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5 Reasons You Should Consider Flat Fee Billing

By Kristin Tyler
March 27, 2018

Today’s legal consumers are growing ever more sophisticated in their business dealings with attorneys.  For example, in a recent survey 47% of consumers said they wanted a law firm that provided fixed fees. For years, research has shown that firms are increasingly feeling pressured to reduce rates and/or offer flat fee billing. Yet many law firms refuse to change, leaving them at a disadvantage. Flat fee billing is growing in use and if your competitors start to offer that option, you risk losing significant business.

However, there are other reasons to incorporate flat fees beside losing a client. Alternative fee arrangements offer many benefits, including the following:

  1. Attract more clients. Whether a prospect finds you online or gets your name from someone else, price is likely to be a concern. Many clients prefer the predictability of a flat fee as well as believe that it incentivizes firms to handle matters efficiently. Offering flat fees gives you a competitive advantage because it’s what clients want, and few firms currently provide that option. It also demonstrates that you are flexible and willing to meet your clients’ needs, which is a great way to stand out from the competition.
  2. Build better relationships with clients. When you bill hourly, clients may hesitate to call or email you out of fear of running up the bill. That is bad for the relationship. It can lead to more stress, loss of pertinent information and a feeling by the client that you don’t care about them unless you can bill them for something. Fixed fees eliminate those concerns.
  3. Avoid future fee disputes. The certainty of billing can help ensure there are no misunderstandings or arguments over how much time was spent on your work. In addition, it puts the focus on the quality of your work and the value you provided the client, not on how you spent the time. That is more likely to build trust and result in a happy client who refers you business in the future.
  4. Improve your firm’s efficiency. A flat fee means you need to focus on maximizing your productivity. It provides a good incentive to delegate tasks and implement systems since having others handle a lot of the legwork – research, administrative, and other work – is more cost-effective for the firm. When you are billing hourly, you may not think consciously about whether it makes sense for you to do all the work.
  5. Increase profitability. If you price and staff your projects appropriately, you can make more money with flat fee billing. You can and should price at a reasonable rate. Look at similar matters you have handled and how long they took, what problems arose and how the current case differs. Your flat fee should reflect this even if its seems like a high number. Remember that clients worry about potentiallyexorbitant fees so even if your price seems high to them, it still gives them predictability as opposed to the potentially unlimited bill from another attorney. Next, look for ways you can reduce your costs on that matter. How did you spend your time on similar matters? Can you manage the workload more efficiently? These are key questions for your firm no matter how you bill because they focus on making your cases more profitable.

You don’t have to switch to flat fee billing entirely. Think about some types of matters where you have a lot of experience and can more easily determine an appropriate price. In addition, consider cases where much of the work can be delegated to other attorneys, either within the firm or to freelance attorneys. Reducing the labor cost will help maximize your return. Outsourcing to freelance lawyers is particularly effective because you can pay them a flat fee plus you save on overhead, which means that your fixed fee case will be even more profitable.

To learn more about how outsourcing can help your firm, check out our blog post on 6 Benefits of Using Freelance Attorneys Instead of Hiring Associates or read about how LAWCLERK™ works.

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