Only 1 in 6 in-house lawyers say that hourly billing is their preferred fee arrangement with outside counsel.  I’m with the other 5.

Lawyers are a conservative bunch.  You can’t blame us – when the fabric of the profession is based on incremental iterations of what came before; there is very little benefit to a novel re-interpretation of years of established precedent.

Lawyers bill by the hour because it is safe.  There is the element of the unknown in every new representation; billing by the hour eliminates an attorney’s down-side risk if a matter takes longer than anticipated, whether as a result of some wrinkle in the fact pattern or simple inefficiency.

But billing by the hour may not be in the best interests of the client, particularly for the new businesses, entrepreneurs and growth-oriented emerging companies that I typically represent:

  • Hourly based billing can be a barrier to effective and timely communication.  In my experience, both as a practicing attorney and as General Counsel tasked with overseeing legal budgets and services, knowing that the “meter’s running” can dissuade clients from making a timely call, or from sharing all of the information necessary to make an informed decision.

  • It’s difficult for clients to budget services provided by the hour.  It’s hard for businesses to predict when they might need legal services, and the most costly services (litigation and major transactions, like an acquisition, for example) are the most difficult to predict and budget for.

  • Hourly billing does not engender the types of trusted, collaborative relationships that can provide real value to clients.  An attorney that understands your business intimately can do a much better job of advising you of potential business and legal risks.  Larger companies can do this by bringing a lawyer in-house, which isn’t an option for most smaller businesses.

We enjoy working with growth-oriented start-ups, entrepreneurs and emerging companies, using value-based fee structures that provide practical and affordable solutions to those businesses:

  • Flat fee services that provide the essential legal services for start-ups and entrepreneurs, such as choice of entity and business formation services, drafting of “core” business documents, trademark filings, and the like.

  • Modest, monthly retainer-based services for existing businesses, that emulate an “in-house” corporate counsel approach. The monthly retainer provides unlimited access by phone, email,and messaging, a scheduled monthly meeting to review legal matters, a shared, online, collaborative legal workspace.

According to a recent study, 5 out of every 6 in-house lawyers would prefer a fee arrangement other than hourly billing.  I’m betting that most entrepreneurs and small businesses owners agree.

What are your thoughts on the billable hour, and our new approach?  We’re interested in hearing your feedback!

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On March 8, 2013

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