For many years, the profession has been talking about alternative billing schemes such as flat fees, unbundled legal services, and pay-what-it’s-worth options. But flat fees are arguably the concept that’s stuck around the longest and the one lawyers are using most regularly.
As anyone who has tried flat fee billing knows, it’s important to balance the potential risk of such billing between you and your client. Charge too little and you end up doing most of the work for free. Charge too much and your client might feel taken advantage of, in addition to whatever ethical pitfalls you might run into for setting unreasonable fees.
When I first started practicing law, I tried to do flat fees for the majority of my clients. As part of a small firm, I was able to make these decisions. I thought flat fees would be better for me because I wouldn’t have to keep track of my time.1 And I was certain it would be better for my clients because they would know what to expect up front and they wouldn’t receive any unexpected bills.
This caused some major problems. First, I found myself underestimating the time a project would take me and then doing far more work than I would have been paid for had the representation been hourly. As a new lawyer, I didn’t have a good handle on how long any given project would take, and I was terrified of overestimating and having the client balk at the price tag and run for the hills or, worse still, be found to have charged unreasonable fees. So I lowballed myself repeatedly and got worn out.
I also found myself spending an inordinate amount of time trying to determine what a reasonable flat fee was. Instead of answering the phone, stating I charged $195 an hour, and then taking or declining the case, I called the prospective client back after I had done research. Lots of research. Also, some guessing. What documents would I need to draft? How long would that take me? What could go wrong, and how would I accommodate those unknowns? I was trying to do this for every client in every practice area, and I was exhausted before the legal work even started. Additionally, my constant underestimation of my fees turned into undervaluing my skills.
So, I changed the way I charge.
My practice right now is estate planning, probate, and family law. Of those, I only do flat fees for estate planning. I have practiced in this area long enough to know that surprises rarely appear, so I’m willing to take the risk. I know how long drafting a document is likely to take, so it’s easy to estimate a fair price for clients and one that is also good for my business.
Doing away with flat fees for probate and family law was tough at first. I wanted to be the lawyer who did things differently and offered the best option for my clients, and I perceived that meant offering flat fees. But, as time went on, I realized two things: (1) my clients actually didn’t expect flat fees, so they weren’t disappointed when I didn’t offer them anymore; and (2) I started to value my services more and became more confident in not only my hourly rate but my skills.
Neither hourly rates nor flat fees nor unbundled legal services will be best for everyone. Take the time to think about your practice, your mission, and your clients to determine which kind of billing is right for you.