Flat fee billing increasing in popularity

Alternative billing is being talked about by more lawyers, though many cynics don’t believe changes will be made. Flat fee billing is perhaps the first step in the direction of change. It is more easily understood and embraced.

The challenge with any alternative fee approach is that lawyers, generally, don’t know their costs of operation. Thus, the fee figure chosen often is a “by guess, by golly” fee, not one based on a cost benefit analysis.

For any such system to work best, the client must be involved in the fee setting process. This means that the client must understand the economic value to him/her of the work to be done.

Experience tells me that flat fees are becoming more popular; I was just asked, for example, to facilitate a law firm retreat on the subject. This would not have happened 5 years ago.

As more firms get into the process, they will realize the need to understand their business – and they will then better understand how to be more efficient in the delivery of services. They just might then be sensitive to the issue of lowering the legal costs for clients, a reason hardly ever given for going to a different pricing model. Jeffrey Carr of FMIC Technologies was quoted yesterday in the Wall Street Journal in another context (the merger of Dewey & Orrick) that lawyers seldom think about lowering the costs of legal services, only about increasing their revenue.

Alternative billing may be a way to do both.

Categorized in: Cash Flow - Finances