May 26, 2020 Modest Means

Alternative Billing: The Future Law Firm Billing Norm?

By: Samuel E. Thomas & Kumudha Kumarachandran

With most of us working from home, this is a perfect time to reassess where your practice stands and what could work more efficiently going forward. Most firms are reassessing marketing efforts, legal technology, and other daily task efficiency. When was the last time you reviewed your billing structure to ensure it meets the needs of your law firm and leads to better client relations? Enter value-based/alternative billing structures. 

Once you have engaged into a value-based/alternative billing structure, the incentive is on both ends to resolve the matter sooner than later.

Once you have engaged into a value-based/alternative billing structure, the incentive is on both ends to resolve the matter sooner than later.

Credit: mapodile/E+ / www.PeopleImages.com

The days of traditional retainers may be fleeting with the recent downturn of the economy and its lasting impact. When a client goes to a dentist, veterinarian, or has a plumbing issue, they want to know “how much will this cost me?” All of these listed professions are capable of giving a definitive answer. Lawyers? Not so much. Our favorite response appears to be: “that depends.” This response instills no confidence in the client to hire you to do the service. Furthermore, the incentive is on the end of the lawyer to prolong the litigation and bill more hours to drain the retainer using possible unnecessary tasks. The result being the lawyer requesting the retainer to be replenished. This will deteriorate the client/attorney relationship faster than other common reasons. Once you have engaged into a value-based/alternative billing structure, the incentive is on both ends to resolve the matter sooner than later. Clients typically do not wish to have their family law action continue for months and months when one possible hearing could resolve many items in their matter. The lawyer will want to resolve the case in the best case scenario for the client in the least time as possible.

This is not to say there will not be outliers if you choose to engage in this billing structure. We will all get burned using this system. The key is to determine the “sweet spot” of the price charged to ensure the attorney receives adequate compensation while providing the client with zealous advocacy and the attorney does not feel “burned out.” One tip to help you find this sweet spot would be to review older cases and how much you typically billed for that particular case under similar circumstances. Did the case involve a contested child custody matter? Did the case involve a business valuation? Did the matter require expert testimony that was necessary to determine issues for the judge? This will give you the road map to assess your price. Once you have the “ballpark” price of what you need for the matter, take a case for that price. Or in the alternative, use a capped fee structure instead of a flat fee, so the client can budget based on knowing that their bill will not go past a certain amount. Use it as the billing experiment for future clients. If it goes well, do it again. Should it not work well, determine why it did not work. Make adjustments accordingly.

One thing you will notice when you convert to this billing structure, your client relations should improve. The issue of money between you and the client will not be an issue any longer. With a retainer up front in this structure, this also reduces the chances of having to hound clients for money owed. One of the biggest concerns family law attorneys have with a value-based/alternative billing structure is excessive communications. However, in my personal experience, I have also noticed the clients do not call for the smallest issue like they did when I was billing per hour. This was unexpected but a great surprise. As always, check your local jurisdiction concerning ethical opinions about alternative billing structures. 

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Samuel E. Thomas

Esq., Athens, GA

Law Office of Samuel E. Thomas, LLC

ABA Section of Family Law Modest Means Committee Chair

Kumudha Kumarachandran

Esq., Baltimore, MD

Cordell & Cordell, P.C.

ABA Section of Family Law Modest Means Committee Vice-Chair