Flat-Fee Billing? Yes! A “Super Episode” With the Host of Lawyerist

Episode Notes

Transcript

Announcer:

So if I was starting today as a New Solo, I would entrepreneurial aspect, change the way they’re practicing leader, what it means to be, make it easy to work with your clients, New approach, new tools, new mindset, New Solo, and it’s leap. Making that leap, making that Leap leap.

Adriana Linares:

Welcome to another episode of New Solo on Legal Talk Network. I’m Adriana Linares, I’m your host and we’re doing something different today. You guys, you’re going to love this. It’s called a super episode and I’m getting to work with one of my favorite groups, organizations, people, consultants, trainers, Lawyerist, who I have admired and loved for many, many years. Stephanie Everett is here from lawyers. I’m going to ask her to tell us a little bit about her and lawyers, which I’m sure everyone knows of at this point. But before I do that, I want to explain that what we’re doing is we’re talking about flat fee billing and how to get there, how to seriously think about reducing or changing the typical work of billing by the hour and how we can encourage you and give you the tools to do that. So Stephanie has interviewed me about the technology that you would want to consider and things that you want to do with technology to help you get to a flat fee billing method model. And I’m going to ask Stephanie about the business side of that, which is less my area of expertise and most certainly hers that’s going to be today on this episode. So I encourage you to go to lawyer.com, find their podcast, or at least look for it in your favorite podcasting app and find that episode. We’ll link to it, of course in the show notes below. So after having said all that, hi Stephanie.

Stephanie Everett:

Hello. I’m so excited to be with you today. Thank you.

Adriana Linares:

I know it’s very cool because we have known each other a long time and we have never actually interviewed each other. I know. So thanks so much for coming on here. Can you tell everybody about Lawyerist, what it does for the profession about the group You guys have, what’s the membership group called?

Stephanie Everett:

Yeah, we call it lab because it’s where Lab? Yeah, okay. Yeah, it’s where you go to experiment on your business. Right? So that

Adriana Linares:

Was okay. Tell us everything and make sure you tell us about yourself too.

Stephanie Everett:

Oh, well thank you. I’m Stephanie and longtime lawyer turned business coach and consultant, and now I tell everyone I hit the professional lottery because this is what I get to do for a living, right? And I get to help lawyers build healthy businesses, which is what lawyers is all about. If you’ve never been to our website, lawyerist.com, that’s a great place to start and just, we have a ton of content and free resources all about how to build a healthy business and all the components of a healthy business. Everything from strategy to your team, clients, systems, tech, profits, and of course being a healthy owner is that final component, which is so important. And from there we then said, some people need even more help. So we launched this coaching program, gosh, about six years now, and we call it lab, like I said, because it’s where you go.

It’s not the lecture hall, it’s not where you go and listen to people talk at you. It’s where you go and you pull levers and you experiment and you figure out how do we implement these concepts into your firm so that you can have the firm that you dreamed of that you wanted and not just build yourself a job, which I’m sure sometimes we wake up and we’re like, wait, what did I do? I thought I was building freedom and flexibility and more money. And sometimes that happens, but if we’re not intentional, sometimes we take a wrong turn.

Adriana Linares:

It’s very true. And I think encouraging attorneys to build the law practice of their dream is something that I’m always trying to do on New Solo. So I’m glad you’re here because it’s been a long time since I’ve had an episode on flat fee billing or limited scope work kind of thing. And I think we can understand the technology side of it. And if you really need to refresh on that, please go listen to Stephanie’s interview with me over on Lawyers podcast. But Stephanie, let’s talk just real quick like we did on your show about the billable hour and why it’s probably better for you at some point. I mean, I know a lot of it can depend on the type of law that you’re practicing, but there are certain areas of law that are just really healthy toward thinking about flat fee. So let me just give you the floor to give us a little bit of background on that and why you might consider it.

Stephanie Everett:

Yeah, I love talking about this because I hate the billable hour. I mean, I hated doing it, so I love talking to lawyers about how to get away from it. And one of the biggest reasons why is it really doesn’t capture the value of the work that you provide, right? Nobody is hiring you for the time it takes you to do a task. They just aren’t. They’re hiring you for your expertise. They’re hiring you for your experience. They’re hiring you to solve a problem. People have probably heard the phrase, and I always get it wrong, it’s like you’re not buying the hammer, you’re buying the hole in the wall. But then I heard someone say it even better where they were like, you’re actually buying the satisfaction of walking by the hallway every time seeing a beautiful picture hung and not being aggravated, that it’s not up there yet, right?

You just want that relief, that satisfaction. I want that. Yeah, you want to not think very thing. Yes, I have a list for my husband. I want that too. So when we bill by the hour, none of that really is captured. I have all these examples and stories of hiring. I had to hire an attorney once for my husband’s business and we just needed to get this approval from the Department of Revenue for this business license thing, and it was just hung up for no good reason. And I remembered, I said to him, this is dumb that we have to hire a lawyer to do this, but we just need to suck it up. We’ll pay $2,500 or so and we’ll hire someone. So we hired the person with the best reputation, who knew the person had them on speed dial and can call and say, why are you holding this up? Push it through. Really that is what happened a week later. I mean, I don’t know, maybe they need an affidavit or something from us, but a week later, it’s a hole in the wall. The thing got approved. Now, I was terrified because getting the bill, I remember literally opening the paper invoice by the way that I got sent in the mail from the law firm, and I was terrified,

Adriana Linares:

But was it the Flintstone law firm?

Stephanie Everett:

Yeah, you’d think, but this wasn’t that long ago. And yes, they made me pay by check, which is a whole nother Oh,

Adriana Linares:

Definitely Wilma at her finest.

Stephanie Everett:

Yes. So I’m terrified I’m going to open this bill. I have no idea what to expect. Now, in this case, to my surprise, it was $783 because why? It did not, I wasn’t, the guy spent four minutes on a phone call and again drafted an affidavit. So that’s not what I was paying him for. I was paying him for the result. I was paying him for his reputation, for his connection. And so in that case, he left money on the table because here he was charging me point twos instead of really listening and understanding what I valued and what I needed.

Adriana Linares:

So that’s such a good story because my first question for you would be, does there have to be an all or nothing, right? Do you just have to be flat? Can you only be built? Or could that guy have sat back for just a second and said, I bet if I charge her $2,000, she’s going to be happy and pay it. And then how do we find that mindset? Because I think that’s really a mindset situation.

Stephanie Everett:

Yes. I think we are so used just to the way we’ve done things right, that it’s hard for us to step back and even imagine what value we bring and we forget. It’s so almost second nature to us that we don’t even realize the things that we do and how they are valuable to a firm. I mean, I know we’re talking about flat fees, but when I help firms set up subscription services and they’re trying to scope out, well, what would I even possibly offer my clients each month? They immediately go to drafting contracts. And I’m like, well, that’s an option, but what about all these other things? What if you were hosting a monthly lunch and learn where you’re teaching the latest things that are happening in the law or best practices or what if because of your knowledge solving problems, you were able to create the proactive checklist for your clients of how to keep out of trouble? These are things that we know in our brain that are valuable that people will pay us for. And so it’s really stepping back and thinking about where do we help? How do we help solve problems? And then we can price it differently.

Adriana Linares:

Lemme take a quick break, listen to some messages from some sponsors, and when we come back I’m going to ask you about rates. So how do I justify a flat fee if my rate is $650 an hour, which sounds like a lot and pretty good versus $250 an hour, we’ll be right back. Alright everybody, I am back with Stephanie Everett from Lawyerist. We’re talking about thinking about and how to actually move to a partial if not full, flat fee billing system. So Stephanie, in our first segment, you made some great points and they make so much sense and I want attorneys to really think about this, but I thought about it as you were talking about the experience and the expertise, and that’s really what you’re paying for. And some attorneys can get through a contract so quick, it’s like the story you told, but if I’m an attorney in LA doing celebrity divorces and my hourly rate is $650 an hour, which is probably not much for that type of law and for those, it is probably, and I can think of plenty of attorneys that charge that much. How do I really think about a flat fee that will justify or make me as much money and make me happy versus an attorney who’s just getting started and maybe they’re charging $250 an hour, but the flat fee makes more sense, help us mentally figure this out.

Stephanie Everett:

Yeah, I mean there’s lots of ways to approach your pricing. So because you used a celebrity divorce example, and by the way, I have a family law attorney in San Diego who does flat fees for contested divorces. So it can be done, but she doesn’t. What we don’t want to do is say, okay, it’s going to be $20,000 for your divorce and I’m all in because unfortunately in litigation, fights happen. And we know that that’s such an emotional area of law too, that if given the choice, some clients will continue to fight about toasters and garden hoses. I have all kinds of stories I’ve heard about people who are lawyers are like, yeah, we’re just going to each buy you guys a garden hose so we can stop the case. So sometimes we have to, unfortunately as lawyers, we use our fees and how expensive we are as a bargaining tool to get our clients to settle their cases.

So I’m not suggesting that you just say, pay me 20 grand and I’m going to fight for the rest of my life over whatever it is that you want. That’s a terrible way to price. But what you could say is for this part of the case, and maybe that’s where you start on where it makes sense and where you have some knowns and you feel comfortable doing it for the pleadings, I’m going to charge you $2,500. I don’t know what the right numbers are, I’m just making them up, but I’m going to charge you this amount to write your complaint or this amount for every day of mediation that we spend or whatever it is, fill in the blank. And so you start thinking about the components of what you do in a matter, and there might be some opportunities again where it makes sense to say, oh, I want to play with flat fees and I’m going to flat feed this piece,

Adriana Linares:

Put it in the lab.

Stephanie Everett:

Yeah, I like playing. I like experimenting because, and by the way, that’s exactly what you should do when you’re starting. You’re not going to get this right. Part of the reason that we are hesitant to go this way is the risk is on us, right? When we bill by the hour, the risk is a hundred percent on the client because we set a rate and then however long we spend on that task, we’re going to probably, unless we write off our time, which is a whole nother issue, we’re going to bill that to the client. In this case, when I’m billing by a flat fee, I’m taking all the risk upfront because now I’m establishing what that rate’s going to be. And so you do want to go in a little bit intentionally think through and you can use how long things take you as an estimate. That might be one way to approach it and you should have an idea there. It just might not be the only factor you use when you’re pricing it.

Adriana Linares:

It seems to me as I think about this and listen to you, that experience is going to be very important in figuring out how this works. So you said when you’re starting out, you can play with it and figure it out, but if you’re an experienced attorney, and I say this to attorneys all the time, I go, you know what? This is going to cost. You’ve been doing this for 30 years. You’ve got a ballpark. If this is a thousand dollars case or a $10,000 case, I mean I know that there might be a lot of, it depends, but you’ve got ballpark. This is like when a contractor comes to my door and I say, look, is this a thousand dollars project or a $10,000 project? Just give me ballpark. But that is going to be much harder for a younger attorney who’s just starting to figure out. So help me help them. I have both types of listeners, if you’re a young attorney, what are two or three things that you can consider, think about or play with

Stephanie Everett:

Versus

Adriana Linares:

If you’re an experienced attorney, this is going to be a little easier for you to figure out. So maybe a couple things to consider.

Stephanie Everett:

I mean, it might be helpful to think about, you probably have an hourly rate in mind as a new attorney where you’re going to start and you might have an idea of how long things are taking you. If not, you could ask around, right? Ask your mentors, ask your friends. But also you might ask your clients, I know this sounds shocking, but what would this matter? What is this matter worth to you? Or how much would you be willing to spend to solve this problem? I know that feels crazy to us. We’re like, what? But you can ask your clients questions on the front end. You could have pricing discussions and you can give options. So I want to give this example. I think it’s really great, and I won’t take credit for it. Somebody gave it to me on one of my shows, but they had a client who said, okay, the client came and said, we want a contract.

And they said, okay, here’s your options. Option one is we’re going to give you access to our template and you fill in the forms and it spits out a contract, and let’s say that’s $500. Option number two is we’re going to have one of our associates create a bespoke contract for you, and you’ll have it in about three weeks, and that’s going to be $2,000. Option three is that same associate’s going to draft the contract for you, but you’ll have it by the end of the day in two days, and that’s going to be $3,200. The client chose, and by the way, they chose $3,200 because the client was valuing those things. What we often do, and by the way, this comes back to why billing by the hour is so terrible. We never have a value conversation with a client. So we don’t ask, do you want this fast?

If I need something delivered to you tomorrow, I will willingly pay extra for FedEx to send next day delivery. Instead of sending it by US Postal, we just have our clients call us and be like, can you get this to me tomorrow? And we’re like, okay, billable hour two 50 or whatever it is times it takes us and we get no benefit for that. So we need to be willing to engage with conversations with our clients on the front end and find out do they want price certainty? Do they want a fast response? Do they want bespoke? Do they want a template? They might be like, yeah, I’ll pay it less for your template or whatever it is. But you start to think about the parameters of what you’re offering, and then again, as you get more experienced, you’ll have a better idea. But you could always start with

Adriana Linares:

Options. It’s like that sign that you sometimes see in a car mechanic shop, which I haven’t been in a million years, but it always says, you can have it cheap, you can have it fast, or you can have it right, but you can’t have all three. Yes, I love that. And two, back to our first segment where you talked about your experience with your attorney. Had he had the balls to ask you and say, what’s it worth to you? You would’ve said 1500, and he would’ve said, oh, done. No problem. Check, right? Yeah. He was practicing in Fred Flintstone’s law firm, by the way, I use the Flintstones and the Jetsons a lot talking about technology. Before we move on to our next segment, and I continue this great conversation, I want to say one more thing, which is we don’t ask clients about billing. They don’t we, the royal we because I’m not a lawyer, but we also don’t do that with technology. And there are so many times that I have said, why don’t you ask your client what they’re using, what they’re comfortable with. Somebody will say, should I have teams or should I have Zoom? I’m like, you should have both and you should be good at both. And then you should ask your client which one they’re more comfortable with. So same thing,

