After I left KPMG and McGladrey & Pullen (now called RMS US), I remained a glutton for punishment by working in internal audit for a mid-sized family firm with broad diversification in retail, major automotive manufacturing, and real estate.
I’ll never forget the horror I witnessed when I was examining a legal bill exceeding $20,000. The invoice total didn’t bother me, it was the thirteen or fourteen pages of detail listing line items down to the six minutes. That image has still stuck with me more than 25 years later.
My Love-Hate Relationships with Law Firms
They do all the loving, I do all the hating. That’s not what I mean. In many cases, I get to pick the attorney my client works with, and I find them through trusted referral sources. In all cases, their competence exceeds expectations. I also do not remember hiring an attorney with poor communication skills. Friendly, personable, and engaging. That’s what I have encountered over the years.
The part I dislike (it’s hard not to say hate) is their billing practices. Every attorney I’ve ever worked with charges by the hour. And I don’t think they’ll ever change their habits which are deeply ingrained in the financial culture of the partners.
Attorneys want us to stay in touch. They get frustrated when we get them in the loop a bit too late when working on a complex project. That’s because I don’t like the idea of being charged for a few emails or a quick, five-minute phone call.
I’m not here to change the world in the way an attorney charges its clients, but I can give you my tips on how I address law firm pricing to my clients.
My Method for Lowering Attorney Fees
My tips are geared toward one-off projects such as contract work for an acquisition, cleaning up an old partnership agreement, or reviewing the legal work for a new real estate purchase. I’ll address a suggestion for ongoing retainer pricing later in this discussion.
- Before the attorney meeting – nail down the scope with the expected outcome in advance.
- Have the attorney estimate the length of time the work will take. They might hem and haw, but explaining a ballpark number is better than no guess at all.
- Find out what work will be passed on to a lower-paid associate or a paraprofessional. I want to know who those people are so that I can direct simple questions to them during the engagement.
- Let the attorney know you’ll check up on them when 50% of the project has been billed and 75% too. That means they have to bill in a timely manner, and that can be a challenge for some law firms. If they are slow at billing, then base your 50% and 75% based on project completion, which will be a guess. These are two of my milestones for calling the attorney to determine how much more work is expected. This lets me know if I’m going over budget and need to earmark more dollars for legal fees.
In summary, using this proactive approach to manage legal costs turns hourly billing almost into a fixed-price arrangement (although the final total will not be exactly what the attorney estimated at the beginning.
Is There a Such Thing as Fixed Pricing in Legal Work?
It was through a recent book that I learned about an Austrailian firm named, Moores. On their website, they have a discussion about agreed upon pricing which they call MAP.
Their discussion about MAP is a breath of fresh air:
Where most firms charge by time, we are different. With Moores Agreed Pricing (MAP) you know exactly what you’re getting and what it will cost. No estimates. No ranges. No hourly rates.
Before we talk to you about price, we take the time to understand your needs. Once we understand your situation, we prepare a proposal and provide a fixed fee cost. This gives you price certainty, with no annoying billing surprises.Source: Moores Agreed Pricing MAP – LINK
Their work even inlcudes a service guarantee.
If you have a long-time relationship with your attorney, share this page with them. While the odds are low that they will change their billing practices, you might get lucky.
Jim O’Loughlin is one of the greatest business minds I’ve ever encounterd. I’ve only known him as in-house counsel with a supporting cast of 3-4 other attroneys and paraprofessionals.
When I started my consulting work in the small business world, I missed being able to talk to Jim on a regular basis. Jim would have accepted a call 24x7x365. That’s not what I’m referring to.
Instead, I wish every business I serve had a Jim O’Loughlin. I know what you’re thinking, “Yeah, right. At what cost?”
Let’s assume you have an attorney on speed dial (or the equivalent to a quick email). Are they good? Do they stretch your thinking? Do they question your motives and ideas?
That’s the person I wish could be on your on-demand leadership team. Find a way to make that work on a monthly arrangement. Mrs. CEO, there will be no taking advantage of that relationship. Mrs. attorney, include some annual legal paperwork in the arrangement. The main idea is getting smart legal minds on the leadership team, even if its just a few hours a month.
Thankfully, many of the attorneys I have worked with remind me of Jim. Regrettably, we’ve never pushed the envelope to pursue these value-adding relationships. Perhaps I need to push harder.
Smart Costs, Not Low Costs
I’ll summarize by stating the obvious. Don’t go cheap on legal fees. Be smart instead. Once you have an established relationship with an outside attorney, use the technique above not to lower the fees, but to be able to better plan and prepare for their charges. One of the side benefits will be a lower bill had you not done this.