Billable Hours Pricing Disappearing (cont'd) By Tony Wanless This article was previously published in the Financial Post, Toronto Canada, in February 2004 Mr. Cohen also pioneered a billing practice that shocked many in his community. He set up a "flexi-fee" system that included five different rates for his services, based on the skill level required for a task. The higher the fee, the more value he adds to the job, such as free consulting time. This doesn't surprise David Raffa, a co-founder of the Vancouver firm Catalyst Corporate Finance Lawyers (www.catalyst-law.com), which was created solely to work within this new world of professional services. The firm's four principals have done everything from merger and acquisition work to working as actors in a video proposal a client wanted to send to a large U.S. company. "I don't think I'll give up my day job," Mr. Raffa chuckles about his acting gig. "I guess you could say that's not something a traditional law firm would have done. But to us, it's all part of the service that we add to the legal process. We can't bill for it because it's not legal work, but adding value in these ways does give us a competitive advantage." To Mr. Raffa, by determining their competitive advantage, or unique selling proposition, legal and other professional services are merely following the path of businesses in any other sector. Firms are dividing into large consolidated operations or more nimble boutique operations that offer more than just their professional service in order to survive. The competitive factor for these smaller firms could be lower rates, added value, or a different approach. Catalyst, for example, was formed solely to build and finance young technology companies and has become the leading law firm in Western Canada to concentrate on that area. Therefore it often acts in many capacities outside the traditional legal sphere -- arranging financing, providing technical consulting, offering advice on real estate, personnel, corporate directors, planning, media coverage and, yes, even acting in their movies. "In professional services you now only have two routes, to lower your rates, or add value to maintain your rates," he explains. "We can't bill for the extra services because they aren't legal related, but they do help justify the rates in the eyes of our clients. In the legal world the middle is disappearing and you either get bigger or specialize if you want to justify your billing. "The reality for technical service providers is that there is a huge downward pressure on billable rates and straight billing for time. Entrepreneurs now want to know how much you can reduce their costs, and what value adds you bring to the table. Service businesses, like any other business, are now under pressure to compete on price and quality."   Back (c) 2004, KnowPreneur Consultants