The legal profession is facing its biggest pricing disruption in decades. As AI becomes increasingly effective at handling document analysis, contract drafting, and legal research and review, it is shortening tasks that traditionally generated significant billable hours.
What happens when a lawyer can deliver the same outcome in two hours that previously took twenty? Gordon Tian, an accountant, barrister, and business coach for law firms, believes the answer isn't to bill less time; it's to rethink how legal services are priced entirely. Value-based pricing, he argues, isn't just an esoteric alternative – it's the model for firms to remain competitive as AI transforms legal work.
What is value-based pricing (VBP)?
“The basic premise of value-based pricing (VBP) is that clients aren’t buying your time,” Gordon explains. “They’re buying the perceived value your service creates for them.”
“This perceived value might show up as more money, cost savings, time saved, reduced risk, or less stress. Even two clients in the same industry can perceive value very differently. So the real driver of price is perceived value, not inputs like time or effort.”
This is a fundamental shift from how legal services are traditionally priced, but Gordon argues that it better reflects reality.
“If you ask a client what they’re actually buying from you, I can almost guarantee they won’t say 'your time,’” Gordon says. “Many lawyers are already applying value-based thinking without realising it. If you’ve ever written time off or not put time down in a file because you felt the fee wouldn’t fairly reflect the outcome, that’s ‘VBP on the downside.’ But you’re likely not capturing the upside when your work delivers massive value in fewer hours.”
According to Gordon, there are big upsides to VBP:
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You capture more of the true value of your work
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Fee disputes drop as the price is agreed upfront
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Debtor days improve because price and value feel aligned
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You get clearer on the actual outcomes you’re creating for clients
“Because of these advantages, many firms are looking to introduce VBP into selected workstreams, where it makes sense, to complement hourly billing,” observes Gordon.
AI will shift pricing towards outcomes, not effort
Even as AI evolves, its pace of progress has been astounding.
“Large firms are already embedding AI into core legal workflows,” Gordon says. “Much of what AI now does well – organising large volumes of text, document analysis, drafting, and summarising – directly overlaps with the day-to-day tasks many lawyers perform. Especially the work that’s time-consuming but doesn’t require high-level judgment.”
However, the massive efficiency gains AI provides are exactly why AI sits at odds with traditional hourly billing.
“AI reduces the time needed to complete tasks, and that creates real tension for the hourly pricing model. If you charge $300 an hour and deliver $10,000 worth of value in two hours, does it really make sense to bill $600?” Gordon points out.
“Flip it the other way: if one lawyer takes 20 hours and another uses AI to do the same job in two, who has the competitive advantage? As AI becomes more widespread, I think we’ll see a natural shift toward pricing models that reflect outcomes, not effort.”
From Gordon’s perspective AI and value-based pricing go hand in hand. The more AI becomes part of legal work, the more value-based pricing makes sense, for both firms and clients.
What does value-based pricing look like in practice?
“VBP at its core is about having a deep understanding of the value your services will provide to the client,” Gordon explains. “To do that well, you have to have the right conversation, to draw out the actual problem they’re solving and why and how it matters to them. That might not be apparent from the surface. As a framework, you should ask open questions to understand; background, motivation, problem, measurement of success, value, consequence, and timing.”
To understand how this works in practice, Gordon proposes a hypothetical.
“Let’s say two clients come to you asking for a basic will and enduring power of attorney,” Gordon says. “Both are in their 60s. Both are married, with adult children. Both have a net worth of $5 million.”
But as Gordon explains, their situations are vastly different.
- Client A has a tight-knit family. The kids get along. There’s a history of open communication and no prior disputes. This client wants to get the paperwork sorted and ensure everything is in place.
- Client B, there’s tension between the children, one of whom was estranged for years and has only recently reconnected. The client experienced serious family fallout when their own parents died without proper estate planning, and they’re determined not to repeat that pattern.
“For Client A, the will is about administrative peace of mind,” Gordon explains. “For Client B, the will is an emotional safety net and a safeguard against deep family fractures and future legal fights.”
“Same legal documents. Same net worth,” Gordon says. “But the perceived value and the potential consequences of getting it wrong are on completely different levels.”
How can you transition to value-based pricing?
Embracing value-based pricing involves two components: administrative setup and understanding your ideal client.
“The administrative side of value-based pricing involves setting up templates, matter scoping tools, and internal billing processes. However, a key foundation is knowing your ‘ideal client profile’ (ICP),” Gordon says.
Without an ‘ideal client profile’ (ICP) clarity, you’re essentially trying to price value without understanding what the client actually values.
“Value-based pricing only works when the service and price align with the client’s goals, risks, and definition of a good outcome. Two clients might come to you with the same legal problem, but one might have a lot at stake in terms of stress and emotion, while the other is after speed and execution. Their perception of value will differ,” Gordon cautions.
“When your firm knows its ICP, you can design your service to resonate with what those clients care about most. You’ll avoid fee negotiations, communicate value more clearly, and price consistently for similar types of work in the future.”
Firms often default to surface-level filters — like industry, age, or net worth, Gordon observes.
“Those help, but they don’t tell the full story. For value-based pricing to really work, you need to dig deeper and understand the psychological and situational factors that influence value perception.”
For example, it is worth considering the following factors about your ideal client:
- Risk profile (to them), urgency, or emotional stakes
- History of legal complexity
- Decision-making style
- Communication expectations
- Level of legal sophistication
- Level of financial capacity
As Gordon concludes: “The more aligned you are with these deeper traits, the easier it is to price for impact, not just input.”
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