In the old days of legal billing, attorney bills, typically a single page with fancy letterhead, contained just the phrase “legal services rendered” and a hefty dollar amount. No time interruptions, no list of activities performed or equipment and supplies used, just a final charge, usually shocking.
But customer demands and the evolution of sophisticated billing software have led to more detailed invoices today. Detailed account statements have sparked discussions among companies about whether hourly billing is the best way to charge for legal services. As the legal profession becomes more competitive and relies on high-quality customer service, attorneys must embrace alternative billing methods.
Flat or fixed rates, contingency fees, non-refundable advances with discounted hourly rates, blended hourly rates, and variations on those themes are becoming more and more common. But many law firms have been slow to join in on this trend: Attorneys still do about 95 percent of their corporate legal work by the hour.
What does that mean for your small business? If your business currently works with a law firm or is seeking legal advice, try requesting alternative billing options. While many law firms rarely initiate different options, they will negotiate when brought to the table. If you want something better than the old “hourly bill” offer, try introducing one of these billing structures:
Project billing for routine problems
If your legal needs include large but repetitive tasks, consider a flat fee approach, also known as project invoicing. If you need legal assistance on a large research project that involves several repetitive tasks with a good amount of predictability for cost estimation and length of time, ask for a dollar limit for predetermined services. Be sure to compare the estimated costs to the equivalent hourly rate – a projected limit that far exceeds any likely bill is actually no limit.
Once you get a billing estimate for the project, feel free to shop around. Making an informed decision (comparing prices and services with other law firms) is good business, especially if you intend to hire a firm for a single project. If you plan to establish a long-term relationship, mention this when you are negotiating the amount of a project; A company can offer a better deal if it expects future work from your company.
Forget the image of personal injury lawyers taking a third of any verdict or settlement. Instead, consider contingency fees – fees based on the outcome of the case and the performance of your attorney. Creative use of contingency fees can drive efficiencies even in the highest-end corporate environments. If you hire an attorney to help your business avoid litigation, combine a reduced hourly rate with a bonus for successfully reducing your litigation outlays.
You can also set an incentive based on a percentage of money earned or saved on the test. If you are a defendant in a case where the plaintiff has a good chance of reaching a $ 1 million settlement, negotiate a flat fee if the case goes to trial, plus a bonus if the plaintiff ends up receiving less than $ 1 million . If you are a plaintiff and estimate that your case is worth between $ 1 and $ 2 million, you can negotiate services for a flat fee plus a percentage of any settlement over $ 1 million.
Contingency fees turn the matter into a shared risk or shared incentive, making the law firm your business partner, not just representation. Contingency rates can work well with both fixed rates and reduced hourly rates. Because there are several variations on the “pay as you go” theme, you should ask companies what options they are willing to discuss.
If you are seeking a firm for substantial legal work involving a number of legal specialties, consider using combined hourly rates. Instead of each attorney billing at the usual hourly rate, the firm calculates in advance an “average” rate based on the anticipated time each attorney spends on the matter.
The value of this arrangement is twofold: it helps define responsibility on a project and provides a fair pricing schedule for the client, avoiding paying a senior partner’s hourly rate for research that should be conducted by a junior associate.
Legal “insurance” companies Companies without an in-house attorney who frequently hire legal services might consider hiring a company. In this legal billing option, companies and clients agree to a specific charge per month in exchange for a predetermined set of legal services. The contract fee allows the client to pick up the phone and speak to the attorney without looking at the clock. This approach works like a legal insurance policy. He encourages companies to contact their attorneys on non-litigation and non-crisis matters, and to save money in the long run by engaging in more preventive legal action.
As in business, the drive for change comes from consumer demand. The sooner companies take the initiative to obtain personalized billing methods more efficiently from their legal advisers, the sooner they will obtain better and more cost-effective legal assistance.