Flat-Rate Billing Mutually Benefits Law Firms & Clients

Legal Services

Businesses of all sizes consistently have a decision to make when they need specialized, professional services: Do they do the work in-house or outsource it?

If they decide to outsource, questions then turn to cost, and how the service provider will charge for its help.

While law firms are known for charging by the hour, our Florida-based bond finance law firm, Bryant Miller Olive, has instead found success by focusing on retainer or flat-fee billing.

As companies look to be more efficient in how they pay for such services as legal, accounting and information technology, BMO’s flat-fee model is worth considering, because it benefits both the client and the law firm’s professional staff.

Law firms long have been known for billing based on the number of hours worked each month. For the firm to reach its financial goals, lawyers must work a certain number of hours. In some cases, this unintentionally prioritizes hours worked over quality of work. In the worst cases, this encourages a lawyer to get creative about finding more hours to hit a monthly quota.

In short, billing by the hour can make firm’s goals conflict directly with a client’s goals.

From the beginning, BMO’s founders encouraged clients to use fixed-fee arrangements instead. With this approach, our staff can focus on providing service to clients that’s tied to specific deliverables that fit the circumstances of the project. This prevents overbilling, provides budgeting predictability for both sides, and aligns the lawyer’s and client’s goals.

Some months, clients get more of our time than they paid for, and some months, it might go the other way. However, we generally find that it evens out over the course of the contract.

The billable hour structure has also been known to discourage lawyers from seeking advice from their colleagues for fear of exceeding a client’s budget. Imagine, for example, that your company has decided to work with one of a law firm’s junior lawyers because the work seems straightforward. But three months into the project, the project takes an unexpected twist. Should the junior lawyer blow the month’s budget on a conversation with some of the partners and bill you for the overage? Or should the lawyer just keep his or her head down and hope for the best?

Neither option is appealing, considering the goal is to have a relationship that works for both the company and the law firm.

Operating on a fixed-fee structure allows a law firm’s associates to lean on one another. In turn, this ensures that clients benefit from the entire firm’s expertise, while helping junior professionals develop by working with senior colleagues. At BMO, this approach helps break down silos and fosters a team atmosphere as lawyers work together for clients.

Another consideration: In our demanding 24/7 work world, wouldn’t it be nice to help your firm achieve work-life balance amid never-ending texts, calls and tweets?

While technology can be wonderful, it also creates an expectation of constant availability. Despite carrying their cellphones everywhere, many of our lawyers actually cite the flat-fee approach as the driving force behind their ability to maintain a work-life balance.

To be sure, charging a flat fee might not work in every situation. But we have found that billing this way is a winning formula for our clients and our staff.

Grace Dunlap is the Tampa-based managing shareholder of Bryant Miller Olive, which represents governments, businesses and agencies in legal matters relating to public finance, state and local government law, complex transactions, project finance and litigation.

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