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Most valuable lawyer: Pricing flat fee cases

Despite lawyers' avowed hatred for tracking time, most still practice some form of time capture/utilize time sheets -- perhaps because it's familiar and comforting to have boxes ready for completion. Lately, though, I have noticed that a growing number of the new attorneys with whom I consult express interest in applying alternative fee arrangements, most especially flat fees. Whenever I talk with these folks, we eventually get around to the topic of the actual fee setting, and I'll ask: "So, what will you charge on the flat fee?" Almost always, the answer is pat, say: $1000 for a will/power of attorney/health care proxy package. The follow-up question -- "How did you arrive at that figure?" -- does not often admit of a similarly measured response, though, with the most common reply being something like, "Well, it seems like a good number," or "That's what my friend from law school thinks seems to be a good rate." Very irregularly do I get a truly well-reasoned answer to my query -- a truly well-reasoned answer being one that incorporates information gleaned from market research, a derived expectation of how long it will take to get the work in question completed and/or an idea of firm costs associated with the work (not an exhaustive list of factors). Of course, it's nearly impossible to settle upon a true value for your services as an attorney if you have not met those considerations. I often, then, tell new attorneys, looking at applying flat fee rates, to make a best attempt to arrive at a number that reflects the true value of their work, with an understanding that there must be a per se discount in place for clients working with new attorneys, who, within the marketplace for legal services, cannot possibly charge for the personal value (to the attorney, for the hours he or she must labor on a matter in a field novel to him or her) of the case. A flat fee determination for the new attorney, then, should be informed by a cadre of considerations, including those related to market forces (competitors' pricing; clients' expectations; field saturation) and bottom line factors (cost to complete the work; time/hours spent; service features applied).

Just as it is difficult to project revenue when starting up, so it is difficult to correctly forecast flat fee pricing. Once the new attorney has handled a handful, or two, of cases in a niche, he or she will have a better idea of whether his or her initial guess came close to capturing the actual value of the service, or not. But, in order to flesh that comparison out, the new attorney will have to utilize some tool for tracking time spent on the work, to determine how much the process costs him or her, in hours used. Only with a sense of how much a project costs in time will the attorney be able to effectively arrive at a value proposition that works for the client and the firm.

Since markets change over time, it is also advisable for attorneys to continue to maintain time records/keep time for flat fee cases, even if those records never make it to invoice, but are only utilized for the attorney's personal interest in calculating case values. It makes little sense to hang onto a flat fee projection decided upon four months into the practice of law 20 years down the line. Tracking time, even informally, over the course of time, means that attorneys applying flat fees can adjust those fees accordingly, as the economy ebbs and flows, and to adjust for other factors.

If you eschew the timesheet, or manual time tracking, you may want to test out some automatic time tracking tools, as alternatives for gathering informal logs to include within your value formula(e).

*The popular consultant Jay Shepherd may disagree with portions of this post, being that he is timeless as a Struldbrug -- says so right here, at his reimagined blog, where you can follow Jay's continuing take on professionals' pricing knowledge versus time.

Tip courtesy of Jared Correia, Law Office Management Assistance Program.

Published March 29, 2012

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