St. Paul business and health care solo David J. Holt wanted to strike a balance between offering his clients value and promising himself a certain level of relatively certain income each month. So after doing some research he came up with a “general counsel” approach, in which, for a monthly fee, he handles the bulk of legal issues a client might have short of litigation. That includes returning calls and emails in a timely fashion — and miscellaneous tasks for which clients sometimes don’t want to call an attorney out of fear that the meter will be running while the work is being done.
“I’ve never been a fan of hourly billing,” said Holt. “I think you want to focus on the value of legal services and work backward from there for pricing.”
For anywhere from a few hundred to $1,200 per month, Holt works with the client on a prepared checklist, in order of importance, of tasks they might need done now, soon or in the future.
“It prompts clients to reach out proactively knowing they save money in the long run,” he said. “It’s a stable revenue stream for me as a solo to know a certain amount is coming in every month. It keeps me from having to do as much marketing as I might have to otherwise.”
His approach is one of many alternative-fee arrangements that attorneys use. Such arrangements can be a good way for solos to ensure they have a certain minimum of income to look forward to each month, and it can help clients worry less about the uncertainty of hourly rates.
“When you think of your practice in terms of running a business and managing a budget, there’s an advantage in knowing what kind of revenue you have coming in,” said Sonia Miller-Van Oort, a litigator with Sapienta Law Group in Minneapolis.
Lots of alternatives
As Holt’s case demonstrates, alternative-fee arrangements can take on many forms. Two of the most common are flat fees, which set out a specific rate for a specific service, such as reviewing a contract or drafting a will. Some attorneys shy away from charging flat fees for such open-ended work as litigated matters, but Miller-Van Oort’s firm isn’t one of them.
“We do most of our alternative fees on litigation,” she said. “If you have experienced attorneys who have done certain kinds of litigation, you can come up with an alternative fee that will work based on your experience.
“It’s probably not something brand new attorneys can do effectively, because they haven’t accumulated the data they need to formulate a fee that will work for both them and the client.”
A flat fee for litigation work can be beneficial if each phase of the litigation comes with its own fee, and a pre-determined bonus if you win the case.
A holdback, another alternative fee structure that resembles a retainer, calls for an hourly rate with a certain percentage of the total being held in a trust account. If your work reaches mutually agreed-on goals, the client can authorize payment to you out of the trust account. Other options include a set maximum (which might or might not be reached) for completion of a matter; and a fee determined by mutual negotiation and based on the anticipated value of your representation.
Following the economy
Alternative fee arrangements spiked in popularity following the Great Recession, when clients were in search of creative ways to get the representation they needed for a minimal dent in their budget. In fact, says James P. Conway, an attorney with Jaspers, Moriarty & Wetherille in Shakopee, demand for alternative fee arrangements tend to go down when the economy’s humming.
“We’re doing less hybrid/fixed-fee work,” he said. “If people balk at an hourly rate, I’ll offer something else, but that was requested more often when the economy was down.”
If you’re a solo practitioner with experience and expertise, however, having a battery of alternative fee arrangements to offer can be rewarding. Along with other advantages, such arrangements can also reduce misunderstandings and disputes over legal fees and costs – thus leading to greater client satisfaction.
“At a big firm, the overhead dictates a different model,” said Conway, whose six-lawyer firm offers flat fees for corporate, estate and assorted transactional tasks. “I can see a solo making one or more kinds of these arrangements work, though.”
“When the objective is budget certainty, it isn’t a matter of the client saying they want to pay less,” said Miller-Van Oort. “They just want to know what they’re going to have to pay you.”