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Budgeting Is the Key to Effective Alternative Billing

By Ed Poll
September 27, 2012

ABA Model Rule of Professional Conduct 1.5 states that lawyers cannot charge an “unreasonable” fee. Clients increasingly say that traditional billing by the hour for legal services is not particularly reasonable, because such billing does not convey either the specifics or the value of what their lawyer did for them for the billed hours. That has opened the door to the numerous alternative billing methods that firms use today. There is nothing magical about hourly rate alternatives ' they all seek to achieve the same thing. Rather than setting price by a standard unit or result, billing alternatives focus on actions taken to benefit the client.

Billing alternatives can include a blended hourly rate, a contingent or percentage fee, a flat fee, or some combination of these and other approaches. No matter what alternative is used, it should reflect a highly interactive process: The lawyer takes a direct financial stake in achieving the desired results, and the client plays an active role in deciding whether those results have been met. No lawyer wants to lose control and direction of an assignment, but absorbing a degree of risk and accepting informed client judgment are often essential elements of a strong and growing lawyer-client relationship. The best way to balance the interests of both sides is by developing a budget at the start of an engagement where alternative billing is used.

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