A Note on Hourly Fee Billing
One of the aspects of ZwillGen that regularly draws clients to our firm is our alternative billing philosophy. As explained on our billing philosophy page, we believe in billing clients the way they want to be billed – whether on an hourly, flat-fee, monthly retainer, or success fee basis. We know clients have different preferences in billing arrangements, and we try to be relatively indifferent. As long as we receive fair compensation for our efforts, we want to present the broadest range of options we can. But what we’ve learned, over and over again, is that clients prefer the hourly billing method over all other methods… at least until they try the monthly retainer method. Once they try a retainer arrangement, clients rarely go back to hourly billing. We thought it was worth a blog post to discuss this phenomenon, and to share what we’ve learned from 7+ years of experimentation with fee approaches.
Second, while it often takes months for our clients to consider a shift from an hourly billing arrangement to a monthly retainer structure, our experience is that clients almost never go back to hourly billing once they make the switch. The reasons for the general satisfaction with these arrangements are worth discussing. Rather than creating marginal costs for each additional piece of work, a monthly retainer arrangement allows the outside law firm to be treated like internal lawyers, who are rarely paid or judged on the value per hour of their work, but rather on the basis of overall satisfaction with the quality and quantity of projects completed. This is the same way that internal employees are evaluated – over the course of time, rather than on a per project basis. These arrangements also remove artificial barriers between the law firm and the client, allowing the lawyers and the client to have a more natural give and take without concern that the “meter is running,” on every call and interaction. Of course, the more time a good lawyer spends with the client, the more effective and useful the advice will be. These arrangements foster greater connection between attorneys and their clients and usually result in more frequent, practical advice for the clients. Moreover, in tighter fiscal times it provides the client with incentive to push more work to the law firms that are on monthly retainers and away from firms that are charging by the hour because it helps them better manage their budgets. This predictability can be invaluable in managing an internal legal budget. Again, you would think that law firms would be more reluctant to enter these arrangements out of fear that their workload will double without a concomitant increase in income, but again, we find that it is the clients who are more reluctant to try it.
Hopefully, this blog helps shed light on why our clients may be drawn to one form of billing over another. At ZwillGen, we stand ready to support you in exploring various billing options in order to find the best fit or combination of approaches for your unique needs.