The Benefits of Fixed Fee Pricing
by David Vilensky
Brief, Journal of the Law Society of WA February 2012
WHAT IS FIXED FEE PRICING?
Bowen Buchbinder Vilensky (“BBV”) is the first significant law firm in Perth to adopt fixed fee pricing. In so doing, we are helping shape the future of the legal profession into one that is more client focused, efficient and outcome orientated.
Unlike most law firms, we do not bill by the hour. Our experience has taught us that clients of law firms dislike the hourly rates regime which most lawyers still use. Instead, they prefer the certainty of fixed fees which is fairer and promotes efficiency and effectiveness.
When law firms bill by the hour all of the risk is with the client. With fixed fee pricing, the risk is shared between the law firm and the client. For these reasons we work on fixed fees agreed up front with our clients in advance of the work being done.
The fixed fee is not an estimate, and there are no hidden charges. The fixed fee also includes all incidental expenses such as telephone calls, postage charges, printing and copying. With fixed fee pricing our clients are not inhibited from seeking timely legal advice by the fear of a meter running endlessly. Fixed fee pricing, as opposed to hourly rates, offers our clients the accumulated wisdom of the firm through lawyers with substantial experience across a range of practice areas.
ADVANTAGES OF FIXED FEE PRICING
One of the greatest concerns for clients seeking legal advice is the costs of doing so. Clients love the certainty of fixed fee pricing and knowing that the account they will receive is not a mystery so that they effectively write a “blank cheque” for fees, which is what generally happens when law firms charge by the hour.
Within many law firms there is a strong, and in our view unhelpful, focus on the amount of time spent on a particular matter due to the inefficiencies of a time billing system.
There is little incentive for lawyers to be efficient when they are financially rewarded for the length of time taken to complete a task. If anything, charging by the hour promotes inefficiency and not outcomes.
Improved communication and efficiencies
Fixed fees improve communication because our clients are not hesitant to call us when they have important questions about a particular course of action. No-one likes to be charged separately for every phone call and email communication they have with their lawyer.
Fixed fees also encourage efficiency. Billing by the hour in fact can encourage inefficiency because when billing by the hour there is no incentive to complete work efficiently. In fact, it is commonly known that billing by the hour is a major disincentive to efficiency and effective work. Fixed fees encourage us to put systems in place to complete the work as efficiently as possible but without compromising effectiveness when representing our clients’ interests.
Greater certainty and peace of mind
After you meet with a lawyer from our firm, you are provided with a no obligation fixed fee proposal. Once accepted, you know exactly what charges to expect, and importantly, when you need to pay those charges so you can budget accordingly. Having achieved peace of mind about the fees at the outset, you and your BBV lawyer can focus on what really matters which is getting the best legal outcome.
At BBV we believe that what we sell is intellectual capital not time. We believe that knowledge is not defined so much by quantity as it is by quality and results. Having fixed the price in advance, our only focus is to deliver for our clients the best possible outcome where you don’t pay for the hours we spend but for the outcomes we deliver.
Fees which fairly match each matter
Not all legal matters are the same. The requirements of an organisation wishing to have a routine employment contract drafted, for example, are very different from those of a company facing an urgent court injunction requiring swift action and an altogether higher order of complexity.
When lawyers are paid on an hourly rate, no distinction is made between the very different matters they handle and inequities in fee levels can often work against clients requiring relatively straightforward work. The fixed fee method which BBV adopts provides a fairer basis for charging, matching fee levels to the requirements of each individual case.
Access to a wider pool of legal talent
BBV only assigns a fixed fee to each case after it has been discussed by a Value Pricing Committee comprising at least four lawyers from the firm. It is the function of this committee to understand the requirements of each case, to discuss strategy and to share relevant experience.
It is not typical for lawyers to consult widely with their colleagues especially in the very early stages of a case. But at BBV we have discovered that this consultation process yields very significant benefits for many of our clients which is a welcome consequence of our fixed fee pricing model. And better still for our clients, there is no additional cost involved to our clients in such an exercise.