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Law firms should not be afraid to broach the subject of fee negotiations for fear of clients baulking at the mention of money. Paul Denvir and Paul Matthews offer advice on how to close a dedal with confidence

Law firms are reporting that clients are becoming more fee-sensitive, thanks to the economic gloom – winning work at the right price is becoming harder. So how do you handle fee resistance and negotiate the right deal for the client and your firm?

The first obstruction to successful fee negotiations is often the mindset of the negotiator. Those who lack confidence in their fees and/or do not see the value in their proposition tend to be less successful than those who do.

In a recent workshop, we met a lawyer who said he “struggled to close deals”. In the session, it became clear that his lack of confidence coloured his whole approach to client meetings. He really believed clients were fee-resistant and everything they said seemed to reinforce his view; his lack of confidence was palpable. In contrast, one of his colleagues was very successful at fee negotiations. Her confidence was evident and she knew how to handle fee resistance.

In these situations, she explored what competitors had quoted and what was offered for that fee. Where there was a difference in both price and offer, she was good at communicating the further benefits the client would gain from her firm’s solution. If the client still wanted a reduction, she changed the offer and reduced the features and benefits in line with the reduction in fees proposed by the client.

Another thing we noticed was her attitude. Rather than going into a negotiation focused purely on what she must win, she consciously evaluated the client’s situation. Her focus was just as much on helping them to win as it was for herself; she had a win/win approach to fee negotiations.

Win/win

Many professionals believe they adopt a win/win approach to fee negotiations (because they are not consciously looking for their clients to ‘lose’), but in reality their aim is to get the best deal possible for their firm. Real win/win comes from finding mutually beneficial solutions. These solutions are not an evenly split compromise, where one side reduces on this and the other reduces on that. The possibility of win/win comes from negotiating on interests rather than positions. Positions are what a person states he or she want to achieve from a discussion; interests are why a person wants to achieve what they do – these are the underlying reasons or motivations behind what they are looking to achieve.

A position may stem from a large number of interests. The good news is that not all of those will be in conflict with ours. One interest could also manifest itself in a number of positions. So, if we know the other person’s interests we may be able to help them achieve these through ways other than their stated positions. In this situation we have widened the scope of the solution and can now explore ways in which both sides’ interests can be satisfied as fully as possible.

The four phases of negotiation

In order to maximise the chances of achieving a mutually profitable outcome to a negotiation, it is vital to ensure that the negotiation is managed well. Every negotiation should be managed through four distinct phases.

The preparing phase

Success in the negotiation is closely linked to the quality of preparation that takes place in the preparing phase. So what should you plan for? Here are some areas we recommend:

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