By Tatia L. Gordon-Troy
In the 2017 Clio Legal Trends Report, one of the critical findings was that lawyers spend only 2.3 hours in an eight-hour work day on billable tasks. Some lawyers even say they spend less. Unfortunately, according to the report, office administration and business development seem to eat up most of a lawyer’s time.
What does this mean in terms of you getting paid? Well, if you use the hourly billing model and you are not spending most of your time on billable tasks, then you are not getting paid.
So what’s the alternative to the traditional billable hour? The flat fee model, of course. For lawyers who have been practicing law for years and are accustomed to hourly billing, you may want to consider incorporating flat fees as an option. For lawyers just starting out or going from firm associate to law entrepreneur, you have an opportunity to weigh your options at the onset and experiment a bit.
Regardless of which direction you choose, you could be leaving money on the table if you are not careful. Know that there are pros and cons associated with both the traditional billable hour and the flat fee alternative.
The Billable Hour
Not only are lawyers too busy to work on their clients’ cases, they also fail to record time that can be attributed to a billable task. Failing to record time spent on a case is like throwing money out the window.
Picture this: A client scatters $100 dollar bills around your office and every bill you collect counts toward your earnings on that client’s case. But you’ve spent the better part of the week working on that old copier of yours, setting up your DropBox filing system, or preparing for a “know your rights” seminar you’re hosting this weekend.
Eventually, those Benjamins go uncollected for weeks, even months, accumulating dust in the corner of your office while you continue to struggle with an outdated copier because your cash flow is low. And your cash flow is low because you’re not earning money!
When you finally get around to working on the client’s case, you fail to record the time it took to draft 10 pages of interrogatories or write that eight-paragraph email to the opposing attorney.
The problem? You are failing to earn money within your reach. When you choose the billable hour model, you must hold yourself and your staff accountable for every minute worked on a particular case. You also should pledge to earn most, if not the entire, client retainer within the first month or two.
Commit to focusing on the billable portion of your work and delegate as much as you can.
The Flat Fee Model
Flat fees sound simple, right? Not even close. For flat-fee billing to work, you need to know the number of hours you spend on the types of cases you handle.
If you are currently billing by the hour, you should have a record of the hours spent on a particular case. If you don’t have a record, start building one today by tracking your time and your staff’s time.
Choosing flat fees means knowing what your time is worth, and how to anticipate and cover for additional developments in a case.
Clients seem more receptive to flat fees because they feel more confident in knowing what to expect. But flat-fee billing can backfire on you if you fail to account for more than what it takes to perform the work, e.g., failing to account for the “high-maintenance” client, payment of court appearance and filing fees, any postage and delivery fees, mileage to and from court, and other average monthly business expenses.
Flat fees work well when combined with limited scope representation, also called “unbundled” or “a la carte” services. If your practice lends itself to a limited scope model, you could restrict your representation to reviewing documents drafted by the client, responding to a court motion, or appearing at a specific hearing.
You could offer your services as a coach, or handle more complex aspects of the case while the client handles others. A limited scope model could help you capture clients who otherwise might be tempted to proceed pro se.
When considering this route, develop a price list for specific duties, and then stay in your lane. That is to say, draft a detailed contract that outlines your responsibilities and your client’s, and don’t be tempted to perform tasks outside the scope of the contract. If the client requires additional help, you should negotiate additional representation.
Choosing a limited scope model with flat fees allows you to get paid faster while freeing up time to spend on administrative tasks and business development.
Tatia L. Gordon-Troy, Esq. is a member of the Maryland Bar and a regular contributor to the Bar Bulletin. She helps attorneys self-publish as a way to market themselves and their practices. She runs her own firm, Ramses House Publishing LLC.