« The Busy Lawyer's Guide to Success | Main | Do Lawyers Really Need Practice Management Software? »

June 30, 2009

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c671d53ef0115718f7f9d970b

Listed below are links to weblogs that reference Will alternative fee arrangements be profitable for lawyers?:

Comments

Allison C. Shields, Legal Ease Consulting, Inc.

Dan:

As a new(er) lawyer, you're correct in that you will not always be able to estimate correctly the amount of time it will take you to complete a matter. But I would be willing to bet that when billing hourly, there are times when you cut your time or give the client a 'credit' for some of the time you spent because you are a new lawyer and you feel that the time expended may be out of line.

Most lawyers, whether they have been in practice for a period of time or are new to the practice of law are new to alternative billing arrangements and using fixed fees - particularly in certain areas of practice where hourly billing is the traditional method of billing clients.

As Ron Baker points out in his comment, project management skills and pricing have to be properly developed over time. There are going to be some erros along the way and some tweaking that has to take place.

Allison

dan X. nguyen

As an attorney with less than five years in practice, it's hard for me to exactly gauge how much time it would take me for everything that came into the door; I can estimate some better than others (others being those areas I have less experience in).

The feedback I've gotten is that alternative billing is desirable because of definitiveness of the costs.

Allison C. Shields, Legal Ease Consulting, Inc.

Ron,

I agree except that I'm not sure that your first reason always holds true. Sometimes, the hourly fee wasn't really reasonable to begin with, and competition and/or lack of perceived value drives the fee down because clients don't want to overpay.

The rest of your comment makes very valid points. Scope creep is one of the big fears that lawyers seem to have with fixed fee pricing. It's imperative to specifically define that scope up front and use those change orders.

As one of my clients said to me during a consultation yesterday, "Everything really does come back to the initial meeting with the client!"

Allison

Ron Baker

Hi Allison,

Good post. There are two major reasons why fixed prices fall below what hourly rates would have been.

1) The firm wimped out on pricing the initial scope of work. This also means they did a bad job scoping the project up-front, managing the clients expectations, and probably began to prescribe without first diagnosing.

2) More common, they allowed scope creep without issuing Change Orders.

Both these errors will drive fixed prices below hourly billing. Both errors can be corrected only by becoming a better pricer, and project manager. Neither can be fixed by keeping more accurate timesheets.

If firms conduct After Actions Reviews, appoint a pricing council and a Chief Value Officer, they will learn from these mistakes, and their skill at pricing will increase. They are learning nothing by pricing by the hour, since they can't answer that all important question: "How much money have we left on the table."

Regards,
Ron Baker, Founder
VeraSage Institute
www.verasage.com
Twitter @ronaldbaker

The comments to this entry are closed.

  • Allison C. Shields
  • 631-642-0221

Receive posts in Email

Become a Fan

My Photo

Disclaimer

  • This website is for education and information purposes only, is not intended to provide legal advice. No attorney-client relationship exists or is created by the use of my site or the products services described. This site should not be used as a substitute for competent legal advice from a professional attorney in your state.

Tracer

  • Tracer