How Lawyers at One Small Firm Said Goodbye to the Billable Hour
A five-lawyer San Francisco intellectual property law firm has largely abandoned the billable hour.
Instead Smithline Jha charges a monthly subscription fee that ranges from $6,000 to about $30,000, the Recorder reports.
The firm’s founders told the Recorder that Smithline Jha focuses on IP licensing for software and Internet companies, work that tends to be steady and well-suited for a monthly subscription arrangement. They began to make the switch early last year, and now collect about 90 percent of their revenues from subscription billing.
Founder and name partner Todd Smithline told the Recorder that the firm keeps track of assignments and tasks for its subscription-paying clients, but not hours devoted to their legal work. He likes the new method much better than the billable hour model.
“We did find all this tracking of hours and dealing with conversations around rates to be distracting, and we didn’t think the billable hour was a good way to measure the value of the services we provided,” he told the Recorder.
During the initial switch away from hourly billing, the firm calculated subscription fees based on a client’s estimated annual spending, divided by 12.
Now new clients are charged an initial fee of $5,000 for the first month. During that time the law firm handles as much work as it can for the client, and uses what it learns about its legal needs to set a future monthly fee, the story says. Either side can request an adjustment if the situation demands it.
Now clients don’t wait to ask for legal help, making the lawyers’ job easier, Smithline told the Recorder.
Updated on Dec. 24 to clarify that the firm used past fees to calculate subscriptions only during the initial change.