Lawyers e-Journal
Thursday, Mar. 29, 2012
Law Practice Management Tip
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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