When my clients tell me that they're having difficulty getting paid or that they are having problems with an alternative billing arrangement with their clients, the first two questions I always ask are:
"What did you tell your client about your fees when you first met with them?"
and
"What does your engagement agreement say about this issue?"
Almost every problem related to fees, billing or getting paid relates back to the original meeting with the client and how well the fee arrangement was explained.
Lawyers are now beginning to experiment with alternative billing arrangements, and that means that they need to change the way they speak to clients about their fees. Under an hourly billing system, the client is quoted an hourly rate. Sometimes a client will request an estimate of the total legal fees that are likely to be expended, but many clients won't. Even if an estimate is given, when the estimate is exceeded, the bill will reflect the number of hours worked on the client's behalf. While this may be 'easy' for the lawyer to explain and to demonstrate to the client, it opens up discussions about why certain tasks took so long to perform, or why the lawyer devoted so much time to a specific item. These conversations don't occur until after the work has been performed, and they place the emphasis on hours, rather than on outcome and the services provided.
By contrast, with alternative fee arrangements clients are likely to ask more questions at the outset, if only because they are used to hourly billing. Some clients may be concerned that the move away from hourly billing is a move made solely for the lawyer's benefit, and that the client may ultimately pay more for the same services. Other clients just naturally want to understand what they're paying for and how much it will cost them.
Too many lawyers are afraid to talk to clients about fees; they rush through the discussion because it's uncomfortable and they are afraid that the client won't accept the fee. This is a missed opportunity. Any discussion about fees is an opportunity for the lawyer to discuss the value of the services the lawyer is providing and to clarify the client's goals and objectives.
One good way to talk to clients about fees is to use written tools such as pricing sheets and flow charts which can help clients understand the steps or stages of the process, the value each task or stage adds to the engagement and how it relates to the client's goals, and how the fee relates to each task or stage in the process. These tools can also help the lawyer explain the variables that may affect the fee and why some engagements are more expensive than others - in terms that the client can relate to, rather than in terms of the number of hours expended by the lawyer or law firm.
Written flow charts and pricing sheets not only help the client understand the process and the value the lawyer provides, but they discourage negotiating on price and requests for discounts. Psychologically, when the client sees a written price sheet, the prices seem more concrete and less 'made up.' And written price sheets can be helpful for new lawyers, solos and lawyers in small firms who might be inclined to negotiate against themselves or immediately discount their prices.
How do you talk to clients about fees? Can you utilize any of these tools to improve the fee conversation with your clients?
If you want to improve the way you speak to clients about fees, or if you're interested in implementing alternative pricing arrangements in your firm but don't know where to start, contact me to see how I can help.
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