Traditionally, attorneys are paid an hourly rate for the work they do. How high the rates are will depend on a variety of factors, such as how experienced the attorney is, what type of practice areas they focus on (for example, a finance attorney may charge more than an estate planning attorney), and how expensive overhead costs are (which will depend on factors such as office rent in the city or area where they are based). At Fonville Legal, we typically bill by the hour, but we are open to discussing alternatives, if and as appropriate. When we begin working with a new client, we are happy to talk with them about what they envision and what makes sense given their unique circumstances. It is important to us that all of our clients feel they are receiving quality services for their money. We believe that our virtual model pulls the pendulum strongly in the direction of value.
Alternative fee structures can take a wide variety of forms. The following are some examples:
Hard Cap
A hard cap fee structure might be appropriate for some (although certainly not all) matters. Under this arrangement you will be billed at an agreed-upon hourly rate, but only up to a certain agreed-upon amount. Attorneys most often agree to a hard cap structure when their clients have strict budgetary restrictions. If the attorney can complete the work that needs to be done without hitting the cap, that’s great! If it takes some additional hours past the limit, though, it won’t impact the client’s bottom line.
If you choose a hard cap fee structure, it’s important to discuss the specifics with your attorney. Will work stop after the cap is hit? Will a certain limited number of additional hours be provided? Will you expect your attorney to get the job done regardless of complications that could arise? It is imperative for the attorney and client to carefully define the scope of the work together to ensure that they are on the same page. Hard caps thus make more sense for uncomplicated projects, possibly involving a degree of repetition, that are easy to scope.
Soft Cap
A soft cap fee arrangement is similar to a hard cap, but with a notable difference. With a soft cap, the law firm receives a reduced percentage of its hourly fee for any work performed after the cap threshold is reached.
Collared fee
A “collared fee” arrangement is where the client pays the firm hourly fees based on a budget and a collar where the price ranges above or below the budget – for example, 10%. If fees are below the collar, the firm may receive a bonus or, if the charges are above the collar, the client may receive a discount off the firm’s hourly rates. A collared fee can also simply refer to a minimum and maximum fee.
Fixed or Flat Fee
The number of hours counsel historically spend on similar cases can often determine a flat fee. Clients favor a fixed fee because it is predictable and a flat rate is easier to compare with flat rates from other legal service providers. However, flat rates (like caps) can work as a disincentive. When the cost of counsel’s work product exceeds the flat fee, counsel may spend a diminishing amount of time on the matter. The billable hour provides for individualized attention to a matter, whereas a fixed fee may not. A fixed fee turns a representation into a commodity.
A variation for matters in certain practice areas is a discounted flat fee with an escalation clause. If the number of hours counsel needs to spend on the matter, multiplied by an hourly rate, exceeds a certain percentage of the discounted flat fee – say 120% – then an escalation or fee adjustment applies. The fee adjustment compensates counsel for the additional time expended.
Blended Rates
It is common for different attorneys at the same firm to have different hourly rates based on their experience, their education, and demand. If you don’t feel strongly about which attorney at a firm handles your case, a blended rate will allow them to work on it as a team. You would then be charged a rate that is a blend of the different attorneys’ hourly fees. This could be an exact average, or even lower if a less senior attorney will be handling most of the work with occasional check-ins from a partner, for example.
Monthly Rates
Fonville Legal colleagues Josh Wallenstein and Andrew Lopez offer external general counsel services utilizing retainer-based billing, whereby a client gains budgetary predictability by engaging counsel part-time at a fixed monthly cost.
Let’s talk!
If you are interested in learning more about alternative fee structures, or want to hire the Fonville Legal team as external general counsel, we would be pleased to hear from you. Contact us today!