• Your company has had a great year and is very profitable, so a) the company can afford to pay more, or b) we deserve a share of the returns.
If these are your underlying reasons for a rate increase, you're about to get slapped.
Are you really going to argue that there just aren't enough competent lawyers out there who'd like a job at half of what top firms pay their associates? Or that clients who work on corporate campuses located in suburbs, where it's cheaper to work, should be thrilled to house you in the penthouse suite while they sit on stackable chairs in windowless conference rooms? Are they supposed to feel bad that your associates—who often make more in base pay than much more senior in-house lawyers who hire them to do their lower-value work—need more perks to compensate them for the long hours you're requiring them to bill to their client? Do you think that you're entitled to a share of the company's profits simply because you performed the work you were contracted and paid to do?
Clients don't expect you to live poorly, and they also expect to pay you handsomely for your services, but they also don't expect to have to pay more each year just so you can inefficiently live better. You have no right to increased profitability for simply showing up.
4. If you aren't the only person in the market offering your indispensable service, or if you haven't improved what you're offering (better and faster results, for instance), then your requested rate increase might just be the final straw that persuades a borderline-satisfied client to take the painful and time-consuming step of replacing you—especially if other firms in the client's portfolio (who'd love to take your work away) aren't engaged in such tone-deaf activities.
The fact that clients continue to pay their bills and retain you is not necessarily a sign of satisfaction. Does your gut not tell you that—for many of your clients—if something better came along, your clients would take it?
5. You just don't inform clients that you're raising rates via a letter—hard copy or email. I don't care about the retainer letter "written notice" provisions: when a client of 13 years—who has about 10 special deals for pricing different matters with you, as well as relationships with three of your partners and 37 different timekeepers—gets a letter that says "as of Jan. 1, 2013, our standard rates will go up 10 percent," he is not only unsure of what it is that that means for his teams, special deals and blended rates; he's teed off. You've just brushed off everything he's negotiated with you over time by fiat.
And if you were planning on calling a few days later to assure him his rates won't go up because he's special, he's even more mad you sent him that letter in an effort to inflate his prices to give the illusion that you're lowering them.
Bottom line: if you're unwilling to make the case for a rate increase in person, then you shouldn't do it at all, or at least be thinking about why even you are embarrassed to have this conversation. If you'd like to propose increasing what your clients pay you, you should talk about it in detail and in relation to the value of the work, not in relation to rates.
Is there a better path to firm profitability and client satisfaction?
Yes, but it's not easy. And it requires both the client and the firm to sit down and talk to each other, hammering out a solution that aligns the interests of the firm and the client, rather than hammering on each other.
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