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Battle of the bill: The art and science of developing your fee structure

By: DOLAN MEDIA NEWSWIRES//October 23, 2012//

Battle of the bill: The art and science of developing your fee structure

By: DOLAN MEDIA NEWSWIRES//October 23, 2012//

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By Dan Heilman
Dolan Media Newswires

It’s a question most lawyers face sooner or later: How much should I charge? Furthermore, how should my fees be structured?

Well, that depends: On your practice area, on the particular case, on the particular client, on your personal philosophy, even on your business model.

The art and science of billing is always changing, but a few constants remain in place. Fee structures for lawyers generally come in three flavors: Flat, hourly and contingency-based.

“It really depends on the work you’re doing,” said Sam Glover, a Minneapolis lawyer and founder of the Lawyerist.com law blog. “I think the best way to go about it is to not develop a rigid fee structure for all your cases, but rather to look at the work your client is asking you to do and figure out a fee structure for that job.”

Hourly fees are the most commonly used structure. It’s favored by lawyers in matters whose resolution seems open-ended, and obligates the client to pay whether the attorney is successful or not. Flat fees are ideal for cut-and-dried matters, such as contracts, that generally hold no surprises for either lawyer or client in the amount of time they take.

Contingency fees, which usually range between 30 percent and 60 percent of recovery, are ideal for clients who seem to have a solid case but lack upfront money to pay legal costs, according to Minneapolis business and commercial litigator Seth Leventhal.

“A project that’s extremely predictable can be done for a flat fee,” Leventhal said. “But a lot of legal work is not amenable to a flat fee because of the uncertainty and unpredictability, for example litigation.”

Having the ‘money talk’

Those are the basics of fee structuring, but there are nuances worth learning about once the amount and type of fee is settled on. For some lawyers, a crucial step is developing a level of trust with clients that will smooth the process of implementing fees.

“I try to suit the fee structure to the task or the matter rather than impose it on my client,” said Glover. “Sometimes a fee menu that looks sort of like unbundled services will work best.”

Other times, it’s a matter of developing a fee schedule and being clear with the client that they can take it or leave it. Glover said he doesn’t try to talk clients into something they don’t want, but he sees it as his job to offer options.

“When I do transactional work, a lot of that is fairly predictable,” he said. “For those, I tell the client I’ll work for a flat fee. And if the client asks me to bill hourly, I’ll probably say no, this is my fee. I’ll explain that I’ve spent a lot of time developing this fee structure, and if you want me to work from scratch, I’m happy to bill by the hour.”

When and how you inform clients about your fees is a matter of personal preference. Some lawyers prefer to have that conversation face to face once a handshake representation agreement has been reached. Others will go as far as to discuss fee structures and rates on their websites.

That freedom to bill how and what feels best for your practice can help your firm find a niche of its own. Minneapolis family law firm Cooper & Reid was founded by a pair of former Legal Aid lawyers who saw a gap in representation between people who don’t qualify for Legal Aid but can’t afford conventional lawyer’s fees. Partners Emily Cooper and Tracy Reid chose to use a sliding fee scale, sacrificing profit margins in order to provide help for a needed market and to help their practice thrive.

“Our practice is based less on developing a fee structure and more on developing a service that we think is needed,” said Cooper. “We take into account client’s income. Based on that, we offer hourly rate plus retainer client can afford. We want to be a little more nimble and have the ability to meet the needs of our clients and ourselves.”

And how to finesse the client when a case looks like it’s going to cost more — maybe a lot more — than you originally estimated? Communication and flexibility can be key.

“Part of my job is to make sure the client is never surprised by the cost,” said Glover. “They know up front that they might end up paying me more than what we originally discussed. They might also end up paying less. But if the client says he doesn’t want to spend any more money, I don’t have a problem terminating the representation.”

And if you’re taking on an unfamiliar type of case and you’re not sure what to charge? Either charge by the hour, or turn down the case.

“If you don’t know how to charge for legal retention,” Leventhal asked, “what makes you think you’re able to perform the work?”

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