I. Introduction:
A. So you are trying to set your hourly rates.
1. This paper is designed to help you (small firm) determine your needs.
a) There is a minimum fee you need to charge to keep your firm alive to help those who need help.
i) Foundations of Finance, Arthur Keown, Simon & Schuster Co. New Jersey, 1994, 1998.
b) You need to charge a fee which at least represents the cost of your expertise and those things you need to function as a lawyer.
2. Don't forget your potential client's needs.
a) Your fee should reflect your cost for representing one client at a time.
b) Think about your target clientelle and what they can pay.
i) The Economics of Practicing Law: a 1998 snapshot, Dianne Molvig, Wisconsin Lawyer v 72 noll Nov 1999 p. 14-20
c) Charge a fee that your clientelle should percieve as a valid value.
3. Charge what you are worth.
a) Hardest question: What am I worth?
i) What is a Lawyer Really Worth, Sharlene Lasiter, Cumberland Law Review v 25 1994/1995. p. 23-58
b) Most firms billing structure breaks down into personnel experience.
c) A market's hightend fees are depenent upon firm age.
e) How efficient are you compared to the other area firms.
B. Does hourly billing have a place in the 21st century
small law firm?
1. Introduction to critiques.
a) Too time consuming
i) www.ljx.com
b) Leads to fraud
i) Gross profits? Questions About Lawyer Billing Practices, Lisa Lerman, Hoftsra Law Review v 22 Spring 1994 p. 645-653
c) Clients feel they pay more than counsel is worth
2. Acknowldements of major alternatives.
a) flat fee
b) contingency fees
3. Critical analysis of critical analysis.
a) Got news for you... Hourly billing was born through critical analysis.
i) What's a Fair Fee for a Litigator, Robert Haig and Steven Caley, Litigator v 20, 1993
b) Are these critiques exclusively applicable to hourly billing.
i) The Billable Hour is Dead. Long Live... What?, Charles Beeching, Jr. New York State Bar Journal v 67 Dec 1995 p. 12-15
c) Costs balance out. (less experience = more time but smaller hourly fee)
C. Given there are parameters (ethical, market and financial)
to the amount of hourly billing your firm can charge, what should your
small firm charge?
1. Ethical parameters.
a) Charge enough to avoid double billing.
i) www.ljx.com
b) Charge enough to avoid surcharges on expenses.
i) www.ljx.com
2. Marketable parameters.
a) Who do you know. (time = trust)
i) www.nysscpa.org
b) What do you know. (experience = winning)
i) quote I heard last year " when I was a young lawyer
I lost a lot of cases. When I was older I won a lot of cases. I guess you
could say equal justice was done."
3. Financial parameters
a) Charge enough to stay alive. (produce an adequate cash flow)
i) Staying Afloat: Effective Cash Flow Stratagies,
James Cotterman, Trial v 32 Jan 1996. p. 48-51
b) Don't charge more than you are worth.
i) What is a Lawyer Really Worth?, Sharlene Lassiter, Cumberland Law Review v 25 1994/1995. p. 23-58
II. New Age/Old Billing. (Do billable hours have
a place in a modern law firm)
A. Does hourly billing have a place in our new economy?
1. Critiques of hourly billing. (its just a bad practice)
a) Not tied reflective of value (pay when loose; win with one phone call)
i) What's a Fair Fee for a Litigator, Robert L Haig and Steven Caley, Litigation, no1 v 20, 1993
b) Its too time consuming/inefficient.
i) www.ljx.com
c) Clients feel they pay too much through the method.
d) Hourly billing cuts research short: avoiding too much time for one client.
i) grove.ufl.edu
e) Leads of fraud.
i) No Contest: Corporate Lawyers and Pervsion of Justice in America. Ralph Nader and Wesley J Smith.
2. Suggested better alternatives. (its not a bad practice, but there are better ways)
a) Flat fee.
i) The Billable Hour is Dead. Long Live... What?, Charles Beeching, New York State Bar Journal v 67 Dec 1995. p. 12-15
b) Contingency Fee.
c) If simple, then done quickly at hourly rage may be
less than flat fee.
d) Flat fee. Don't call me.
i) Smart Money Methods to Setting and Collecting Fees, Emily Couric, American Bar Association Journal v 71 July 1985. p. 66-68
e) Ethical problems with contingency fee.
