Alternative Fees for the Process-Oriented Law Firm

For many lawyers, billable hours are a necessary, albeit unpleasant, part of practicing law. Tracking and billing time has long been part of the daily lives of lawyers, often adding to the stress of the their already busy practices.

Fortunately, hourly billing isn’t your only choice in 2018. Many lawyers are using alternative fees in their law firms and reaping the benefits. Interested in learning more? Then you’re in luck! This very topic was discussed earlier this year at the ABA Techshow in Chicago. During this presentation, “Alternative Fees for the Process-Oriented Firm,” Mary Vendenack and Shantelle Argyle covered the ins and outs of implementing alternative fees in a law firm.

Below you’ll find the visual notes from that session along with some of our favorite tips (click to view larger image):

The benefits of alternative fees

The speakers explained that the benefits of fixed and alternative fees are many. For starters, legal consumers – driven by their purchasing experiences outside of legal work – are increasingly expecting predictability in legal fees. Clients prefer to know what they’re paying for up front. The billable hour is anything but transparent and legal fees can quickly add up, which can be frustrating for legal clients.

Alternative fees solve this problem by providing clients with a clear understanding from the start regarding the scope of the work that will be performed and how much it will cost. The more clarity that you can provide at the outset, the better off you’ll be, since your clients will be happier knowing exactly what to expect and what they’re paying for.

Knowing when to use alternative fees

According to the presenters, it’s important to pay attention to your clients during the initial consultation. Look for cues from potential clients that will indicate whether using an alternative fee structure might be called for. One important part of this analysis will be ensuring that you fully understand the client’s business. The client’s values, business processes, and legal needs will play a part in determining whether alternative fees should be used in lieu of charging by the hour.

Certain types of legal matters are simply not amenable to alternative fee structures. The key is being able to make data-driven business decisions. Have a thorough understanding regarding the work that a particular type of legal matter will entail and how long it has taken you in the past to handle similar cases. Then, use that knowledge to assist in determining the appropriate fee structure for the case at hand.

Also important is to ensure that your firm is operating as efficiently as possible. Use law practice management software to automate your law firm’s processes. The more you can automate your law practice, the easier it will be to have a full understanding of your costs and the time required to handle a matter.

Determining how to set your fees

Alternative fee structures vary and it’s up to you to determine what makes the most sense in a given case. As the presenters explained, you have many options. A flat fee is always a possibility, but you can also establish a hybrid contingency, wherein you receive a flat fee up front and also receive a percentage of the amount collected at the end of the case. Another variation is to establish a fee cap for a given case; this allows your client to budget and avoids sticker shock. The trick is to ensure that – no matter what fee you set – that you get paid for the value you provide to the client.

Covering your bases

When exploring alternative fees, it’s important to cover your bases. For example, the presenters suggested that you consider charging an initial consultation fee as part of the fee plan discussed at the outset of the case. It’s also important to clearly lay out the scope of the work to be performed and the fee structure in either the retainer agreement or another document that is signed by the client. Doing so memorializes expectations up front and in writing. And, importantly, if the scope of the project expands during your representation beyond what you’d discussed or expected, you’ll need to inform your client and modify the existing agreement or create a new one.

Now that you understand the basics of establishing alternative fees in your law firm, what are you waiting for? If you’re still not sold on the benefits of fixed fees or want to learn more about alternative fee structures, then make sure to watch the video recording of our recent webinar: “Fixed Fees: Ditching the Billable Hour in 2018.

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