Legal Fees: Price vs. Value

There has been a lot of talk over the last decade about offering clients alternatives to the hourly rate. While the conversation has shifted in many directions, it should focus on two things: (1) the client’s perceived value; and (2) the appropriate price for that value. In other words, lawyers should focus on pricing for the value they provide their clients. Sometimes this involves the time-tested method of using an hourly rate, and other times an alternative fee arrangement may be utilized. Johnsen Law offers alternative fee arrangements whenever possible and believes that when they are appropriately structured, they are beneficial to both the firm and the client.

At the beginning of every matter, the lawyer should ascertain the client’s goals. If achieving those goals involves a myriad of unpredictable factors or milestones, an hourly rate may be the best fee structure. But if achieving those goals involves just a discrete task, a flat fee may be more appropriate. In either case, whether the lawyer and client agree on the price or estimate depends on how the client perceives the value of the legal services and how the lawyer puts a price on that value. Johnsen Law strives to have a candid discussion with its clients at the beginning of each matter, understand its clients’ goals, educate its clients on the value of the proposed legal services, and be flexible and accommodating in providing pricing options that reflect true value.

Does the billable hour reflect true value? Sometimes — but that should not be the primary reason for tracking time. The primary reason for tracking time should be so that the firm can evaluate the lawyer’s cost to the firm. Companies that work on a project basis understand this — law firms, not so much.

Can a lawyer’s effective hourly rate be higher under an alternative fee arrangement? Yes. Neither the client nor the firm should pursue an alternative fee arrangement solely to get a “better deal.” This misses the point. Instead, the parties should focus on value. When the parties focus on value, the pricing arrangement is more beneficial to both parties and a stronger, longer lasting attorney-client relationship is forged.

Johnsen Law was founded with a desire to maximize the value of legal services to businesses of all sizes and industries. As such, Johnsen Law strives to charge its clients for the value they receive. Some scenarios in which flat-fee arrangements may be appropriate include reviewing, revising, and drafting the following documents:

· Non-disclosure agreements

· Terms and conditions of purchase or sale

· Master services agreements

· Long-term supply agreements

· Letters of intent or memoranda of understanding

· Letter agreements

· Distributor or sales representative agreements

· Commercial leases

· Equipment rental agreements

· Bid documents

· EPC contracts

· Lien documents

· Termination letters

· Formation documents

· Governing documents

· Trademark applications

· Demand letters

· Employment agreements

· Confidentiality agreements

· Non-compete agreements

Additionally, Johnsen Law offers package options, such as outside general counsel plans where the client receives specific services for a monthly flat rate. Johnsen Law also offers limited scope representations in which legal services are unbundled and the lawyer only performs certain limited tasks. An example of a limited scope representation is where the lawyer only prepares the petition in a small claims case and coaches the client on how to present the case at trial. However, the lawyer does not appear at trial and does not work on any other aspect of the case.

So, if there are alternatives to the hourly rate, is the hourly rate going to die? No. The hourly rate is here to stay, especially when dealing with more complex or unpredictable matters. The time it takes to complete a matter is one possible measure of value, but there are others, and they may be used in conjunction with the hourly rate (a hybrid approach) to price for value.

If you are interested in learning more about alternative fee arrangements for a specific matter, give Johnsen Law a call. We look forward to hearing from you: (832) 786–8646.