Billing Like It’s 1989: The $99/Hour Lawyer
Call it a new kind of legal limbo as law firms take a turn on the conga line to see just how low they can go. Only this form of limbo isn’t a game, but serious business. Large firms are quoting suicide rates to keep business reports Lawyerist while solos and nonlawyer networks are exploring cut prices potentially as a new business model.
Consider for example, Law99, a company that allows consumers to access legal services for $99 or less an hour, according to this press release. Attorneys register to use the platform for $99/month and receive clients whom they’ve agreed to represent for $99 an hour or less thereby avoiding any fee splitting issues. There’s not much detail at the site on how long the lawyer must commit to a $99/hour arrangement and whether the commitment to keep rates below $99 an hour constitutes a contract with the lawyer, client or both (for example, if the lawyer raises rates or decides to charge a contingency, could Law99.com sue for breach of the terms of service?) These are certainly issues I’d want to pin down before using the service.
In addition, I’d have some concerns about the types of lawyers signing up for Law99 and how that might impact myreputation. It’s not exactly promising that the founder is quoted in a press release as saying that lawyers will want to participate in Law99.com to supplement their current income or because they are broke and need clients. Not sure that I’d want to be seen online in the company of the destitute and desperate, even if I fell into that category myself.
Still, Law99.com is a far better option than costly pay per click sites or those that force lawyers to handle for a miserly flat fee. At $99/month, the cost to join Law99.com isn’t exorbitant (though it could still be better spent on personal networking or developing one’s own web presence) – and at $99/hour, lawyers won’t get rich but at least (in theory), they’ll be compensated for the time they put into the case. If you’re going to spend 40 hours on a DUI, you’re far better off being paid nearly $4000 than doing 40 hours of work for a flat fee of $1000.
But if you’re intrigued by discount rates, there’s no reason that you can’t simply offer them yourself, on your own terms. That’s the gamble that Lous Wierenga, a Palos Heights, Illinois is taking with his $100/hour offer to new clients for the first year with his firm. Starting clients off at a low rate can be tricky because they may grow accustomed to reduced fees – which is one of the problems when using a service like Groupon as I pointed out here. Still, if the lowered rates get clients in the door who can subsequently refer you to others, you could terminate the $100/hour rate service and just grandfather the earlier clients under that rate.
In many ways, I’m glad to see competition on rates because it expands access to law. No, lawyers won’t get rich on $100/hour — but they won’t starve either (particularly with the emergence of income-based loan repayment plans). Billing and collecting a modest 15-20 hours a week at $100 an hour amounts to $90,000/year and taking off $1200/month for expenses (say, $600 for loans and $600 for law firm expenses) comes to $76,000 which isn’t bad for honest work that doesn’t jeopardize your health, where you’re the boss and most of all, have an opportunity to do challenging work that every so often makes a difference.
Where I live, court appointments pay considerably less than $99 an hour.
This is contrary to Foonberg’s advice in his best seller. So if some guy will do it for $99 you then offer to do it for $88, a race to the bottom.
Some guy is offering to do it for less – the prepaid legal companies and auction sites. In this regard, the $99 hour isn’t top dollar but it avoids bargain basement. No it’s not optimal or long term but I didn’t raise it as a race to the bottom
Carolyn
Hi My Shingle Readers,
Thanks for the mention in the article, would love to participate in this conversation or any others taking place regarding solos.
cheers,
Lou Wierenga
Don’t forget to include malpractice insurance in your overhead calculation.
Don’t forget to include malpractice insurance in your overhead calculation.
There’s an old Wall Street saying, “You can make money being a bull. You can make money being a bear. But, you’ll never make money being a pig.” Sometimes less is more.
$99 an hour is not far off from many insurance defense rates. Given that, you would need to learn how to be as efficient with your time as an insurance defense firm to make this profitable or at least survivable. For my firm, there are some practice areas we bill at $300 an hour, others we bill closer to this level as a loss leader because they feed into our higher rate work. If you impress them on the cheap work, they will often stay with you for the more expensive work.
The biggest reasons businesses fail is because they dont charge enough. I learned a long time ago that you can never be the cheapest. It always starts a race to the bottom. Check out Elance. Lawyers are bidding for work at $30 an hour or less. In any business transaction clients look for value first and will pay your price if they’re convinced your skills are worth it. Id rather be known as the best lawyer in town rather than the cheapest guy in town.
“Billing and collecting a modest 15-20 hours a week”
Oy. Have you been a solo recently, Carolyn? I’m pretty sure you only work for lawyers, so I don’t think so.
I wonder if you have ANY idea how difficult it is for most relatively new and comparatively unskilled attorneys (i.e. the ones who are likely to charge $99/hour) to do this. You’d need to generate clients; do the work; track the time accurately; generate the bills; and–most difficult–collect money.
What makes you think I work for other lawyers? I have a law practice ( carolynelefant.com and nextgenerationenergylaw.com) – and if you check my ranking on Avvo or Google Scholar or the FERC docket and PACER, you will see that I have real clients and real cases.
If you read the entire series, you will see that I wrote that if lawyers do bill at $99/hour, they’re going to have to get paid up front. That is a given – and indeed, the tradeoff for the low rate is the assumption that you reduce collection issues. The reason that I said bill 15-20 hours a week is also because I assumed that the remaining 20-25 hours would be spent on marketing, admin billing and the like. And the salary that I calculated – around $70,000 – is an annual amount, not assuming that someone will have another job.
I did not say that I think the $99/hour is a good idea for everyone. I viewed it as a way for new lawyers to get a foot in the door and most importantly, as the lesser of two evils , i.e., you are better off charging $99/hour and getting paid for all the work you do than agreeing to be part of a prepaid legal plan and get flat fees of $700 for a misdemeanor that could involve 20 hours of work.