beyond the billable hour: how to leverage afas to build a better practice
TRANSCRIPT
Beyond the Billable Hour: How to Leverage AFAs to Build
a Better Practice
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What the ABA Says“AFAs are not about charging more than what an hourly rate might be — they are about charging an appropriate fee based on what value the client receives and how that client perceives value. Alternative billing should be based on what is fair and reasonable both to the client and the lawyer. Keeping track of time should be the lawyer’s measure of cost, not necessarily a measure of the value he or she is providing the clients in their legal needs.”
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The Debate
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Setting Expectations
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Delight with Details
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Leverage Technology
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Types of Alternative Fee Arrangements
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Fixed or Flat Fee• Total fee or a portion of your overall fee (can be
periodic)
• Often employed where approximate workload and resource requirements can be easily estimated
• Value-based fixed fee can be created and split into equal payments for a predetermined period (e.g. quarterly, monthly, etc.)
• “Look back” which allows for reassessment of the fixed fee due to unexpected developments
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Contingent Fee• Based on desirable goals and
achievements • Requires a very clear agreement
defining the scope and desired outcomes
• Fees will typically depend on a range of events or specific recovery
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Performance-Based Success Fee/Holdback• Can be used with hourly and fixed fee
arrangements • Percentage of client’s fees placed into
separate account or “held back”• Benchmarks determined in collaboration with
client, and fees may be disbursed to firm, refunded to client, or divided between them
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Task Based Billing• Identified tasks and projects are used to
measure and trigger the fee• Complex litigation or transactional
matters with many tasks and steps
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Percentage Fee• Based on a percentage of the dollar
value of matter• May be consistent or graduated
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Retrospective Fee• Based on value of the outcome• Exact amount is unknown until the
conclusion of the case• Agreement must outline all the factors
involved in determining the fee after successful or partially successful outcome
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Hybrid Fee Arrangements• Blended hourly rate• Phased Fixed Fee with Collar• Fixed fee with hourly• Fixed fee with success fee• Hourly rate with contingency
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Other Arrangements• Volume Discounts• On-site legal expertise• Multiple Matter-based Relationship Incentives• Fixed fee with success fee• Hourly rate with contingency
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Where to get AFA Language
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Sample AFA Language
Portfolio Fixed FeeThis letter is a proposal for a fixed fee arrangement for counseling on privacy matters betweenSky Bros, and Jones, Bierko and Hill Law Firm (JBH Law). To that end, we propose an arrangement whereby Sky Bros would be able to call upon JBH Law on an as-needed basis for rapid responses to spot global business counseling issues, a concept that we believe will provide a cost-effective arrangement that encourages utilization of JBH Law’s resources:
1. The agreement would cover general counseling on privacy matters (“Covered Matters”).
2. For its services in connection with Covered Matters, JBH Law would be paid a flat fee in monthly installments of $5,000. In addition to the payment of fees provided for in this agreement, Sky Bros would be responsible for reasonable expenses and disbursements, if any, in accordance with the guidelines set forth in our prior agreement.
3. To the extent that the value of JBH Law’s time for any single privacy counseling matterexceeds $7500 (based on JBH Law’s standard rates), or by mutual agreement of Sky Bros and JBH Law, a separate matter would be opened. If Sky Bros elects to retain JBH Law for any such new matters, fees for those matters would either be billed pursuant to our prior agreement or we can negotiate a new arrangement specific to that matter.
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Another Helpful Drafting Resource
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Easily manage varying AFAs with Legal Practice Management Software