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I’ve been practicing law for nearly seven years, both as a solo and with a firm. During this time, I’ve tried different billing arrangements with varying degrees of success and learned plenty of lessons (often about what not to do). Here is my take on the pros and cons of various billing options I’ve used.
When I was a solo practitioner, I used flat fee billing for almost all of my work. I did not lift a finger on behalf of a client until I had a signed engagement agreement and their check cleared. My engagement agreement stated that fees were earned on receipt so I could deposit it directly into my operating account and bypass the trust account.
With flat fees, it’s easy to quote a price based on how simple you expect a project to be. I made the mistake of quoting a low price for someone who wanted a simple contract. He turned out to ask so many questions and nitpick everything I wrote that my hourly equivalent by the end was painfully low.
When I used flat fee billing (notice the past tense), the majority of my work was transactions: copyrights, trademarks, and contract drafting and reviews. I’ve heard that some criminal defense attorneys also use flat fees for run-of-the-mill matters that tend to be formulaic.
What I refer to as “flat fee plus” involves charging a flat fee for a project with a limited scope and then charging the client your hourly rate for any work performed beyond that. This is what I currently charge to file a trademark with the USPTO — a flat fee to do a trademark search and submit the application with up to $225 in filing fees. The client is responsible for all additional filing fees (approved in advance), and they pay my hourly rate for any interactions with the USPTO after I submit their application. This may include everything from a simple conversation with the examining attorney to an opposition.
Although there is less certainty for clients, this billing method is a good strategy when there’s less certainty for the lawyer, too, concerning how much work will be done. I have used flat fee plus billing with some contract drafting. I charge a flat fee to draft a contract with one set of revisions if requested within seven days, with all other revisions to be billed at my hourly rate.
This is the classic model that exchanges hours for dollars. I recommend hourly billing for any matter that involves an opposing party. We can’t control how much work we will have to do because of the opposition.
With hourly billing, it’s important to ask clients about their budget (though some will refuse to give you one) and to set expectations from the start. I tell my litigation clients to expect their matter to cost $5,000 to $10,000 each month for the duration of the dispute. On the flip side, I have a handful of clients who have run up substantial bills and only some of them are diligent about paying it down each month.
With all the work involved in litigation, hourly billing can be quite lucrative. When we’re working long hours, we can at least take solace in the idea that we’re being well-compensated for our efforts.
There’s no one way to bill for your time. My suggestion is to respect the value you bring to clients and clearly state the requirements and expectations for payment in your engagement agreement.
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