Industry Expertise · July 20, 2020

Alternative Billing Models for Law Firm Innovation

For decades, the billable-hours formula has been the standard for charging clients in the legal field. But in recent years, the industry has grown increasingly competitive. Thanks to technology-led practices of law firm innovation, customers have more options than ever before, and they're becoming more cost-conscious. As a result, many firms give customers more flexibility to provide the best client experience.

Alternative billing models offer several benefits. For example, they can foster trust. No client likes to open a statement that includes more hours than they expected. By offering set fee structures, you take away the chance of a miscommunication over billing and your client won't worry about the ticking clock.

Flexible pricing can also encourage long-term relationships with clients because they often feel they're getting a better value. Alternative billing models could attract more clients to your firm who couldn't afford an hourly rate. These are four of the most common alternative models for law firms.

1 Flat fee

A flat-fee pricing model offers a set charge for certain types of legal services. If your firm takes DUI cases, bankruptcies or draws up wills, this could be an attractive way to bill. Clients appreciate knowing the full cost of the service up front. And if you're experienced and efficient with these types of cases, the rate you earn per hour will likely be as much, if not more, than a billable-hours model.

Another way to incorporate the flat-fee model is to use it for a portion of a long-term project or extended litigation. You can charge one rate for the filings, another for the discovery period and another for the trial. This provides flexibility for you and your client as you move forward with a pending matter.

2 Capped fee

Offering a capped fee is a hybrid of the billable-hours and flat-fee systems. The client pays by the hour, but the number of hours is set in advance. This provides clients with a ceiling on their total bill and peace of mind that the service fits their budget. If the number of hours you work reaches the cap and additional work is required, the law firm absorbs the cost.

Like a flat fee, the capped-fee structure is for projects expected to take a typical number of hours. It can also be a good structure for a client who wants to have a law firm on a monthly retainer. Each month, the client and firm can reevaluate the capped hours.

3 Unbundled

An unbundled fee structure is when a lawyer offers a set cost to perform a specific task, process or issue instead of handling the entire legal matter. Firms offer a menu of services, each with its own price. This puts the client in control in case they want to do some of the work themselves.

Offering an unbundled pricing model opens your firm up to new clients, who may be comfortable handling parts of the work and only need help with certain tasks. For example, a divorce attorney may offer this type of arrangement if the client has reached an amicable settlement and only needs the paperwork drafted.

4 Contingency pricing 

This structure appeals to clients because they only pay the firm if they win their case. Contingency fees are most common with personal injury, insurance and medical malpractice cases. If the case is won or a settlement is reached, the firm charges a percentage of the recovery.

Attorneys need to be selective about the cases they take for a contingency fee. The percentage could vary depending on the type of litigation and the possible outcome.

Finding a fit for your firm

The best solution for law firm innovation could be to offer a variety of fee structures based on the clients you want to attract and their needs. The key to a successful practice is to offer great value. Alternative billing should be based on what's fair and reasonable for you and your clients.


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