Friday, December 4, 2009

Why I do not always bill on an hourly basis

The Client Revolution asked What if the Apple Store billed by the hour?

But in reality, law-firm clients resist double (or triple) billing by multiple lawyers. So firms often have to write down the time of other lawyers. In this scenario, two of the Apple team members would have had their time cut. Since only Angelina actually generated revenue (by swiping my credit card), Anil and Pam’s time would have been cut. This is ironic, since Anil (by helping me get the right protector) and Pam (by affixing it) gave me the most value.

Of course, law firms want their associates to bill as much time as possible, and they discourage nonbillable time. So if the Apple Store were run like a law firm, Anil and Pam would have been discouraged from such “nonbillable” work as helping me choose or affix an inexpensive screen protector, in favor of “billable” work like selling a new Mac Pro. If the Apple Store employees focused on selling billable hours, they wouldn’t be wasting time helping customers with little things like this.
In law firms where lawyers are measured by the hours they bill, they are effectively punished for nonbillable time spent helping clients. Which is why people love going to the Apple Store, and hate dealing with lawyers.
I notice it has been a year since I wrote about my flat fee policy (see here and here and here).  Outside of custody cases, I have a strictly flat fee rule.  I charge an hourly rate for trial work in custody cases with everything else being a flat fee.  Even now the perpetual question is what is your hourly rate?  This misses the true cost of a case which can only be understood in terms of the whole project.

I am still not so sure that will make people love dealing with lawyers but it should help them understand what they are getting for their money.


Angelina said...

In my opinion a sale person comparison to a lawyer’s billable hour is not the best comparison. Furthermore, a lawyer’s billable fee includes administrative support staff to provide the best possible service. In the same way that the retail merchants price their products to cover overhead.

Indeed, billable hours are a concern for most lawyers. However, at the end of the day, it has to be measured against what is the best value for the client.

Sam Hasler said...

Yet there is a serious trend away from the hourly rate by lawyers.

It is nice to see a non-lawyer recognizing that our charges include overhead.