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A How-To Guide on Flat-Fee Billing
For many lawyers, flat-fee billing offers an attractive alternative to the tyranny of the billable hour. Among the advantages, flat-fee billing rewards rather than penalizes lawyers for efficiency, plus it liberates lawyers from the tedious practice of tracking time.
Despite the perceived benefits of flat-fee billing, most lawyers don't have a clue about how to transition from the billable hour to a flat-fee system. And that's why this this article from the ABA Journal is so valuable. Though cursory, the piece offers some good advice from Boston attorney Jay Shepherd, who has banned the billable hour from his own law practice. Shepherd's suggestions include:
• Do your homework. A switch in billing method is not a shoot-from-the-hip exercise. "We went back and looked at eight years of bills," Shepherd says of the 10-year-old law firm. Shepherd's firm grouped similar cases and compared price tags, asking: What made case A twice as expensive as case B? And FitzGerald says that his attorneys can now anticipate time-consuming, costly issues before they arise.
• Find a new measure for performance. At Fragomen Del Rey first-year associates' transactions are scrutinized, but not the hours; supervisors review the number, the revenue received and client feedback. Sure, year one is still hard work for rookies, but it's also a breath of fresh air.
• Stick to your guns. It's one thing to tell a client your help will cost $500 per hour; it's quite another to say, at the outset, that a case will cost $80,000. "It's a bit of a leap of faith," Shepherd says.
Being steadfast has its price -- one being the dream client demanding to be charged by the hour. "The answer," Shepherd says, "would have to be no."
• Be a business geek. "In law school, we don't learn about business. It's just not taught," Shepherd says. But law is a business more than anything, he says.
• Don't secretly keep track of time. The temptation, even if only for reference, must be overcome, Shepherd says. The move from billables to flat fees is not just a practical change; it's a different way of thinking.
Incidentally, if you are looking for additional guidance on flat fees and alternative billing, perhaps one of the best authorities is Allison Shields of Legalease Blogs, who has written extensively about this topic.
And what about you, readers? What is your experience with flat fees -- and what advice would you have for those who seek to implement an alternative billing approach?
Posted by Carolyn Elefant on July 7, 2008 at 04:16 PM | Permalink
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