October 23, 2012

Are You Ready for AFAs? A Self-Assessment Checklist

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November/December 2010 Issue | Volume 36 Number 6 | Page 35


Are You Ready for AFAs? A Self-Assessment Checklist

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.