I thought you'd be interested in this ABA Journal story:
The best part about value billing is the focus it places on delivering value. For all of the chatter about the simplicity of hourly billing and the supposed challenges presented when you have to define deliverables and quote a flat fee, the most important point is sometimes lost. By talking value, thinking value, and quoting value, you are compelled to deliver value. Flat fee projects and defined deliverables get really easy when all discussions concerning the project’s scope, price and the rest is driven by whether or not the client is going to receive value at a particular price point. As the lawyer works through the deliverable list, the entire focus is on ensuring value. At the end of the project, the lawyer’s focus is on identifying the value provided for the client review and consideration.
If a lawyer doesn’t deliver the value promised, the client most certainly won’t return.
Every once in a while, I’ll dive into my web traffic statistics and see something really interesting. Sometimes, search terms which bring people to our primary law firm web site are funny. Other times, I am filled with a sense of pride to come up number one in the search results. Check out these Google search results for “flat fee general counsel services” in which our law firm comes back number one. For start-up, small and rapid growth companies, a flat fee approach to providing services makes a lot of sense. How, you ask? Simple. You simply define what is and is not included in the flat fee amount. The client is encouraged to use you as aggressively as possible on these issues. It is the lawyer’s responsibility to ensure that the client receives value. Instead of waiting for the call, the attorney actually reaches out to the client on specific issues.
Not every case is ripe for an alternative billing arrangement. Litigation is more challenging to bill on a non-hourly basis than most other matters. Defense litigation is perhaps the most challenging of all. On the plaintiff’s side, we often work on an alternative billing arrangement, sometimes a monthly flat fee and sometimes a blend of reduced hourly rate plus contingency fee. On virtually everything else, we bid projects on a flat fee defined deliverable basis. There are lots of advantages to flat fees including the fact that costs certainty allows many more clients to say “yes” to a project which they might otherwise punt or handle on their own on an hourly fee proposal.
MyShingle.com is a popular web site published by Carolyn Elefant. She is a big proponent of the solo practitioner and helping the solo see that going solo is a reality that can be reached. In a recent post, she references an article written by Malcolm Gladwell in the New Yorker entitled "How David Beats Goliath" which shows how the little guy can really survive and win in the face of adversity. While the big law firms are finding ways to cut costs at the expense of associates and support staff, the small firms and solo practitioners are finding ways to "create their own playing field" to attract business and keep costs down. The solo and small firms are putting forth more effort in attracting business through ingenious ways of billing, using virtual workers and blogging on various web sites. The solo and small firm will continue to survive because they are not afraid of trying new things to attract and keep clients.
For those of you who don’t know, Ronald J. Baker is one of the foremost advocates for alternative billing and killing the billable hour. He started his accounting career with KPMG in San Francisco. Today, he is the founder of VeraSage Institute, a think tank dedicated to teaching value pricing to professionals around the world.
If you haven’t checked it out, he was interviewed on blogtalkradio recently about his mission to kill the billable hour.
I will be a presenter for the Center for Competitive Management with regard to setting alternative fees, along with my co-faculty member, Pamela H. Woldrow, Principal, Altman Weil, Inc., on Wednesday, May 6, 2009, at 2:00 p.m. EDT. Here is the link to sign up for the Conference if you are interested, as well as the points which will be covered:
* Pros and cons of alternative fees
* Best practices for setting fees
* What value billing is and how it can affect your bottom line
* How and why to include pricing in firm marketing
* How clients are driving new fee setting standards
By the end this session, you’ll also know more about:
* Hourly billing – why it’s under the gun
* Value billing
* Flat fees
* Ethical considerations
* Best timing and methods for raising fees
We recently posted about some of the challenges which firms that are struggling financially face in preserving their client relationships. Let's face it, there is always an uneasy balance of "friend or foe" between clients and their hourly billing law firms. Some commenters replied that clients need to "trust but verify" the hourly billing engaged by their law firms, perhaps even more carefully now that there is a lot of financial stress in the system. Others noted that big law firms who are cutting lawyers should be more trustworthy since they are at least taking measures to cut costs. Other firms who aren't cutting lawyers may simply be engaging in "make work" projects which provide very little value to clients.
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.
Here is a threaded discussion on LinkedIn titled “Will the recession change the way law firms do business permanently?” posted by Larry Bodine, Editor at LawMarketing Portal. Larry points out that many people and large corporations are seeking smaller law firms that offer alternative billing in light of the current recession. Here is Larry’s survival guide to weather the recession: