Most law firms charge an hourly rate for each lawyer that works on your matter – and provide no guarantee that the fees you pay won’t spiral out of control. Essentially, they take on open-ended projects under a fee arrangement that encourages them to take more time to complete a task than it needs to take. After all, under an hourly billing arrangement, the longer a project takes – and the more people billing on it – the more they get paid.
We don’t mean to suggest that other lawyers are being unethical or dishonest because they bill by the hour. Not at all. In fact, we believe that the vast majority of our colleagues are honest and diligent. We also believe that sometimes an hourly billing arrangement is practical, if the nature of the project dictates it. But, at best, an hourly billing arrangement provides a lawyer with a perverse incentive to put their own interests ahead of their client’s that they must constantly guard against and it creates an opportunity for the client to be suspicious of their lawyer. We believe this is an awful basis upon which to develop a professional relationship.
So, at Maslyn Law PLC we look for ways to structure our fees that will provide the proper incentive to us, while providing our clients with the ability to more confidently budget their legal costs. The following are examples of different fee arrangements that we may consider, in appropriate circumstances. Generally, we offer our clients multiple fee arrangements options to choose from.
The Flat Fee
One popular alternative to hourly billing is a flat fee. At Maslyn Law PLC, we try to offer our clients a flat fee option whenever possible. Generally, we will offer a flat fee option if a project can be described specifically and we can both agree in advance on the scope of work to be done and if it is possible for us to develop a reasonable estimate of the time that the project will take.
Flat fee arrangements may not always result in lower fees than an hourly billing arrangement, but they often will. And, a flat fee arrangement provides a client with the peace of mind of knowing that their legal costs will be within their budget.
The Modified Flat Fee
Maslyn Law PLC may offer this variation of the Flat Fee in situations where the project is reasonably well-defined, but where estimating the time the project will take is especially difficult for some reason. In these arrangements, a “Flat Fee” is set which represents a fee for an expected amount of work, within a certain range. If the actual amount of time spent differs significantly (more or less), the amount of the fee would be recalculated using an hourly rate that is based on our standard hourly rate. For example, if the project takes significantly more time than anticipated, the fee would be increased, but it would be calculated using a lower hourly rate than we normally charge. On the other hand, if the project takes significantly less time than anticipated, the fee would be decreased, but it would be calculated using a higher hourly billing rate than we normally charge. We believe that these modifications provide an incentive for us to be efficient and provide you with some protection from run-away legal costs.
The Success Fee
Another type of fee arrangement that clients may consider is the “success fee.” Normally, these arrangements involve two components – a base fee and the “success fee.” Success fee arrangements are most often used for specific projects in which the client has a specific desired result in mind at the beginning of the project. In these situations, the client may decide that the result is important enough that they are willing to pay a premium fee if the result is achieved. In the event that the result is not achieved (e.g., a transaction does not close) the client pays only the base fee, which could be a flat fee or based on hourly rates.
Success Fee (for Start-Up Franchisors)
Maslyn Law PLC understands that start-up franchisors are often very concerned about managing their cash flow during the initial roll-out of their franchise program. To help, Maslyn Law PLC sometimes offers a variation of the Success Fee to start-up franchisors. Usually, this option involves a minimum fee (a substantial portion of which is paid up-front), a maximum fee and periodic monthly payments based on the number of franchises sold over the course of a reasonable start-up phase (for example, 2 years). The monthly payments will end if the total amount paid exceeds the maximum fee. If the maxmimum fee is not yet due at the end of the start-up phase, no further fees are due.
The Retainer — one of the oldest forms of lawyer billing arrangements – is used only infrequently in today’s legal market. But, if managed properly, it can be extremely beneficial to both the lawyer and the client. For our purposes, a retainer is simply a flat fee, paid in advance for a lawyer’s services for a defined period with a defined subject matter. The amount of the retainer is set initially by estimating the amount of time the client and lawyer expect to be devoted to the issues covered by the retainer. Periodically, the lawyer and the client will review the actual time spent and determine whether the retainer should be revised going forward. This arrangement has two main benefits for the client. First, the retainer allows the client greater certainty in budgeting their legal fees. Second, having a lawyer on “stand-by” encourages the client to bring legal issues to the lawyer’s attention at an early stage, which may help avoid or limit legal exposure to the client.
Sometimes there is no realistic alternative to hourly billing. In those cases – or where our clients prefer to be billed on an hourly basis – Maslyn Law PLC is happy to operate on this basis. We believe our hourly rates are extremely competitive in any legal market and as much as half the rate that would be charged for a lawyer with similar credentials at a large multi-national law firm.