Do you want to know what the best part of hourly billing is? Hands down, bar none, the best reason to bill by the hour is its simplicity. In fact, it is really thoughtless on almost every level. A client calls with a problem, you tell them what the retainer amount is, and you get to work. Putting aside for a second the fact that hourly billing does nothing to provoke a conversation as to whether or not legal work should actually be done in the first place; I believe that it is the simplicity of the business model that perpetuates the hourly billing system.
I will be the first to admit that proposing a flat fee, defined deliverable project for a client requires intellect and some level of effort. You have to get enough information from the client to understand the scope of the project and the value proposition behind engaging in the legal work. You have to decide what phase one will look like, identify deliverables for the client and develop a flat fee price for those deliverables. There is nothing thoughtless about proposing a defined deliverable flat fee project.
But for those of you who do not mind actually using your high-powered brains, are interested in providing tremendous value to your client and you are as interested in the outcomes as your client may be, proposing a legal project to a client has huge advantages.
The art of preparing a project proposal to a client involves these basic (and relatively easy) steps:
- Understand enough of the client’s problem to understand in general what it is that you are going to need to do. Are you going to be proposing an assessment project, in order to better understand the variables? Are you going to get directly into drafting a license agreement?
- Conduct an interview of the client and try to understand the scope of the problem and the value proposition. You need to ask questions and listen during this part of the proposal process. You need to understand whether or not the client has a million dollars on the line or ten thousand. You need to understand the worse case scenario for the client and ask them the question, “what kind of financial impact would this have on your business?” Other good questions include, how much gross revenue they are generating as a result of the particular issue at stake, how much the deal might be worth, and other questions that will help you understand how much is at stake.
- Prepare a list of deliverables for this particular phase of the project. Deliverables include items such as obtaining background information, conducting interviews, preparing documentation of the problem, assessing the ROI, identifying leverage (legal and non-legal) and providing recommendations, next steps and the cost of any more proposed project phases.
- Provide the proposal to the client asking them to approve or contact you for any further questions.
- Generate a flat fee bill and let the client know that as soon as it is paid, you will start working on the deliverables.
Yes, you are going to be doing a little bit of work in order to create a project proposal. However, you typically would not engage in this activity unless the client had already indicated the desire to move forward. Ninety-five percent of the projects that we propose get accepted by the client as proposed or with minor revisions. We are paid up-front, so we do not have to worry about sending out any further bills or collection. The art of flat fee defined deliverable billing really isn’t much of an art at all. It is just common sense.