How I Fixed Legal Fees
The problem with legal fees is not the fee structure. The problem is the intent of the lawyer and the client. Lawyers want to maximize profit from their clients. Clients want to receive as much work as possible for the lowest cost. Today, everyone is estimating the industry average cost of a service. Clients want to pay less than the average cost. Lawyers want to charge more than the average to show higher profit margins. These competing interests are what causes the biggest conflict between attorneys and clients.
- Lawyers want to get paid above industry standard prices
- Clients want to pay less than industry standard prices
- These interests conflict and cause friction
How Other Lawyers Approach This Problem:
Attorneys approach the fee problem in 2 ways:
- They structure their fees for themselves and rely on their size / experience to gain new clients,
- They use an “alternative” fee structure that ends up charging substantially less to the client and the attorney puts in a correspondingly low amount of effort.
Below are relevant fee structures in today’s practice and their problems:
Hourly billing is the first and still most common fee structure. The problem with this fee structure is the stigma that all attorneys using this structure are charging higher hourly rates than they should and inflating their hours to milk every dime out of their clients. Unfortunately, the stigma is mostly true and is how bigger firms bill under approach 1 above.
Flat fees are widely used under approach 2 to help clients feel like they are not being taken advantage of. While the intent is good, the outcome is generally terrible. Lawyers must estimate how much work the task will be and set the fee before starting. The nature of legal work is that estimating is impossible because their are too many variables. The result is that the lawyer will inevitably over estimate or under estimate. This means either the client gets cheated or the lawyer gets drastically underpaid. When lawyers get underpaid, they don’t work hard or do a good job.
Contingency (I get paid when you get paid)
This fee structure is similar to flat fees. You will pay a set percentage upon winning your case. This seems like a good structure under approach 1 and 2 because selfish attorneys can overcharge and clients never pay out of pocket. However, a good attorney doing a good job will typically try to settle a case as soon as possible to save their client time and money. This does not work with contingency fees. Do you know what the very first item is to get waived under a settlement? Attorneys fees. Opposing parties hate paying opposing attorneys fees. Therefore, approach 1 attorneys will not want to settle and approach 2 attorneys end up getting drastically underpaid (and do a bad job).
How I Solved The Problem
I solved the legal fee problem by changing my underlying intent. My intent is to make money and do good work. I also understand that a satisfied client will come back and will refer me to others. The future revenue of a satisfied client is far more than a small increased profit margin on a single case. Therefore, I charge a fair amount that keeps myself paid and motivated, while not overcharging clients and upsetting them.
My Fee Structure
Hourly Billing. Lower Retainer.
I know. Hourly rates are used by legal thieves. But I am a very impatient man and I don’t waste time. I’m not going to turn a 2 hour deposition into a 6 hour deposition to make a few extra bucks. I would rather satisfy 2 clients in 10 hours instead of satisfying 0 clients in 10 hours, only completing work for 1 and overcharging.
If you are evaluating attorneys, make sure that you are not being overcharged by understanding the industry average price of your case. Also, make sure you are not underpaying or you can rest assured that the attorney will not do a good job.
I went to law school at Capital University in downtown Columbus. There, I became the first person in school history to graduate the program (a 3-year program) in just 2 years while on the Dean’s list. I started my firm straight out of law school after marrying my beautiful wife and passing the bar exam. Now, I represent businesses in litigation, draft transactional documents, provide legal advise to business owners, and represent them in transactional negotiations.
- Patent Lawyer FAQ’s
- How Mergers and Acquisitions (M&A) are Valued
- Shareholder Disputes FAQ’s
- The Different Types of M&A
- Mergers and Acquisitions Law in Ohio
- PCT Patent Applications
- Breach of Contract: Definitions and Legal Consequences
- Understanding a Patentability Search
- Guide To Provisional Patent Applications
- How to Buy A Business: The Legal Side
- Video: How to start a 501(c)3 charity [4 Steps]
- How To Start a 501(c)3 Charity
- Video: How To Start A Corporation [4 Requirements]
- Video: How To Start A Business [4 Steps]
- 4 Reasons Why You Need An Operating Agreement
- Why You Need a Lawyer to Start a Business: Part II
- Why You Need a Lawyer to Start a Business: Part I