- Led market research study to understand current price positioning versus the market
- Reset rates across practice areas to reflect market positioning and recommended resource mix, leveraging existing price realization data and adjusting for existing rate variation
- Built a pricing model to set new client agreements, leveraging market data to inform target
- Implemented annual standard rate increase process
Market Intelligence
Representative survey indicated opportunity to more closely align prices with market expectations
Gross to Net Waterfall
Measured current rate realization and net revenue by user to identify and correct price leaks
Sample Learnings:
- Individuals with high realization had greater opportunity to increase rates
- Practice Group Chairs benchmarked their teams’ realization against other teams
- Measuring changes in realization allowed the business to ensure that increases in Standard Rates were not discounted back to customer
Differentiated Rate Increase
Differentiated pricing model based on historical and market data to determine optimal rate increase recommendations
Process
5-Step Process:
- Analyze historical and market data
- Apply rate power factors
- Generate standard rate recommendations
- Review recommendations with practice chairs
- Finalize and communicate standard rates
Process
Annual market-relevant rate increases based on a continuously updated model
- Established a score based on prior year performance
- Developed weighted scoring system to generate baseline rate increase cap
- Added caps to adjust for market relevancy or new business
Model
Example Power Factors & Model Output:
Model
Example Impact from Recommended Increases:
Collections Realization
Streamlined processes and technology to sharpen organizational focus, strengthen management support, and instill rhythm
- Developed account management technology to boost efficiency and centralize visibility through through tools such as automated email alerts and an embedded escalation process
- Weekly reporting at a client level
- Established commercial PMO focused on addressing profit leaks and trailing new approaches to maximize growth
Impact
100.8% Billed Revenue Growth Over 4 Years
Alongside timely cash collections
11%
Revenue growth from pricing
4-5%
Average yearly rate increase
With timely cash collection
Significantly reduced price and discounting outliers
Billed Revenue Results
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