Does the Billable Hour Need a Refresh?

Oct 12, 2018 6:00:00 AM


The traditional hourly billing method has long been a contentious topic among attorneys. But, with the increasing demand for better cost predictability and transparency, does this billing method need a refresh or should it be ditched for other billing strategies?

How hourly billing falls short.

Pricing should be thought of as a public statement of the value you place on your services. The problem with the hourly billing method is that it doesn’t communicate very much to potential clients. As this method cannot provide the total cost upfront, it becomes impossible for a prospective client to ascertain the value of your services. Not only does this ambiguity miss out on an important marketing opportunity, it also leads to issues with transparency—an important component in building trust and converting potential clients.   

Not only is hourly billing bad for your clients, it is arguably not good for attorneys either. Since spending more time on a task means getting more money, hourly billing has the potential to discourage workflow efficiency and create an unpleasant sweatshop culture. Despite these negativities, many practices still cling to this billing model relic. Why? Mostly because it’s easier than attempting to calculate a fixed fee.

Just because something is difficult, doesn’t mean it’s impossible or not worth the effort. When deciding on your prices keep in mind what kind of client you want to attract. And remember, it’s a balancing act—too high means you can’t compete with cheaper DIY services, and too low says you don’t value your services. In the grand scheme, fixed pricing is one option among many billing strategies. Here are a few other alternative methods to consider implementing into your practice:

  • Fixed price  - The attorney provides a defined scope of legal services (such as a basic estate plan with a will, power of attorney, and health care directive) in exchange for a fixed fee. This can be the most clear and predictable billing for clients.
  • Tiered prices - This pricing strategy builds on fixed fees by giving clients a choice, and is a take on the “good,” “better,” “best” strategies that we’ve all seen in other businesses. For example, an estate planner may have a will-based plan (“good”), a basic trust-based plan (“better”), and a comprehensive trust-based plan (“best”).
  • Subscription services - We’re all familiar with Netflix, Amazon Subscribe, and the litany of other subscriptions available today. For clients with ongoing needs, such as business owners or families with trusts, offering ongoing representation for a predictable price is a win-win for the attorney and the client.
  • Hybrid - For attorneys who are not yet ready to abandon hourly fees, a hybrid approach may be best. In this case, some aspects of the representation use a modern billing arrangement (fixed price, subscription, etc.), whereas other aspects of the representation can remain on an hourly basis.

Whatever you decide to implement, just remember that your pricing strategy is a billboard for your practice—telling prospective clients’ who you are, the value of your services, and whether or not you can be upfront about your costs.   


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