There are many well-established benefits to flat fee billing, but what holds many attorneys back is determining what to charge for a particular service. Developing a fair price requires doing some research and analyzing the particulars of the matter involved.
Determining the Fee
First, you should have a sense of the going market rate for the work you are pricing. It may not be easy to find out, but ask your colleagues or search public records, such as cases where individuals disputed attorney fees or where fees are disclosed in securities filings. You can even use Google. People share all types of information online. Even a general range can be helpful. If you encounter a potential client who is shopping around on fees, ask them what other attorneys have quoted them for the work.
Next you need to analyze your own past data. If you worked on similar matters, consider:
- How many hours did the work take?
- How much money did you actually collect?
- Was there a great deal of variance in hours between matters?
- What factors most impacted the total amount of hours?
Often there are certain types of tasks that are fairly predictable, and you can easily determine the time they will take. However, there will be unique variables in every case. It helps to break down the tasks that apply to each phase of the matter, so you can see which ones are likely to be impacted. Some common factors that can affect the time it takes to complete a case, include the emotional state of the parties, skills of opposing counsel, complexity of the legal issues, amount of the claim, the court or judge involved, etc.
Taking the first step
Unfortunately, some attorneys don’t keep timesheets in a way that makes it easy to analyze how they spent their time on matters. If you are considering flat fee billing, you should start by developing standard categories and descriptions for the tasks that you perform. Years ago, the ABA developed a Uniform Task-Based Management System to enable clients and law firms to track, by time and task, cost information on legal services and to implement budgeting and billing systems utilizing this information. This is not the only method for firms to use, but the point is that using standardized codes and descriptions for each task gives firms meaningful cost information that they can use to set flat fees and gauge the profitability and productivity of their work.
Firms don’t have to switch to flat fee billing entirely. The best approach is to start with some types of matters where you have a lot of experience and can more easily determine an appropriate price. In addition, consider cases where much of the work can be delegated to other attorneys, either within the firm or to freelance lawyers. Reducing the labor cost will help maximize your return. Outsourcing to freelance attorneys is particularly effective because you can pay them a flat fee plus you save on overhead.
To learn more about how flat fee billing can help your firm, check out our blog post on 5 Reasons You Should Consider Flat Fee Billing.