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Sunday, May 15, 2016

How refusing to bill clients by the hour is working for me

When I opened my new law office about 9 months ago, I set up a billing system that does not rely on billing my clients by the hour. I bill everyone on a "job" or project basis and I am very transparent about what the job or project will cost. If it's something that is lengthy, such as negotiating a settlement on an estate dispute that is going to take several steps, the clients and I work out what the steps will be, what I'll bill, and when I'll bill. I don't take retainers. I don't bill clients for printing pages or postage.

All of this is extremely unusual for lawyers to do. We are traditionally compensated for our time by the hour (or parts of an hour) and charge back for every postage stamp and piece of copy paper. In some circumstances, we are compensated for our results, such as in a contingency agreement on a car accident where the client pays a percentage of the monetary settlement to the lawyer.

I tried to envision what a law office would be like if it were more client-friendly, and where the billing arrangement was more like other businesses. Now that I've been operating this way for several months, I'd like to offer a few thoughts on how it's going.

1. Clients LOVE it. Our feedback has been 100% positive. We constantly hear how the experience was wonderful, how they loved working with us, it was stress-free, etc. They are effusive in their thanks to me and my staff. Many of our clients hug me. I think I've had more hugs from clients in the last 8 or 9 months than I had in the previous 25 years of practice. Our clients feel at home in our office, and in fact we have had three or four drop in without appointments just to see if we're free to have a cup of tea. One customer who lives nearby drops in to bring treats to our little office dog (Teacup Pomeranian named Roxy. That's her in the photo, in her raincoat).

2. It generates new business. When clients leave your office absolutely pleased in every possible way, what do they do? They tell everyone how great you are. We've already had a great deal of word-of-mouth business from existing clients, which for most lawyers takes a long time to generate.

3, Clients understand it. As we walk out of my office with the work completed (i.e the will signed, the Grant of Probate obtained, the dispute settled), I give the client the invoice. This is just like being billed at the dentist or buying something from a retail store. The bill is not a multi-page list of increments of time spent but a description of the job they just had done. They recognize it, and the fee is exactly what I told them it would be with no surprises. They would actually prefer to get the bill right away rather than wait for something unknown to arrive in the mail. It's cleaner, more transparent, and offers the client more certainty.

4. It's great for cash flow. Since when do lawyers' clients OFFER to pay the bill? Mine do. They pay before they leave even before I ask, so I never have to send out bills then wait 30 days for them to be paid. I have almost no receivables at all because my clients pay right away.

5. Billing this way is part of a culture shift in the law office. It's part of a change away from the attitude that the lawyer is some kind of oracle that may deign to speak to you or may not. The billing system is supported by commitments to the clients to have work done within a certain time, and meeting those commitments. I also send off quick emails to clients as frequently as I can to let them know about developments, even small ones, on their files so they know I'm working on their matters and to cut down on unnecessary phone calls. It's much more about client service than the way I was first taught as a student-at-law.

In other words, it works for my clients and it works for me. I'll continue to monitor the system as we go forward, but early indications are that clients appreciate this system and that it is sustainable in the long term. I hope other lawyers will consider making this kind of change to how they work.

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