Here’s a review of the main ways that firms can charge for their services. Ideally the basis for charging should provide a win-win for firm and client.
So how do the main forms of charging typically get viewed from these two perspectives:
Method |
From the firm perspective |
From the client perspective |
Hourly rates |
Great! But will you be able to charge all of it? | Allows comparisons with other firms, but is increasingly seen as rewarding inefficiency and gives no indication of actual costs |
| Discounted hourly rates (for higher volume of work from client) | Can lead to greater profitability, through higher utilisations | Can be seen as better value, but above concerns still stand |
Blended rates |
Provides a perception of cheaper rates (particularly if client compares with partner rates from rival firms) | Simplifies budgeting and reviewing, but concerns that the trainee will do all the work to offset lower margin |
Fee estimate |
Requires skill of ‘scoping’ the work (ie specifying what is included and what is excluded) and skill of project managing and renegotiating | Still some risk that actual fees will be higher |
Fixed fee |
Biggest risk. May be appropriate to build in an override in the negotiation to allow for ‘substantial’ changes that could not have been predicted. | Now we’re talking! Though may have concerns that quality of work may suffer if matter is over-running and the firm tries to avoid write-offs |
| Value billing (client and professional firm agree a fee after work is completed) | Some upsides and downsides | Encourages the firm to focus on delivering value. But some clients find the negotiation uncomfortable and prefer greater certainty about fees at the outset |
| Conditional fees (no win – no fee) | Payment only on result. Risky | I like the sound of this! |
| Contingency fees (law firm gets a % uplift if successful) | Similar to above, but less risky. | Costs more than above, but may encourage a more rigorous approach |
Tony Reiss 