Hey Lawyers – What Ever Happened to Value Billing For Legal Services?
About four years ago, one of my very favorite bloggers, David Giacalone wrote this provocative post, Value Billing versus Value Bilking, arguing that in many instances, value billing represented just another way for lawyers to extract more money from clients when the billable hour didn’t yield as much. Back then, I didn’t completely agree with David; I assumed that like me, most lawyers offered alternatives to the billable hour to increase efficiency and give clients more for their money, not less.
Now, I wonder whether I may have been wrong. Because the recent weeks of economic crisis have brought all kinds of articles and blog posts on law firms rethinking legal fees and law firms competing on price, or at least, highlighting price advantages. What happened to those $1000/hr billing rates which last summer, didn’t make anyone blink, or those value billing proponents who advocated lawyers charging premium fees just because they could? You’d think that in troubled times, the services of good lawyers would carry more value, not less. Yet if the recent news is any indication, lawyers are charging less, rather than more.
Well, some lawyers anyway. Not me, and not many of my colleagues here in the world of the independent practitioner. Because for us, being a lawyer has always been about doing good work, delivering top value, providing clients the best possible service and always keeping clients’ budgets in mind when taking on a case. As I’ve written before, it’s not the pricing mechanisms that make legal fees unreasonable…it’s how we lawyers use them.
Yes, Carolyn, how the lawyer uses any particular billing method is the key. Each method has its own potential pitfalls for the client. It’s good to see that market forces — lots of providers chasing fewer (or poorer) customers — is helping to bring down fees. To the extent that value billing attempts to protect the lawyer from competitive forces and deny the client the benefits of competition it increases the chance that resultant fees will be unreasonably high.
Yes, Carolyn, how the lawyer uses any particular billing method is the key. Each method has its own potential pitfalls for the client. It’s good to see that market forces — lots of providers chasing fewer (or poorer) customers — is helping to bring down fees. To the extent that value billing attempts to protect the lawyer from competitive forces and deny the client the benefits of competition it increases the chance that resultant fees will be unreasonably high.
I think value billing is a wonderful alternative to the billable hour. The problem, however, with value billing for new lawyers is that setting a fair value for a service (i.e. a project or case) feels like a shot in the dark, whereas setting a fair value for your services (i.e. your billable rate) is easy to determine. I, personally, am not aware of a standard for new lawyers to measure value billing. It seems, just starting out, that a fair billable rate is the best way to provide top value with the client’s budget in mind.
I think value billing is a wonderful alternative to the billable hour. The problem, however, with value billing for new lawyers is that setting a fair value for a service (i.e. a project or case) feels like a shot in the dark, whereas setting a fair value for your services (i.e. your billable rate) is easy to determine. I, personally, am not aware of a standard for new lawyers to measure value billing. It seems, just starting out, that a fair billable rate is the best way to provide top value with the client’s budget in mind.
If we are going to really talk about “value billing” we need to look at value from the client’s point of view. Most times when lawyers talk about value billing they are really talked about fixed price billing – which is still billing based on the amount of time the lawyer puts into the file.
True value billing means determining what our services are worth to each individual client. The same activity may be worth not be worth the same amount of money to different clients. Similarly the same activity may be worth more or less at different times.
There are things that I do that don’t take up a lot of my time but are of tremendous value to the client. If the activity saves my client tens of thousands of dollars, why shouldn’t I ask to be paid say $2,000.00 even if I only spent one hour on the file.
$1,000 hourly rates are a joke because I’ve never met a lawyer in 20 years of practice that consistently produces work of that value day in, day out, but there are times when we do and when we do there is no reason we shouldn’t expect to be paid for it.
If we are going to really talk about “value billing” we need to look at value from the client’s point of view. Most times when lawyers talk about value billing they are really talked about fixed price billing – which is still billing based on the amount of time the lawyer puts into the file.
True value billing means determining what our services are worth to each individual client. The same activity may be worth not be worth the same amount of money to different clients. Similarly the same activity may be worth more or less at different times.
There are things that I do that don’t take up a lot of my time but are of tremendous value to the client. If the activity saves my client tens of thousands of dollars, why shouldn’t I ask to be paid say $2,000.00 even if I only spent one hour on the file.
$1,000 hourly rates are a joke because I’ve never met a lawyer in 20 years of practice that consistently produces work of that value day in, day out, but there are times when we do and when we do there is no reason we shouldn’t expect to be paid for it.
Andrea,
I agree that lawyers should be paid for the value they provide. That is why I find it odd that lawyers are now cutting rates. You’d think that value would remain constant and not ebb and flow with the economy. I haven’t had to change my practices in this economy or lower my rates because they’ve been reasonable all along. And I often tell client that in ongoing relationships that if they cannot discern a benefit from using my services than they shouldn’t retain me.
Josh, you are correct that value billing is tricky. But it is most difficult, I think for someone who is providing contract attorney services because in most cases, you are not in control of the matter. YOu depend upon what the attorney delegates to you and that can make it even harder to figure out how much time the matter will take.
Andrea,
I agree that lawyers should be paid for the value they provide. That is why I find it odd that lawyers are now cutting rates. You’d think that value would remain constant and not ebb and flow with the economy. I haven’t had to change my practices in this economy or lower my rates because they’ve been reasonable all along. And I often tell client that in ongoing relationships that if they cannot discern a benefit from using my services than they shouldn’t retain me.
Josh, you are correct that value billing is tricky. But it is most difficult, I think for someone who is providing contract attorney services because in most cases, you are not in control of the matter. YOu depend upon what the attorney delegates to you and that can make it even harder to figure out how much time the matter will take.
It’s amazing to me that so many lawyers are still working off of a billable hour model, trading hours for dollars. That’s a clear roadmap to average results (and must be terribly scary to a client)–not knowing what its going to cost.
I always be the voter for good, effective marketing that is not about the lawyer but enters the conversation going on in the potential clients mind. Its by having a steady stream of potential clients that you can choose to represent that
1. allows you to get full value for your expertise and
2. allows you to be the best lawyer you can for your “perfect client.”
It’s amazing to me that so many lawyers are still working off of a billable hour model, trading hours for dollars. That’s a clear roadmap to average results (and must be terribly scary to a client)–not knowing what its going to cost.
I always be the voter for good, effective marketing that is not about the lawyer but enters the conversation going on in the potential clients mind. Its by having a steady stream of potential clients that you can choose to represent that
1. allows you to get full value for your expertise and
2. allows you to be the best lawyer you can for your “perfect client.”