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Thursday, Jun. 21, 2012
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Law Practice Management 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:

0621LPMChart1
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:

0621LPMChart2

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.
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