Hourly Billing Makes Us Sick!
Have you ever had what you thought was a quick and friendly conversation with your attorney, and then been surprised by a bill in the mail? That was the result of hourly billing (as opposed to value billing). Value billing is not the usual way that lawyers bill their clients. Value billing is based on the idea that one should charge a fee that is appropriate and ethically reasonable for the value provided to the client. It is my viewpoint that both clients and lawyers can enjoy better relationships if lawyers charge value-based fees. Read on to see how we might make value-billing work… Lawyers have charged by the hour since time began. Unfortunately, hourly billing can easily poison the relationship between attorney and client, and both attorneys and clients wish there was a better way. The burdens of hourly billing record-keeping and delayed cash flow are a nightmare in almost every law firm. But a few lawyers have found a better way—and many estate planners, business lawyers, and elder law attorneys have begun to abandon the hourly rate. Instead, they embrace value billing—a concept that both clients and attorneys can learn to love. Clients are suspicious of lawyers’ billing practices and frequently complain, “How could that have taken you so long?” From the client point of view, hourly billing creates an apparent disincentive to provide a quick solution. On the attorney side, hourly billing creates a disincentive to investing in modern technology and electronic research tools. After all, once a law firm is more efficient, it could lose money due to increased efficiency and productivity. Clients like fee certainty—and although it is not an option for every law firm, it can be offered for some transactional legal work. Value billing provides a great way to get out of the hourly billing hamster cage. Law firms can quantify commonly repeated legal tasks such as estate planning, and then determine what would be a reasonable bill for a specified package of legal services. Those specified packages of legal services can then be offered to the public at a predetermined rate which covers a justifiable overhead cost as well as profit. At Law Elder Law LLP, we have found that value billing greatly enhances our attorney/client relationships. Clients loathe receiving bills after telephone conferences and incidental conversations. We want to enhance our client relationships for repeat business and referrals—so it makes dollars and sense to improve our billing practices. Last week, I had a telephone call with the daughter of a dying client. Our elderly client had taken a surprise downturn, and hospice services had begun. The client’s daughter needed a sounding board, a friend, and a trustworthy legal guide to help her in the uncharted end-of -life process. We spent thirty minutes discussing the client’s physical care needs, funeral needs, and other important issues. After the call, both of us were united in our concern for the client. Nonetheless, if I had been forced to send a bill for thirty minutes of legal time, my relationship with the client and the client’s family would have been wounded. Obviously there are many types of legal work which attorneys must bill by the hour. We are governed by the ethical rules of the Supreme Court of the State of Illinois. But if you are an attorney and value billing is something you think your firm could offer, Law Firm Fees and Compensation: Value and Growth Dynamics by Edward Poll provides wonderful practical help on how to make a smooth transition to value billing.