Flat-fee billing is simple. Instead of ordering legal services with little to no idea how many hours it will take to do the project, when you order services on a flat-fee basis, your lawyer will commit upfront to a set fee for the project. Generally the lawyer simply assesses how long the project will take and multiplies that number of hours by his hourly rate and, presto, there’s the flat fee. If it takes a little less time or a whole lot more time, you only pay the flat fee.
What is Flat-Fee Billing?
The simple solution of paying a fixed price for your legal services instead of an hourly rate, Flat-fee billing guarantees that you won’t receive any unwelcome surprises once our work together ends.
Why Flat-Fee Billing?
For one, it allows you to make smarter purchasing decisions. In law, as in life, some things you have to do and some things you choose to do. Some legal tasks are necessary – your company absolutely must have them. Others are nice-to-haves and you need to weigh the cost of the service vs. the benefit to you right now. Flat-fee billing gives you certainty regarding cost, which makes it easier for you to decide whether to get something done or not.
Second, flat-fee billing allows you to budget better. We understand it’s frustrating to not know how big the legal bills are before they arrive. In a small or even medium-sized business, cash flow is critical and the way you manage cash flow is by budgeting. With flat-fee billing, you know what the bill is going to look like before it arrives. Lastly, flat-fee billing better ensures you and your lawyer are on the same page and avoids billing disputes later. In order to bill on a flat-fee basis, you and your lawyer need to spend more time upfront figuring out exactly what you need done. This is positive. It avoids miscommunication and misunderstandings about what you really wanted. And, flat-fee billing forces your lawyer to dig in and really determine how to most efficiently deliver to you exactly what you need.
Why Don’t all attorneys do Flat-Fee Billing?
We think some lawyers oppose flat-fee billing simply because they like the way things used to be. They like being able to turn on the parking meter and let it run as much as they need or want it to. Hourly billing gives lawyers control and ensures they never wind up having to write off hours because they misjudged how long a project will take. In fairness, there are other reasons people profess to oppose flat-fee billing. The main argument against it is that a lawyer will stop working on your matter as soon as the fee is exhausted (i.e., as soon as she has spent the number of hours she thought the project would take). We disagree with this argument, though. First, the law is a reputation business. And even in the largest cities, the market is relatively small and reputation matters. The lawyer who delivers sub-standard work or effort will not be in the game for long. Second, it’s unethical and lawyers are held to a high ethical standard. Of course, we know some lawyers are unethical. But, most aren’t and won’t tell you they will complete a project for you and then fail to do so.
The flat-fee arrangement requires a certain degree of trust. You have to trust your lawyer to do a thorough and complete job even if he misjudged the amount of time a project will take. Your lawyer needs to trust you to accurately and thoroughly describe what you need done and to be fair if circumstances arise that neither of you could have foreseen that wildly change the scope of a project. But, you and your lawyer should work like partners anyway so we think trust ought to be present in any strong relationship to begin.
We do a lot on a flat fee basis. The flat fee is meant to share risk and to help us figure out the right budget for your work. If you’re buying a company for $100,000, you will (or should, at least) spend less money on legal services than if you are buying a company for $10 million. A flat fee is very useful for helping us figure out the right amount for you to spend. Sometimes, it’s not possible to work on anything but an hourly rate basis (e.g., if there is a lot of negotiation involved and it’s tough to estimate the total time we will spend on your work), although it still helps to think about and we always give you an estimate about the total cost.