Clients are growing ever more sophisticated in their understanding of the business of law and how it relates to their own bottom line. More and more clients are negotiating with their attorneys to find ways to bill work on a flat fee basis rather than the traditional and notorious billable hour.
What types of legal work are good candidates to be charged as a flat fee? Certainly, many types of document review and/or preparation, such as drafting a deed, estate plan documents, contracts, or routine business agreements can be billed on a flat fee basis. In the litigation context, many clients are turning to flat fee arrangements for research memos on the strategy for the next phase of the case. They are also requesting flat fees for issuing and responding to discovery requests. Flat fees are growing increasingly common in many family law cases as well.
With the traditional hourly billing system, clients may refrain from calling or emailing you with additional information for fear of running up their bill. The unease of not knowing the cost adds to the stress most clients are already feeling when going through a legal issue.
On the flip side, attorneys who have not already incorporated flat rate billing into their business practices may have their own understandable unease about how to start charging flat fees. Most attorneys are comfortable with the hourly rate and reluctant to incorporate new billing methods to their law practice. However, the trends in the modern practice of law indicate that clients are increasingly demanding flat fees.
How does an attorney determine how to set reasonable flat rates? The attorney needs to take a step back and look at their own practice. What tasks do you find yourself repeating for clients? How long does it take on average for you to complete those tasks? Are there ways to incorporate technology to further streamline and possibly automate those tasks?
You know your practice and you can easily gather data on past, similar cases to look for averages to help set flat rate fees. For example, if you have written eight operating agreements in the past month, you can pull the data on how many hours it took to prepare each of those agreements and come up with an average. Obviously, some of the agreements were more complicated than others so you can also see what the agreements cost on the high-end for more complex client needs. You can use this data to set a flat fee rate for operating agreements knowing that if a client comes to you with a particularly challenging list of factors to draft into the agreement, you can increase the flat fee price to account for the extra work.
Keep in mind that when you set your flat rates, you are not carving stone. You can adjust these rates over time (and for each client or matter) as your workflow evolves and you see how the use of flat fees plays out in your practice.
Incorporating flat rate billing will undoubtedly give you a competitive edge. If a client gets fee estimates from three different attorneys and you are the only one willing to offer a flat rate, that will be a huge deciding factor for the client.
Flat fees also help build client trust by avoiding any future disputes over a bill that wasn’t agreed to up front. This can lead to clients who are more satisfied with their overall experience working with you and will hopefully also generate more referrals in the future.
Give it a try – your clients will love the option of flat rate billing. If you don’t nail the sweet spot for the flat fee on your first case or two, you can always refine it over time.
