While there are many documented benefits of fixed fee (or flat rate) billing, like that of cost certainty, increased efficiency, and administrative simplicity, there’s no specific guidelines how lawyers can put in fixed fees in practice.
Many lawyers do not implement fixed-fee billing as they fear that if they keep their rates low, they’ll be stuck in that rate even if eventually, the case winds up taking more time to resolve than previously expected.
On the other hand, miscalculated fixed fee billing can either scare the client or make them abusive. Too expensive flat rates can turn away potential clients while rates that are too low can leave the lawyers on the losing end.
Here are 6 ways to help solo and small firm family lawyers implement fixed-fee billing effectively and keep clients happy:
1. Define the scope of the work
The most crucial step in implementing fixed-fee billing is to define the scope of work. You need to specify in your representation agreement the services inclusive in the flat fee. If you are working on a DUI (driving under the influence) case, state that the flat fee will include all work related to resolving charges up through trial.
2. Fixed fees are not capped fees
Some lawyers wind up on the short end because they confuse fixed fees with capped fees. In a capped fee, lawyers offer to bill X amount per hour but no more than XX amount in total. If the lawyer bills fewer than 50 hours, he’d be paid the same as if there’s no cap. So if the lawyer exceeded 50 hours, he’s essentially working for free. The lawyer ends up on the losing end.
In a fixed rate setup, the lawyer earns $10,000 regardless of how many hours he spent resolving the case. Over time, if the lawyer has set fixed fees appropriately, each $10,000 fee that requires 100 hours of work will be offset by five or ten $10,000 fees that can be dispatched in 10 hours. If the amount of work for fixed fee rate actually takes more hours to resolve, it doesn’t mean that it doesn’t work. It means that you have to adjust your fee.
3. Don’t base your prices on volume
Don’t ever settle for low prices just to beat the competition figuring they’ll make it up on volume. If you set prices so low, taking dozens of cases won’t fix the problem because dozens of cases at zero dollars still amounts to zero.
How can lawyers compete then? There are a few ways to do it. If you decide to charge more, you can also offer to do more. You may provide extras like free follow up legal consultation a year after you’ve worked together.
4. Track hours for reimbursable fees
Not tracking your hours even if you charge flat fees can have upsetting consequences in matters where your client is eligible for attorneys’ fees. Courts evaluating claims under fee-shifting statutes require lawyers to record and document hours spent on the case as they may deny recovery of fees in the absence of timesheets. Make sure you keep your timesheets especially if you can anticipate that your client may be entitled to fees.
5. Yes, flat fees are not for everyone
Not all of the time, the phrase ‘one size fits all’ applies. In terms of family law services, your fixed fee quotes may either scare off the clients or may place you on the losing end. This is why it is crucial to examine the case first before laying down your quote to your client. There will be cases that are so extraordinary that it may require you extra work to resolve, while there are some that you can easily go through.
As many clients are becoming more informed about fixed fees especially for family lawyers, make sure you determine which services you are willing to work on fixed rate. Always set client expectations early on so you wouldn’t have issues in the long run.