|
Better Legal Billing: Time
Slips for the Future
Options Abound, But It's
Often Up to Clients to Suggest Them
In the old days of legal
billing, lawyer's invoices — usually a single page of
elegant letterhead—contained only the phrase,
"legal services rendered," and a hefty dollar
amount. No time breakdowns, no list of activities
performed or equipment and supplies used—just a final,
usually shocking, charge.
But client demands and the
evolution of sophisticated billing software have led to
more detailed invoices today. Itemized statements have
triggered discussion among businesses about whether hourly
billing is the best way to be charged for legal services.
As the legal profession becomes more competitive and
dependent on high quality customer service, lawyers need
to embrace alternate billing methods.
Fixed or flat fees,
contingency fees, non-refundable retainers with discounted
hourly fees, blended hourly fees and variations on those
themes are becoming increasingly common. But many law
firms have been slow to join this trend — lawyers still
perform approximately 95 percent of their corporate legal
work on an hourly basis.
What does that mean for
your small business? If your company is currently working
with a law firm or looking for legal counsel, try
requesting alternate billing options. While many law firms
rarely initiate different options, they'll negotiate when
brought to the table. If you want something better than
the old "bill by the hour" deal, try presenting
one of these billing structures:
Project billing for routine
issues
Questions To Ask Your Legal
Counsel
Is the attorney experienced
in business law or just practicing it between drafting
wills and selling homes?
Does the attorney give
advice in plain language or does he use a lot of jargon?
Is there good
"chemistry" between you and the attorney?
Are the attorney's ethics
and goals clear?
What's the attorney's track
record with other businesses similar to yours?
If your legal needs include
large but repetitive tasks, consider a flat-fee approach,
also known as project billing. If you need legal
assistance on a large research project involving several
repetitive tasks with a fair amount of predictability for
cost estimation and time duration, request a dollar cap
for predetermined services. Be sure to compare estimated
costs at the equivalent hourly rate—a projected cap that
far exceeds any likely bill is really no cap at all.
Once you get a project
billing estimate, don't hesitate to shop around. Making an
informed decision — shopping around, comparing prices
and services with other law firms — is good business
sense, especially if you intend to hire a firm for a
single project. If you anticipate establishing a long-term
relationship, mention this as you're negotiating a project
amount — a firm may provide a better deal if it expects
future work from your company.
Results-oriented options
Forget the image of
personal injury attorneys taking a third of any verdict or
settlement. Consider instead contingency fees — fees
based on the outcome of the case and the performance of
your counsel. Creative use of contingency fees can create
efficiencies in even the most high-level corporate
settings. If you retain a lawyer to help your company
avoid litigation, couple a reduced hourly rate with a
bonus for successfully lowering your litigation outlays.
You also can establish an
incentive based on a percentage of money won or saved in
trial. If you're a defendant in a case where the plaintiff
has a strong shot at a $1 million settlement, negotiate a
flat fee if the case goes to trial, plus a bonus if the
plaintiff ends up getting less than $1 million. If you're
a plaintiff and estimate your case is worth between $1 and
$2 million, you might negotiate services for a flat fee
plus a percentage of any settlement over $1 million.
Contingency fees turn the
matter into a shared risk or shared incentive, making the
law firm your business partner, not just representation.
Contingency fees can work well with both flat fee and
reduced hourly fee arrangements. Because a number of
variations on the "pay-according-to-success"
theme exist, you should ask firms for the options they're
willing to discuss.
Multi-layered tasks
If you're shopping for a
firm for substantial legal work involving a number of
legal specialties, consider using blended hourly fees.
Rather than each attorney billing at the usual hourly
rate, the firm calculates in advance an
"average" rate based on the anticipated time
each attorney spends on the matter.
The value of this
arrangement is twofold—it helps define responsibility in
a project and it provides a fair price schedule for the
client, who avoids paying a senior partner's hourly rate
for research that should be conducted by a junior
associate
Legal "Insurance"
Firms without in-house
counsel that frequently hire legal services might consider
contracting with a firm. In this legal billing option,
firms and clients agree to a specific charge per month in
exchange for a predetermined set of legal services. The
contract fee permits the client to pick up the phone and
talk to the attorney without needing to eye the clock.
This approach works like a legal insurance policy. It
encourages companies to contact their counsel on
non-litigation, non-crisis matters, and to save money in
the long run by engaging in more preventive legal action.
Just as in business, the
impetus for change comes from consumer demand. The sooner
businesses take the lead in securing more effectively
tailored billing methods from their legal counsel, the
sooner they'll get better, more cost-effective legal
assistance.
|
