Optimising Your Retainer

In the initial stages, businesses usually seek legal advice on an ad hoc basis, based on the issues which they can foresee or crop up along the way. As time goes by and the business begins to acquire a certain tempo, the owners or managers may seek alternative solutions to deal with the increased number or complexity of issues

Typically the word “retainer” comes up when the business foresees a high volume of matters that require legal intervention. There is an underlying assumption that getting a retainer lowers the cost of legal services as compared to an ad hoc approach, but the volume doesn’t quite justify hiring a full-time in-house counsel yet. However in order for the adviser to provide services at a lower average cost, the following considerations would apply:

1. The service should be specific.

If the retainer only puts the adviser on standby for a certain number of hours or period of time, then the client is basically paying a time-cost bill upfront. This happens when the business only has a general idea that it needs legal assistance, and wants some sort of safety net.

To avoid simply paying for time, the client needs to be specific about the issues that it wants to solve by outsourcing them to the adviser, because that frees up the owners or management to run the other parts of the business. This usually requires the adviser to discover the root of the problem in order to propose a cost-effective process.

2. The service should be repeatable.

Most businesses understand that the greater the supply of a particular good or service, the lower the average price will be. This principle also applies to legal services on a retainer – a consistent service lends itself to a consistent price because the adviser can streamline his own processes after multiple iterations, and over time deliver a consistent outcome to the client.

Simply blocking out the lawyer’s time doesn’t guarantee that the problem will be solved consistently. The lawyer would have to figure out if he can develop a process to deal with issues that persistently crop up for the client, before offering some sort of bulk rate for that service, and the utility of developing that process is much higher if it can be reused in the future.

3. The service should be provided at a sufficient scale.

It follows from the previous point that the adviser has a much stronger incentive to streamline his work process for efficiency, if he can achieve economies of scale. Most businesses understand that certain investments can only be justified if it leads to a certain volume of sales, so it should not surprise them that lawyers, having to also run a business, may think along the same lines.

Therefore, in order to lower the average price, the adviser has to be presented some other incentive, such as a higher total volume of services required. Service providers often resist the concept of discounts because of the perception that it adversely impacts their ability to defend prices in the future, but asking for a “bulk rate” in exchange for buying at a “bulk volume” may address that fear.

In conclusion, a retainer is more effective when the business has identified specific needs that happen at a high frequency, because the lawyers are then able to resolve the issues efficiently by developing a process that can be applied repeatedly and refined over time. Rather than just reserving a lawyer’s working hours for themselves, a retainer should be used to streamline business processes which gives the business more bang for its buck.