Hourly billing, contingency fees, and retainer fees are the most common methods used by lawyers and law firms when it comes to client billing. However, attorneys are increasingly transitioning to a “flat fee” billing structure in lieu of the traditional hourly rate. Flat fee rates, or “fixed fees,” are agreed upon and usually fully paid upfront before an attorney begins work on a client’s legal matter.
Fixed fees are much more client-friendly than traditional billable hours and can be effectively applied to ensure firms and solo practitioners are both profitable and competitive. This assumes, of course, that these firms and practices are operating efficiently with predictable expenses, making it possible to scale the volume of work and associated revenue streams.
The billable hour is becoming a relic of the legal industry that is quickly being abandoned in favor of pricing models that more accurately reflect attorney value and meet client expectations.
Flat fees create a “bottom line” expectation that benefits both parties
When clients pay for outcomes instead of process, attorneys are incentivized to work efficiently. And the more accurately they can predict the time and resources they need to produce the outcome for which the client has paid, the more they can rely on steady profit margins and a stream of referrals from happy clients.
With flat fees established at the onset of an attorney-client relationship, clients know in advance exactly what expenses they will be responsible for to resolve their legal issue. In contrast, the billable hour structure provides few limitations on hours and there is no binding upfront agreement to the scope of the work. It’s an attorney-friendly contract rather than a client-friendly one, and is often a source of contention between the two parties.
The hourly billing structure typically extends to client communications as well. This correlation can discourage clients from setting up necessary communications with their attorney. Ultimately, many clients forego interactions with their attorneys in order to avoid additional expenses, and the quality of representation may suffer as a result.
Flat rate fees set expectations for attorney-client engagement and support necessary transparency between the parties. This improves the overall client experience and helps achieve the client’s desired outcomes.
Flat fee billing allows attorneys to value their work product without basing fees solely on time spent working on an issue
Value-based pricing in the form of a flat fee rate encourages attorneys to evaluate the depth of a case or matter and outline the estimated work required to effectively produce the desired outcome before providing the client with a fee quote.
With flat fee billing, lawyers can define the scope of their engagement and charge based on the level of expertise required to proceed with a case or matter. Additionally, a flat fee liberates attorneys from spending time tediously logging or tracking the hours they’ve spent on a client’s issue.
Flat fee work motivates attorneys to automate business processes, making workflows more efficient and practices more profitable
This might include implementing automated client intake processes, document assembly, or other legal technology software to streamline tasks and eliminate unnecessarily burdensome duties. As lawyers improve their project management skills, they’ll also improve their ability to more accurately tailor their flat rate fees for different client needs and further amplify their profitability.
Today, implementing flat fee work can also make an attorney much more competitive against other firms or solo practitioners who continue to bill on an hourly basis. Clients prefer a straightforward and transparent approach to billing, and are increasingly choosing legal services providers who offer it.
As more attorneys automate their processes and operations in response to the market demand for more client-centric services, making a transition to a flat rate fees model is gaining more and more traction. Eventually, and not in the too distant future, those who fail to make the transition will be left behind.
Madaleine Gray is a recent J.D. graduate of Belmont University College of Law. Originally from Sydney, Australia, Madaleine now resides in Nashville, Tennessee. During law school, Madaleine interned for the Public Defender’s Office, small firms, the District Attorney’s Office, the State of Tennessee Attorney General’s Office, and the Honorable Judge Angelita Blackshear Dalton. Madaleine was also a member and Managing Editor of the Belmont Criminal Law Journal, where two of her publications can be found. Currently, she is employed as a judicial law clerk for the Honorable Judge Barry R. Tidwell, studying for the October Bar Exam, and pursuing a Master’s in Applied Intelligence at Georgetown University.
