Alternative Billing Gains Traction for Solos, Small Firms
Posted Mar 27, 2010 1:39 PM CST
By Rachel M. Zahorsky
While contingent and fixed-fee models aren’t new, a fresh look at alternative billing may help established small-firm attorneys and solos distinguish themselves from the surge of laid-off lawyers and unemployed law graduates now wading into solo practice.
Alternative fees are very useful marketing tools for consumer clients who like to shop around for deals, Oklahoma-based lawyer and blogger Jim Calloway said Saturday at an ABA Techshow program he co-presented on alternative billing.
“When everyone is doing it on an hourly basis, and I’m doing it for X, that sends a powerful message,” said Calloway, who authors Jim Calloway’s Law Practice Tips Blog and co-produces the podcast The Digital Edge: Lawyers and Technology.
Solo and small-firm lawyers may also find alternative billing models are easier for clients to understand, especially if they aren’t sophisticated legal service buyers, said Natalie Kelly, director of the State Bar of Georgia’s law practice management program.
“I’m from an extremely small town, so hourly billing requires a lot of client education,” Kelly said of clients who may balk at a $300 hourly rate. “Sometimes lawyers offer flat or fixed fees because it makes better sense to the client.”
The predictability of alternative arrangements is more aligned with client expectations from other consumer-based services, which fosters better relationships with clients as well as increased collection rates, especially when clients aren’t shocked by a large legal bill at the close of a matter, Kelly said.
Calloway suggested lawyers slowly delve into alternative arrangements using “bite-sized” steps. For example, a corporate formation package could include minutes for the first year, two hours of phone questions and an advisory letter on running a new business bundled together for a set fee.
“Clients get predictability and free calls to a lawyer, and you get one year to prove how valuable you are,” Calloway said.
Lawyers should also re-evaluate case management to be sure work is billed based on the value provided to clients rather than the expertise of the person completing it. Having a lawyer file a matter versus a law clerk adds zero value to the client and should be billed appropriately.
Closed case files are also valuable resources and should be mined and integrated with knowledge management systems that can improve efficiency and quickly refresh recollections of similar work completed in past cases.
Finally, if a firm rewards attorneys for high billable hours, focus should shift to dollars billed and received, not production alone.