3. Arguments for hourly billing as it exists now. (with new technology and ethical
a) It does give an accurate account of value recieved.
i) www.ljx.com
b) Wholsale critique of billed hours ignores the building of a better mouse trap.
i) grove.ufl.edu
c) Good way to train new lawyers.
i) www.ljx.com
d) Yes there are drawbacks, but there are rewards.
i) Reaping the Benefits of Keeping Time, John Iezzi,
Trial v. 33 Mar 1997. p. 64-66
4. Can hourly billing itself evolve into a marketable
billing practice?
a) Blended Fee.
i) What's a Fair Fee for a Litigator, Robert L Haig and Steven Caley, Litigation, no1 v 20, 1993
b) Premium Billing.
i) What's a Fair Fee for a Litigator, Robert L Haig and Steven Caley, Litigation, no1 v 20, 1993
c) Reverse Premium Billing.
i) What's a Fair Fee for a Litigator, Robert L Haig and Steven Caley, Litigation, no1 v 20, 1993
d) Retrospective Fee Based Billing.
i) What's a Fair Fee for a Litigator, Robert L Haig and Steven Caley, Litigation, no1 v 20, 1993
e) Hourly Billing as its self.
f) You should keep track of your hours anyway
i) Reaping the Benefits of Keeping Time, John Iezzi,
Trial v 33 mar 1997. p. 64-66
B. Technology and billing.
1. Availability of software for various billing practices.
2. Can software make hourly billing a more reliable and
marketable practice.
a) What used to take six hours now takes a half of an hour.
i) The Economics of Practicing Law: a 1998 snapshot, Dianne Molvig, Wisconsin lawyer v 72 no11 Nov 1999. p. 14-20
b) Easier Tracking.
c) Less work recording time.
III. Ethical Parameters. (there are consequences
for surpassing reasonable fees)
A. Reasonableness. (ABA and other sources say there is
an ethical cap)
1. ABA (resolution)
2. Devil's Advocate. (website)
B. Unethical practices (make your hourly rate what it
needs to be to avoid unethical practices)
1. Charging more than one client for the same period of time.
a) If you are flying on a plane for client A don't charge cleint B for the brief you are working on while on the plane.
2. Surcharges on expenses.
a) Don't charge 15 cents for a copy that costs 10 cents to make up for fees.
IV. Market Parameters. (your place in the market)
A. In what area of law are you praticing. (not all lawyers earn the same)
1. Average fees charged in selected fields.
a) The Economics of Practicing Law: a 1998 snapshot,
Dianne Molvig, Wisconsin Lawyer v 72 noll Nov 1999 p. 14-20
2. What area of the market do you want to serve. (know your clients)
a) The Economics of Practicing Law: a 1998 snapshot,
Dianne Molvig, Wisconsin Lawyer v 72 noll Nov 1999 p. 14-20
3. Specialization does matter.
a) The Economics of Practicing Law: a 1998 snapshot,
Dianne Molvig, Wisconsin Lawyer v 72 noll Nov 1999 p. 14-20
B. The age of the firm. (the older the wiser and the more
contacts for business)
1. Experience Matters
a) More experience = Higher hourly rate.
b) But fewer hours will be spent.
2. The more people who trust you the more you are worth.
C. Your firm's size. (size does matter)
1. The larger the firm the higher the cost
a) Ethical problems.
i) Gross Profits: a Clients Perspective, Duncan MacDonald, Hoftstra Law Review v 22 Spring 1994. p. 645-653
b) Why bigger firms can charge more.
i) Gross Pofits: symposium audience discussion,
Hofstra Law Review v 22 Spring 1994. p. 661-669
D. Your region. (data: 8 markets average fees)
1. East Coast (urban)
a) Have yet to find a source
2. East Coast (rural)
a) Have yet to find a source
3. Midwest (urban)
a) Have yet to find a source
4. Midwest (rural)
a) Have yet to find a source
5. Mountain (urban)
a) Have yet to find a source
6. Mountain (rural)
a) Have yet to find a source
7. West Coast (urban)
a) Have yet to find a source
8. West Coast (rural)
a) Have yet to find a source
E. Local Market Price.
1. If you charge too much, then the customer goes across the street.
a) Smart Money Methods to Setting and Collecting Fees,
Emily Couric, American Bar Association Journal v 71 1985. p. 66-68
2. If you charge too little, then the customer thinks your aren't worth thier time.
a) Smart Money Methods to Setting and Collecting Fees,
Emily Couric, American Bar Association Journal v 71 1985. p. 66-68
V. Financial Parameters. (the needs of your business)
A. General Accounting Practices.
1. Cash flow is king.
a) Firms life is bound up in cash flow.
