Embracing alternative and value-based business models: We embrace alternative billing models which support our principle of 'paying value for value provided.' If our activities are not providing real value to solving your legal problem, we don't bill it. We never bill for phone calls under 10 minutes (we love to speak with our clients without having to worry about the billing clock). Basic transactional and administrative activities (like transmittal letters, filing and other paper moving tasks) can add up to 15% or more of your monthly legal bill with many traditional billing models. We treat these activities as part of the cost of business. You only pay for activities which solve legal problems or are directed at accomplishing your legal goals.
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Larry Bodine's Blog reprints an article from the April 18 issue of the Chicago Tribune titled "Hourly legal fees under attack, Traditional billing by time spent is standard at most big law firms, but McGuireWoods is advertising alternatives."
One of the more interesting things about entering the blogosphere has been the realization that we at Traverse Legal are not the only people who (1) believe hourly billing is bad for clients and bad for the profession of law and (2) are trying to change the way law is practiced. In the above noted article, there are several references to large law firms which offer innovative and service-oriented billing alternatives to their clients. Here are some of my favorite quotes:
- Survey after survey of in-house law departments shows that their top priority is reducing the money they spend on outside law firms. Some of the growth in legal expenses is out of their control, as companies deal with more lawsuits and regulations and turn to outside lawyers to handle these matters.
- One Chicago firm has found that alternative arrangements work in handling large, complex lawsuits. Bartlit Beck Herman Palenchar & Scott, a boutique litigation firm, typically charges a flat fee, payable in monthly installments. The client retains a percentage that it pays only if the firm is successful. Otherwise, the client keeps the money.
- "We like to get paid for results rather than the hours," said Sidney "Skip" Herman, Bartlit Beck's managing partner.
- McGuireWoods has been offering alternatives to hourly bills for years. About 35 percent of the firm's annual revenue of about $300 million comes from alternative billing arrangements.
Traverse Legal looks forward to continuing its innovation on billing models which serve client goals and stay within budget. We are part of a national trend to deliver more value to clients by leveraging technology and focusing on focusing on client goals.
Dennis Kennedy - a true voice in the area of alternative billing and delivering value to clients -- comments on a Law Practice Today interview of Jeff Carr concerning alternative billing which could not be more 'right on.'.
On forming his own firm: "I thought I was fed up with being a lawyer. What I learned was I didn’t hate the practice of law, I hated the business of law as it was being practiced at law firms. What brought me back to in-house practice after this little five-year experiment was the fact that at my core I’m a lawyer. I worry about our profession and I worry about the failing of lawyers in law firms to understand that they are in a business and to understand that it is a customer service business, and understand what customer service means."
On the great attorney / client "disconnect": "If you think of the law firm model, the economic model is based upon total revenue brought in the door. And that’s a function of hourly rate times the number of hours that you actually bill for and can collect for. That has absolutely no relationship, whatsoever, to the value that the corporate client places on the services."
On what has been called the "latent market for legal services": "I think quite frankly legal services have gotten too expensive in this country. Look at the rise of things like Nolo Press and Willmaker, software packages, that essentially permit people to do a lot of what would have been done by a lawyer on their own. Let’s face it, most legal work, about eighty percent of it, in any context, whether it’s your personal stuff, or whether it’s in a corporate world, is commodity type of practice. It’s really that only twenty percent are high value, high risk, bet the company, go to jail, lose your house matters. Those are the things that you really need the specialized service for. I think, in general, legal services have been priced out of the market for the general
Law Practice today has some great articles on alternative billing, one of the pillars which will support the Traverse Legal law firm.
The question presented is can lawyers provide legal value to clients in fewer hours and thus less cost? Anyone who has worked in a law firm knows the answer is a resounding 'yes' in many types of cases and matters. Lawyers must, however, commit to find legal solutions for clients as opposed to creating problems which 'front' for an excuse to bill (or allowing an angry client to make poor decisions which provide little value but drive costs up), (2) to handle cases and matters which are within your core talents and (3) farm out issues and matters to other 'value billing lawyers who specialize in such matters.
All the incentives of hourly billing are to hold a file until the client has spent substantial funds. Hourly billing contains literally no incentives to solve problems.
Dennis Kennedy scores again with his great link page for resources concerning alternative billing strategies and controversies.
And yes Dennis, we have read Arthur G. Greene's article on alternative billing which we agree is a must read for anyone interested in this important topic. As Mr Greene notes:
Lawyers have to understand value.
Lawyers have to deliver value.
Lawyers have to communicate value.
From the client’s perspective, a fair fee is often described as being both predictable and providing value commensurate with the dollars spent. In many situations, hourly billing does neither. And from the lawyer’s perspective, a fair fee is one that rewards the lawyer’s efficiency and expertise, and provides a return on the lawyer’s investment in technology and related systems. Hourly billing provides none of these benefits.
Value-based billing serves the client's interest and provides access to justice for many who could not otherwise afford it. Value-based billing serves the lawyers business interest in that it creates opportunities to provide legal services to a broader market and to build relationships with clients which result in repeat business and referrals. A good lawyer becomes a low cost resource for people with all sorts of legal problems. 'Word of mouth' brings people to the law office's front door, not the yellow pages.