Billable Hour Hangs On

Posted: May 21st, 2009 | Author: | Filed under: Billing | 1 Comment »

In my quest to eliminate the billable hour (which has been fairly vigorous I can tell you), I have been polling quite a few of my business clients to see if they have any interest in being billed in some other way, such as value-based billing using fixed fees, retainers and so on.  Well the results really were pretty interesting.  In just about every case, the clients were surprised that I thought they might be disgruntled with the present system (they weren’t, which is good I suppose).  They said they trusted me, and were concerned that if I quoted a fixed fee, it might compromise the integrity of my work (the quicker I work, the more I make, which is the exact opposite of the hourly dilemma; the slower I work the more I make).  

The lesson for me is that I shouldn’t be imposing my value judgments on others quite so easily.  By all means suggest alternatives, but don’t force clients to accept them.  Educate clients on alternatives wherever possible, but accept that as human beings, we are all unique, have unique approaches and unique ideas.  It seems like the billable hour isn’t quite dead for me yet?

Dear Client

Posted: May 8th, 2009 | Author: | Filed under: Billing | No Comments »

“Dear Business Law Client

After much soul-searching and after receiving feedback from a number of clients, I have decided to try to eliminate hourly billing from my business law practice wherever possible as from June 1, 2009.

I don’t think that hourly billing serves the needs of clients particularly well and often discourages them from contacting their professional advisors when they need them most, that is, early on before mistakes are made.

Clients become irritated when they are charged in fractions of an hour per phone call or email (whether they originated the call or email or their lawyer did); this hardly encourages them to contact their professional advisor on a proactive basis. Clients feel rushed when they know they are “on the clock”, which discourages meaningful consultation. When clients ask their advisor how much a service will cost them, the answer is typically vague, something along the lines of “it depends” or “there are so many variables that it’s hard to say”. This lays all the risk of cost overruns at the feet of the client (the longer it takes, the more it costs) and makes it really tough for clients to budget for services.

I think clients would be better served by a system where clients are charged for professional services based on the value of the service provided, which typically has little to do with time. Time is certainly a factor to be considered, but even our professional associations permit lawyers to take a host of other variables into account in setting fees. Yet we as a profession consistently fail to do this because it takes us out of our comfort zone.

I would like to offer a fresh perspective using an alternative billing system based on the following basic principles:

 Charges for services should be linked to their value to clients.

 The fee structure should be designed to motivate clients to seek professional legal services at the earliest opportunity before mistakes are made. It is better to identify problems early on and plan for them than try to clean up the mess later on.

 Professionals should share in the risk of cost overruns together with their clients.

 Professionals should be rewarded for devising innovative solutions which may result in high financial yields to a client but when quantified in terms of pure time, yield little return to the professional.

 The fee structure should encourage and reward efficiency.

 Fees should be returned to clients if they are not satisfied with the services they receive.

Based on these principles, I am going to charge clients based on the type of service they ask me to provide and wherever possible, what the client believes the service is worth. In each case, I will discuss the service and fee before I do any work so there are no misunderstandings. I will also offer clients a refund if they are unhappy with any part of the service.”

Hourly Billing Withdrawal

Posted: May 4th, 2009 | Author: | Filed under: Billing | 4 Comments »

They warned me it would be tough, but this takes me back to painful memories of nicotine withdrawal!

As part of my commitment to finding better ways to deliver real value to clients, I have set myself the goal of eliminating hourly billing from my practice by June 1 and replacing it with a value-based system based on client wants and needs. The new model (which is by no means unique, just seldom used by business lawyers) would wherever possible make use of periodic retainers covering all consultations, and project-based fees for specific jobs, to be negotiated up-front with clients.

I have prepared multiple iterations of a letter summarizing the model, but each time I’m about to declare it effective, I come across a new business or transactional matter or process that takes me out of my comfort zone and causes me to grasp reflexively at hours, minutes and seconds and brings home just how addicted to hourly-billing I have become over twenty odd years of rigorous time-keeping. But I’ve also come to understand that there probably is no perfect billing model, and that I’m simply going to have to go through the withdrawal process and accept a higher degree of risk, which is, after all, what my clients have been doing for during my twenty odd years of rigorous time-keeping!

I am determined, and I intend to kick the habit.