A few weeks ago I was playing golf with some old friends. Now that my old friends are, well, old, conversations tend to include family, kids, hobbies (what little time we have for them), and work. One of my old buddies is a litigation partner at a suburban law firm outside of Boston. He was talking to a friend who runs a hedge fund. Here's how the conversation went:
Blah blah blah kids blah blah blah hobbies blah blah blah family vacation blah blah...
...by the way, does your company's law firm have a litigation department? Even if they do, if you ever run into a problem you should give me a call. Our rates are really reasonable. Less than $300 an hour.
My first thought for my old buddy was...mistake. When it comes to litigation attorneys, hedge fund managers don't buy hourly rates. They buy winners.
Because of the nature of my work, I happen to know the details of the rates that many consulting, accounting, technology services, law, and other professional services firms charge. I know who charges fixed fees, who charges time and materials, and who uses contingency fees. I know how my clients scope projects, and I know (sometimes more than they do) what their project profitability is.
While I've read research on the subject (nothing much I liked), more questions came to mind. On a large scale, I'd like to know:
What are the regional differences in pricing and fees?
Do large firms charge more than small firms? The other way around?
What are the differences across service specialties?
How much does brand recognition affect the ability of firms to charge premium fees?
Do service firms discount? If so, when?
Are "compliance" services really commodities, generating lower fees than other value-added services?
Are the higher fee firms more profitable? If so, how much?
Are firms with higher fees growing faster than firms with lower fees?
What do firms with the highest fees do differently than those with average and lower fees?
Do national firms with national clients generate higher fees than regional or local players?
Do firms with set service packages and specialties generate higher fees than generalists?
How do firms go about raising fees?
What have firms learned about fees?
Are fees going up? If so, how fast?
As a percent, how many firms offer fixed fee, time and materials, and contingency fees? Of these firms, are any of them faster growing or more profitable than the others?
Thus was born our newest major research report on pricing and fees in professional services. We're just getting the survey writing and response generation process underway now, and expect to launch the report in early 2008 through RainToday.com.
What data have you seen about service firm fees and pricing? When it comes to fees and pricing, what do you want to know? Feel free to email me or comment below.