In my experience, most attorneys still live and die by the billable hour. It’s the preferred billing method for most big firms and it’s also the means by which associates are evaluated. If you fail to meet your minimum billable hours by the end of the year, you’ll probably consider yourself lucky to still have your job the following year. Conversely, bill a lot and you’ll be on track for bonuses, raises and promotions. By the end of the first year as an associate I’d learned to obsess over making sure I’d “capture” my time. I wanted to make sure I didn’t lose any opportunities to bill for any legitimate work I performed on a case.
By the time I began my own practice, I was good at the billable hour. To some extent, that meant simply entering my hours in to our billing software immediately after performing my work. Failing to do so made it easy, maybe even likely, that I’d forget to bill for some of my work. After all, it’s easy to forget about a call, an email, or drafting a short letter if you don’t do it right away. And, over the course of a year, all of those .1’s to .3’s can start to add up. As a result of my attention to detail, I’d often exceed my billable requirements and qualify for yearly bonuses. So, yeah, I think I was pretty good at the billable hour structure.
Nonetheless, I didn’t hesitate to mostly jettison the billable hour as soon as I could. Sure, there are plenty of situations in which flat fee billing isn’t a good fit (some types of litigation are a good example). But, flat fee billing is a perfect pairing for the work I’ve performed for my clients in the entertainment and publishing industries. Indeed, I’ve found that flat fee billing is an excellent option even for more complex cases. I begin by breaking down the representation into segments and setting the rate for each segment individually. Additionally, to ensure that we’re on the same page, I draft a careful retainer agreement carefully delineating what is and isn’t covered in each segment of my representation.
Although I typically offer my clients an option between an hourly rate and flat fee billing, across the board my clients have chosen the flat fee rate. They’ve been wise to do so. I’ve underestimated the amount of time I’d spend on nearly every case I’ve quoted my clients thus far. However, that is often because I’ve decided to put a little “extra” work into a project to further tidy up a contract, to rephrase a research brief, or to perform a little extra research.
Despite that, there are a number of reasons I prefer to offer my clients a flat fee arrangement. In most cases, it’s my belief that time is not a good indication of value for legal work. So I don’t believe that the billable hour specifically encourages better work or better value for me or the client. Further, the billable hour arrangement doesn’t promote efficiency. And, as a personal matter, I prefer to work without the stress of having to itemize every piece of work I perform. Moreover, because flat fee structures encourage me to work more efficiency, I have more time to devote to other projects. Moreover, as I indicated above, I find that across the board my clients have preferred the flat fee arrangement because of the certainty and value it provides. So even though the flat fee structure has on a few occasions meant receiving less total fees for my work, it has also led to happier clients who continue to return to me with new work. That alone makes up for the fees I may have lost on a single case.
Do you offer your clients flat fee rates? If so, what have your experiences been like? If not, why not? We’d love to hear from you in the comments section.