Ten Rules About Hourly Billing

After the great response I got to yesterday's Ten New Rules of Legal Marketing post, I've decided to share a few more "Rules" of Hourly Billing I've culled from my blog and my speeches.  Enjoy!

1.  Ask your clients what they buy from you.  If it isn’t time, stop selling it!

2.  Imagine a world where your clients know each month how much your bill will be so they could plan for it.  They do.

3.  If you don’t agree on fees at the beginning of a case, you’ll be begging for them at the end of it.

4.  Sophisticated clients who insist on hourly billing do so because they’re smarter than you are, not because they want you to be paid fairly.

5.  When you bill by the hour, your once-in-a-lifetime flash of brilliant insight that saves your client millions of dollars has the same contribution to your bottom line as the six minutes you just spent opening the mail.

6.  Businesses succeed when their people work better.  Law firms succeed when their people work longer.  Your clients understand this -- and resent you for it.

7.  Every time your clients jokingly ask you, “Are you going to charge me for this?” they aren’t joking -- and they’ll check next month’s bill to be sure.

8.  The hardest thing to measure is talent.  The easiest thing to measure is time.  The two have absolutely no relationship to one another.  Your law firm measures talent, right?

9.  Would you shop at a store where the cost of your purchase isn’t set until after you’ve agreed to buy it? You ask your clients to.

10.  There are 1440 minutes each day.  How many did you make matter?  How many did you bill for?  Were they the same minutes?  Didn't think so.

If you'd like to get more ideas like these in real time, follow me on Twitter.

Comments

[Marc Thomas]

Okay, I don't buy this for most legal services, particularly litigation. This idea that I'm the one that should know exactly how much it should cost at each stage of say, a tax controversy or a pension plan dispute is ludicrous, really. The complexity of the issues and tenacity of the opposition are not always known or fully appreciated before the start of the matter. Unknowns, tripwires, and unanticipated events and arguments always present after the fact.

Moreover, what about the ethics of billing in a fashion that fixes the fees at various stages? If everything is as I predict (rarely or never the case), then it's fair. Otherwise, the client or I am getting shafted from a bad deal. If the client is overcharged, that's potentially unethical. If I'm shorted, it's at least not fair to me, my partners, or employees.

The hourly rate, like it or not, is the fairest to all parties, assuming the attorney isn't making up his hours. A contingent fee the fairest of all, but it assumes the attorney is willing to take on the risk. That isn't possible in a lot of litigation.

Wills, trusts, probate administration, and the like, sure. Fix your fees. The process is so predictable it's fair to all. Litigation and other controversies are hourly fee matters and, in some cases, contingent. But I'm not buying that an hourly rate, agreed to by the client and the attorney is the most ethical and fair to all parties.

Finally, as to point 4, that's why hourly cases require substantial retainers and a fee agreement that allows you to withdraw for nonpayment. Who's smarter, now?

[Kimberly Alderman]

Hm... This was definitely more an argument against hourly billing than how to do it best. There are certainly instances where hourly billing is appropriate (for instance when practitioners hire freelance lawyers), and I'd love to see Ten Rules About Hourly Billing (as opposed to Ten Reasons Not to Bill Hourly), so that I might expand my perception of how to do it most efficiently and ethically. I offer flat rate billing, but some clients just don't want it!

[Vickie Pynchon]

Fabulous! Were I still practicing law, I'd circulate this to my partners and rant about it at partnership meetings where they'd continue to look at me as if I had just stepped out of a flying saucer. Same look they had when I said "abolish the summer associate program; let Skadden train them & pick them up in their 3rd year when they're profitable, offering quality of life over $$$." What firm was that? Oh . . .it doesn't exist anymore. Wonder why.

[AZMike]

Hey Mr. Homann (calling a lawyer by his first name seems, friendly). By the way it's me again.

I hate to even mention this thought that occured to me while reading your post because 1. I haven't followed you enough to know whether you are already doing it or not. 2. If you aren't doing it you might start. The thought, well for every ying there is a yang, or should be. For your above metioned items, all the consumer benefits should be in another blog aimed at the competition (or should I say clients)?

It would be great if your kind could work a sliding scale, such as "if we are successful in our endeavours to get you (Ms. Client) the results you want we will be paid "X". However if we are not, we get "sq." (Now if I could get those chiropractors' that worked on me without success the same sliding scale, with "sq" = jack-squat.

Oh well I enjoyed your post and it re-affirmed what marketing guru D.K. said about "....if you are in a commodity business you need to get out."

AZMike