How a law firm or lawyer chooses to price their billing will have a meaningful impact on client acquisition and the financial bottom line. While the field of law is unique, the method of determining pricing structures is similar to that of most businesses. Three methods are usually considered:
- Pricing Based on Competition - This method determines price based on billing rates of competition.
- Pricing Based On Cost - Using this price method allows lawyers and law firms to assign pricing based on business overhead costs. Very useful calculators can be found online to assist in calculating all costs and percentages to give you a realistic pricing base for your billing.
- Pricing Based on Customer Valued - This pricing method determines price based on the unique value of a customer to the lawyer or law firm.
What sets lawyer and law firm pricing structures apart is how the client will be billed for any legal work. Following the pricing method determination, the following billing options will need to be considered:
- Contingency - When a lawyer or law firm bills based on contingency, it virtually eliminates the need for predetermined cost and instead follows a percentage. Using this model, a portion of the end recovery for a client is charged. This means a vastly different charge is procured with each case.
- Hourly - One of the most popular and traditional methods of billing within the legal community is hourly. Following setting a predetermined hourly rate, lawyers and law firms will then charge according to time spent working on a case or consulting with the client.
- Fixed Fee or Retainer - A fixed rate is a predetermined total cost for a case that is charged by a lawyer or law firm, Similarly, when a lawyer collects a retainer, it’s essentially a percentage of the total price being paid as a downpayment upfront.
Historic Billing Rates
Rates and fees charged vary greatly depending on the field of law and the type and complexity of the case; That being said, there are certain averages that can be reflected within historic billing rates. We’ve listed some examples below:
- Hourly Billing Rates - Hourly rates usually begin at $100 per hour, depending on the case and experience of the lawyer or law firm handling the case. Generally, for less experienced lawyers and firms the rates range from $100 - $200. For more experienced lawyers and law firms, rates can average from $200 - $400.
- Fixed Fee Billing Rates - For certain common projects and cases, such as divorce or will establishment, lawyers and law firms will often charge a set rate. Fixed rates charged will vary widely depending on the area of law; For instance, the cost of a basic will and testament can run about $300, whereas a prenup preceding a marriage can average $1,000.
- Retainer Billing Rates - Because a retainer is an upfront percentage of the expected overall cost of a case or project, the amounts can vary greatly - averages tend to begin around $2,000 and can go as high as $100,000.
- Consultation Billing Rates - Quite often, initial consultations are not billed by lawyers and law offices. Typically, if a consultation fee is charged, it can range from $50 to $100 per hour.
- Contingency Fee Percentage Billing Rates - Contingency fee percentages vary based on the type and size of case. Percentages can range from 15% for large cases up to 50% for smaller cases.
Once rates and billing methods have been determined, it’s very important that a law firm periodically reassesses based on factors that contribute to their pricing structure. For instance, for pricing based on cost law firms should ensure that overhead costs and budgets coincide with pricing. Law firms basing pricing structure through competition should also scout for any changes that can and will impact pricing.
Pricing structure set and looking for a way to maximize your legal billing? We've got all the information you need right here.