i) Staying Afloat: Effective Cash Flow Stratageis, James Cotterman, Trial v 32 Jan 1996. p. 48-51
b) Very little hard asset value to fall back on.
i) Staying Afloat: Effective Cash Flow Stratageis,
James Cotterman, Trial v 32 Jan 1996. p. 48-51
2. Where does your cash flow go.
a) Personnel.
i) Staying Afloat: Effective Cash Flow Stratageis, James Cotterman, Trial v 32 Jan 1996. p. 48-51
b) Facilities
i) Staying Afloat: Effective Cash Flow Stratageis, James Cotterman, Trial v 32 Jan 1996. p. 48-51
c) Other.
i) Staying Afloat: Effective Cash Flow Stratageis,
James Cotterman, Trial v 32 Jan 1996. p. 48-51
3. Assumptions.
4. How complex do you want to make your billing structure.
a) Premium Billing.
b) Reverse Premium Billing.
5. Charge enough in fees for a quality staff.
a) The Economics of Practicing Law: a 1998 snapshot,
Dianne Molvig, Wisconsin lawyer v 72 no11 Nov 1999. p. 14-20
6. How much do you want to work. The Economics of Practicing Law: a 1998 snapshot, Dianne Molvig,Wisconsin lawyer v 72 no11 Nov 1999. p. 14-20
a) You will have to average fees.
b) Don't forget vacation times.
7. How much do you want to make.
a) Annual salary desired.
b) Vacaion desired.
c) Taxes.
8. How much detail do you want. (How much of your work day do you want to spend tracking time.
a) Smart Money Methods to Setting and Collecting Fees,
Emily Couric, American Bar Association Journal v 71 July 1985. p. 66 -
68
9. Prepare for write offs. (know how much of your fees you are willing to let go)
a) Set your minimum levels of write offs
i) Staying Afloat: Effective Cash Flow Stratageis, James Cotterman, Trial v 32 Jan 1996. p. 48-51
b) Have your collection mechanims in place.
i) Staying Afloat: Effective Cash Flow Stratageis, James Cotterman, Trial v 32 Jan 1996. p. 48-51
B. Mechanics of hourly billing.
1. Billing v. expenses
a) Why is there a differnce.
b) Do not make up for low fees with overly priced expenses.
c) Choose your expenses wisely.
2. Overhead v. expenses (philosophy of which things may be added into billing)
a) Why is there a difference
b) insurance
3. The secret to successful billing is in the clients
and the case.
a) Choose clients you can trust.
b) Choose cases where there is clear liablity.
i) Staying Afloat: Effective Cash Flow Stratagies,
James Cotterman, Trial v 32 Jan 1996. p. 48-51
B. Minimum hourly billing. (what you need to charge)
1. Charge enough to avoid unethical practices?
a) Avoid temptation to charge an overly low fee.
2. Do you need a pot of funds for unexpected expenses?
3. What is your firms minium?
4. How often should you analyze your billing structure?
C. Hourly Billing: There is more than just one.
1. Premium Billing.
a) What's a Fair Fee for a Litigator, Robert L
Haig and Steven Caley, Litigation, no1 v 20, 1993
2. Reverse Premium Billing.
a) What's a Fair Fee for a Litigator, Robert L
Haig and Steven Caley, Litigation, no1 v 20, 1993
3. Retrospective Fee Based Billing.
a) What's a Fair Fee for a Litigator, Robert L
Haig and Steven Caley,
D. Switch it up... If you want.
VI. Conclusion.
A. There is growing wholesale critique of hourly billing.
1. That may be an overly generalized critique.
2. Deficiencies with hourly billing can be fixed.
B. Hourly billing can be beneficial to both attorney and
client.
1. Client know what they are paying for.
2. Experience can be reflected through stratified hourly
rate.
C. You now know what to consider when setting your fees.
Use this information and good luck.