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January 30, 2004



I know this post is 6 years (!!) old, but I have to comment on it as I'm working my way through your old posts because I have found so much value in your current ones.

I think "hourly billing" and pure "value billing" are simply two ways to say the same thing.

Tell me - exactly - how a lawyer (or an accountant like myself) sets his/her 'hourly rate' in the first place? Aren't we just assigning a "value" to our time?

How do I KNOW that my hourly value is 5 times what it was worth when I was a new accountant? We aren't told how or when to raise our hourly rates, we do it when we perceive there to be an increase in the value of one hour of our time to our clients.

If we "value bill" the entire invoice, or assign a value to each hour and then multiply that value by time spent (less write offs), aren't we, in fact, doing the same thing?

David Giacalone

You've given me a lot to think about, Matt. Thanks. However, it seems that most of the major issues I raised haven't been addressed. It would really help to know how you think "value billing" would work in practice with a client. If you're not basically saying "what's it worth to you?", than what process do you use?

Here's a couple of quick thoughts/questions:

The problems you raise with hourly billing are still primarily problems caused by abuse of the system by unethical, greedy lawyers and/or firms with very bad management skills. How would "value billing" work with lawyers less scrupulous and client-concerned than you?

There are so many significant differences between buying a lawyer's service and having a house built or purchasing a car or any consumer goods, that it's difficult to even begin to respond. The lawyer's expertise, and the result achieved are not tangible and most clients can't judge the quality of the service, even in hindsight. With almost all major consumer goods, the buyer has the opportunity to intelligently judge quality and compare prices in advance, and rely later on warrantees. If the market for the product is at all competitive, the consumer can expect workable price competition.

Bravo, if you have enough disposable income that you don't care how much profit a builder or auto manufacturer makes off of you, but I'm wondering where you'll find a lot of consumers who feel that way. Indeed, you better not let them know that you feel that way.

Hourly billing is not all about counting hours -- the hourly rate itself is obviously very important. Many of the Rule 1.5 factors relate to the size of the hourly rate (e.g., lawyer's expertise, reputation, skill required, opportunity costs). The number of hours spent marks the maximum limits of the total fee.

I still must ask how charging what the market will bear -- or forcing the client to place a value on a service -- jibes with the fiduciary obligations of a lawyer

I'll give this more thought and continue this interesting and important discussion at ethicalEsq.

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