Before starting any crossover from an hourly (cost-based) billing method to an alternative (value-based) method, you need to know your own environment and practice and go through a detailed process of self-assessment. Ask the following questions to help assess what your practice is all about and which billing methods are appropriate to help you reach your objectives.
Objectives and Goals
- What opportunities exist in your market that you might not have addressed?
- What services do you now provide? What services should you provide in order to address market opportunities and meet your goals and objectives?
- How do you as owner(s) of the firm perceive your organization, its competitive advantages and disadvantages? Are your perceptions realistic and supported by the facts?
- How do your perceptions fit with your clients’ perceptions? Prospective clients’ perceptions? How will you find out?
- Who are your lawyers and staff, and what are their talents?
- What is the experience mix of your firm’s lawyers, and how does it fit the needs of your clients and prospective clients?
- Who are your clients, and what are their legal needs now or in the foreseeable future?
- How do your firm’s talents meet the needs of your clients?
- Do your clients believe that you or your firm has the skills to meet their needs as they perceive them?
- Do the services you provide your clients vary in where they fit on the value curve?
Present and Future Market Trends
- What are the market trends?
- What is the demography of your firm? Clients? Community or market area?
- Who are your competitors, and where are they located? In what practice areas do they compete?
- What are the prevailing rates for the types of services you provide in your market, especially if you are providing services that are price sensitive?
- What are the needs of your present or potential clients?
- Do your current clients have legal needs that are presently being handled by other firms?
- Are these areas of practice that you are or should be providing?
Current Billing Methods
- Do your current billing methods enable you to achieve a desired level of profitability?
- Do your current billing methods meet client needs and preferences?
- Do they enable you to compete effectively?
- Do they enable you to further your firm’s goals?
- Do they fairly measure value to the client?
- Are they consistent with trends?
- Do they promote effective marketing?
- Are they based on written fee agreements?
- Have they been innovative? Flexible?
- Are your current billing methods different for different types of services?
- Are they competitive in your market area as to price?
Willingness to Try Innovative Billing
- Have you analyzed your practice to determine those practice areas or types of services for which alternative or innovative billing methods might be beneficial?
- Are you or some members of your firm willing to innovate?
- Do you have clients who have requested or might be willing to accept alternative billing methods?
- Are you willing to take the time and make the effort to bring about a change in how you bill for legal services?
- Will your firm support the effort?
Thoughtful consideration of the preceding questions can provide insight, and completing this preliminary self-assessment is an important first step. However, it is not enough to merely mentally review these questions. As with any project, some written notes add a framework and aid in the retention of thoughts and observations. The lawyer must weigh the pros and cons to determine whether the environment is such that innovation in billing has a chance to succeed, or in what areas it has the best chance to succeed initially. Only then are you ready for the next step: determining the cost of producing the legal services.
Excerpted from Winning Alternatives to the Billable Hour, Third Edition , by Mark A. Robertson and James A. Calloway (ABA, 2008). Available at www.ababooks.org.