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March 29, 2007

Flat Fees More Profitable To Small Firms

Once again, on the heels of my last post, Law.com comes out with an article stating due to technology small firms are moving away from the billable hour to flat fees (and how far away from flat fees is the leap to project-based fees or budget-driven fees) because it is more profitable to the law firm...and more client-friendly.  Technology allows legal services once requiring two hours to now take ten minutes.  If lawyers billed for ten minutes they'd lose money.

It's a great affirmation of shifting from the archaic model of the billable-hour to more creative billing practices which benefit both the lawyer and the client.

"It's a desirable structure for all firms, but it is much more practical for small firms, said Alexander.

"It's much easier for us to implement it than a large firm because we have no bureaucracy to go through," she said. "Everyone wants to go in that direction, but they don't know how to get there." In the past, something that would have taken two hours, we can now do it in 10 minutes," he said. "If we only bill for that 10 minutes, obviously, we lost that revenue."

It's a desirable structure for all firms, but it is much more practical for small firms, said Alexander.

"It's much easier for us to implement it than a large firm because we have no bureaucracy to go through," she said. "Everyone wants to go in that direction, but they don't know how to get there."

I'm sure this article will fuel a great commentary across the blogosphere from value-billing proponents who have been spreading their gospel for years.  You should check out their collective wisdom and response to this article when it emerges. 

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Comments

Steve Weaver

For over 25 years I have been a transactional entertainment attorney. For that long flat fees have been a part of my practice and those of many other entertainment lawyers. Flat fee billing for those of us based in Nashville is most often used for drafting of agreements common to the industry and for negotiation of various agreements (e.g., recording agreements, songwriting agreements). If at all possible, I attempt to quote for my clients either a flat fee or perhaps "unbundled" fees (where various phases of a transaction are priced individually, allowing the client to select a la carte attorney services).

While I would like to tell you that the fees I set are based on a careful analysis of ROI, past experience, numbers of hours predicted, etc., that would not be completely true. My flat fees are normally set based on such factors as the "going rate" in the community at the time, the time I think the project will take and the "value of the deal" being transacted.

I have many clients who resist the flat fee if given the option of hourly billing, which option I sometimes give if the matter is one that involves unknowns such as negotiation and/or re-drafting time. Most often the clients who balk at the flat fee are those who are early in their music business careers and unaccustomed to hiring attorneys. The flat fee looks large to them and so they pick the hourly option. The resistance to flat fee billing in my practice has come more from clients than it has from me.

Thanks for your post. I am always trying to improve the fee setting aspect of my practice.

Steve

http://musicrowlawyer.blogspot.com

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