Pricing Legal Services

Published on: 
02/24/2014
Most clients would prefer to know how much it will cost them for the legal service they need and are seeking.

Perhaps more important, however, clients want to be assured that the quality of the service to be provided will be of the highest standard.

Is there a way for us to combine the two desires into one offer?

While there is no guarantee of quality or outcome that can be provided, there are certain aspects to this question that should be taken into consideration.

First, we can and should guarantee that we will deliver our best, both in quality of service and in effort. In fact, among the very first mandates in the rules of professional conduct is that the lawyer must be confident to provide the services to be offered.

In the past, the issue of confidence seemed to be a "given." Competence meant that the lawyer passed the bar exam and was reasonably current with changes in the law applicable to the current matter. We were fortunate if the lawyer was a leading figure in the substantive practice area, but that was not required. After all, everyone can be the leading authority in a given area.

Second, there are alternative billing modalities that come close to giving some assurance to the client as to the ultimate cost of legal service. Contingency fee billing is one example of assuring the client of the maximum amount, or cap, on the cost of legal services. This method, though, is usually limited to personal injury and debt collection matters.

Lawyers are taught from the very beginning not to offer guarantees. This clearly should be the case when projecting the ultimate outcome in connection with any matter. However, in today's world, it is becoming more prevalent for a client to ask for, and a lawyer to offer, a guarantee as to the maximum or outside cost of legal service.

In fact, virtually any form of billing other than an hourly rate offers clients a degree of certainty suggested by a price guarantee. Rather than setting price by a standard unit of time, billing alternatives focus on actions taken to benefit the client, beyond the time of how that value is created.

For the client, this certainty is a benefit; for the lawyer, it's a two-edged sword. If the flat fee is high enough, it encourages use of technology so that the lawyer can do the work faster and increase the effective hourly rate. The challenge with flat fees is that lawyers, generally, don't know their costs of operation. Thus, the fee chosen often is a "by guess, by golly" fee, not one based on a cost/benefit analysis.

You cannot aspire to set an accurate flat fee unless you understand the operation of the firm as a business (budget, collections, profit, loss), the firm's billing structure, and how each attorney determines firm profitability. A flat fee is only an acceptable billing alternative if the attorney knows the cost structure behind it and if the client accepts the value that the fee represents.

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