LPM Tip
Use war stories to make better fee estimates
The Third and Final Part of a
Series on Legal Project Management
Providing clients accurate fee estimates can be extremely
difficult. Clients of all sizes want more certain fee estimates.
Yet, due to the unique nature of each case, attorneys feel
compelled to provide extremely broad estimates or just tell the
client "It depends." In a pinch, an attorney might quote a flat fee
and hope he or she will not take a bath.
Sharing "war stories" (descriptions of interesting past cases)
is not only entertaining, it can help you make better estimates.
Instead of just reliving those interesting matters, analyze them to
find variables that increased (or decreased) your fees.
Analyzing prior cases for fee information is not complex.
Picture your last 20 or 30 cases. If you don't have enough cases to
analyze call one of your colleagues who performs the same type of
work to discuss their cases too (keeping client confidences of
course). Identify the most run-of-the-mill case: a case with no
variables that increased or decreased fees and that took about the
amount of effort and resources you expected (or would expect) to
resolve. Then analyze the cases that were not
run-of-the-mill for the variables made them atypical. In trust and
estate matters typical variables might be multiple prior wills or
trusts to review, a difficult family situation, or real estate or
tax issues that must be resolved. In an immigration practice
typical variables could be logistical issues such as travel or
translation, or the necessity to collect documents from countries
with weak governance. A table of litigation variable might look
like this:
Once you have a list of variables, you next identify two aspects
of each variable. First, how much did the variable
increase or decrease the fee from a typical case -- either in
dollars or as a percentage of the base fee. You can estimate the
average amount of increased fee or dissect each case for an exact
amount and then calculate an average. Second, assess how often the
variable appeared across all of your sample cases. If the variable
appeared in 2 out of 20 cases it has a 10 percent likelihood of
appearing in a single case. Now put this data -- the per case cost
of the variable and its per case likelihood on your table:
Now you have building blocks to create more rigorous fee
estimates. You take the base fee from the run-of-the-mill case,
assess whether the above variables appear in this client's case (or
whether you need to investigate more to make that determination).
Even if you can't predict whether a variable may appear in the case
you are estimating (such as the other side becoming uncooperative
midway through a case), you have an idea of the likelihood of that
variable and the cost of that variable and can work such unknowns
into an estimate either by increasing the fee, negotiating a hybrid
fee structure, or by adapting a section of your fee agreement to
address such contingencies. These tools can also improve flat fee
quotations. In such matters, you have a better idea of what work to
exclude from the flat fee services.
Possibly most importantly, these tools are a way to explain the
basis of your fee instead of saying "It depends."
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Thanks to Aileen
Leventon of QLex
Consulting for her invaluable advice and examples of attorneys
using legal project management tools to innovate and improve their
practices.
Want more legal project management tips? Part one of the series,
the April 27
LPM Tip discussed using project
management (PM) tools to promote more efficient drafting. The
May 25
LPM Tip discussed using PM to improve particular aspects of
cases or office practices.
Tip courtesy of Scott L. Malouf,
Law Office
Management Assistance Program.
Published June 21, 2012
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To learn more about the Law Practice Management
Section, which is complimentary for all MBA members,
contact LPM Section Chair Thomas J. Barbar or Vice
Chair Stephen
Seckler.