Flat rates vs. hourly fees in legal rates. Which one is better?
In this week’s Lawyer’s Weekly, Lonny Babli discusses the advantages of a flat rate billing model versus the hourly rate model that lawyers have traditionally adopted.
The value of results vs. time.
Balbi makes a number of interesting points including a telling anecdote of Merv Griffin writing the theme song to Jeopardy in about a minute. The anecdote illustrates that even though the ultimate value of the song has netted Merv $7 million over the years, that value has little, if anything to do with the time associated with it.
As also pointed out, “most businesses do not equate time with money”. The same can be said for any individual who is facing a legal problem.
Examples of how flat rates in legal fees make sense.
Using domestic assault as an example, a person who is charged has very specific goals in mind with certain aspects they are not willing to compromise on. The goals may include: 1) a withdrawal or acquittal of charges, 2) reconciliation and restoration of communication and contact with the complainant, 3) no criminal record that may affect employment, and lastly, an expediency in obtaining these results.
With goals come hurdles that the client may or may not be compromising on. Continuing on the domestic assault example, hurdles might include: 1) whether they are willing to enrol in counselling, 2) whether they are willing to accept responsibility in any manner whatsoever, 3) the length of the proceedings, and 4) the cost of the matter.
People generally assess value upon the end product, not on how long it takes a professional to complete it.
Like businesses, people charges with criminal offences look to the bottom line in making assessments in retaining their lawyer and the value they attribute to it. Even though we as lawyers are often selling our time, it is actually results that the client wishes to obtain – the time, manner, or effort required to obtain those results is largely inconsequential to them. Much like Merv Griffin humming and selling the catchy tune of Jeopardy in seven minutes, clients would be delighted if their lawyers were able to obtain the ultimate result in such short order.
Balbi’s suggestions of adopting anew business model for lawyers to operate on flat rates is a wise and one that I implement whenever possible. Having a flat rate has a number of advantages for the lawyer and client that are often overlooked. Those include:
- Certainty in cost / accounts receivable;
- Alignment of interests (both parties want the matter to end to each other’s satisfaction as quickly as possible)
- Clarity in objectives using a task-based model of value
- Easier administrative aspects to collecting retainers
Although not possible for all files, I highly recommend that any lawyers, particularly those in criminal law, consider a fee-based system of retainer and assess whether the serves you and your client’s needs are better met.