Stephanie Everett:

We’re

Adriana Linares:

So afraid to ask clients very helpful questions in running a law practice that we struggle through it and we make a lot of mistakes because of it. So if you’re a young attorney getting and hearing this advice, maybe some of this is something that will resonate with you because as I also always say, bad habits are hard to break. So if you’re an experienced attorney, you’ve been doing this a long time, this is going to be totally foreign to you. You’ll never do this. I got you. But if you’re a newer attorney or a New Solo, then these are things you might really consider. And I think they’re so interesting. Alright, I’m going to take a quick break. We’re going to listen to some messages from some sponsors. I’ll be right back with Stephanie. We’re going to wrap it up. Welcome back everyone. I’m here with Stephanie Everett from lawyers, and we’re talking about considering ways to introduce flat fee billing or flat fee rates into your modern law practice.

And Stephanie, I think where you are very good at this is on what I always call the social side of the law practice. I’m really good at the technology side and then there’s the business side, but now the social side, there are two bodies that I want to ask you about now, and that is the client and staff. So first question is going to be about how do we convince the client that this is better? And then I’m going to ask you, what do we do about staff who might not be used to, I have a feeling staff is going to welcome something like this, but

Let’s talk about staff second. But let me start with the client. As I mentioned in my interview where you interviewed me, I said, well, I have an attorney friend who always wanted to move to a flat fee, but his clients didn’t want it when he gave them the choice, kind of what you described earlier, which is given a choice, sometimes they might make a bad choice or what you consider to be a bad choice. So how do we present the idea of a flat rate to a client who is more likely to trust the billable hour where they can see how an hour was spent versus a flat fee where it’s like, oh, there’s time being billed, but I don’t really see it.

Stephanie Everett:

One, I think time is our friend here because as other pricing models have started to change, I think our clients are getting more used to the idea that attorneys too can bill differently. And then I wonder when I hear the question is this because there’s a fundamental distrust of lawyers, right? I think what’s embedded in the question of a client saying, I want a billable. I don’t trust you to charge me the right amount. And so that’s why I want you to prove how long you took on something. So I don’t know. We have work there to do as a profession. And so I have clients who have started off by saying, Hey, I want to bill this new way and here’s why I think it’s super beneficial to you. You can still choose the hourly model, but again, let me remind you all the advantages that exist over here and what you won’t get if I bill you by the hour and his clients are picking it, nine times out of 10, they’re going with his alternative fee model.

He’s doing a combination. He does some flat fees, he does a subscription for his business clients. So sometimes it’s about educating our clients and talking to them and helping them understand that we’re not out to get them. This isn’t like us trying to find new ways to not make more money, screw them over, I don’t know whatever we want to say, but educating them just like you would about how do you want me to communicate with you having this discussion and really explaining, I’m doing this because it helps both you and me. And one thing that’s really been impactful for the folks I know doing this is ask your client, have you ever been scared or nervous to call me because you knew you should just pick up the phone and ask me that question. You knew you should bring me in earlier to the situation, but you didn’t. And why is that? It’s because you were worried I was going to turn on a clock. Well, how much could I have helped you and saved you and let you sleep better at night if you had just gotten me involved? I’ve got one client and she was like, listen, I am really good at negotiating, but nobody ever asked me to negotiate because they don’t want to pay their lawyer to negotiate. They think that’s a business thing to do. They just pay me to do the contract after they’ve done the deal.

So now she’s flipped her. She does a subscription model as well, and part of her pitch is like, I can save you money. I’m really good at my job. I know how to negotiate. That’s what I do for a living. People often forget that that’s a skill that we have.

Adriana Linares:

That’s right.

Stephanie Everett:

And she’s like, she’s like, let me loose people. Don’t just let me come in and document the deal. Let me go create the deal and get you a better deal in the process. So I think as we start to kind of get our minds around this, so you can already start seeing like, oh yeah, this is a good thing. This actually helps me. It allows us as lawyers to really become those counselors that we want to be. How impactful would it be if you were in your client’s board meetings or in their strategy sessions or helping them think through what’s coming? What can we plan for? What can I prevent from happening or where do I need to be in earlier? And I think clients start to see it too, and then they get excited like, oh, okay, this is going to be a good thing.

Adriana Linares:

That sounds like a great conversation, by the way, for subscription billing too. That’s where that would come in. Doctors don’t bill by the hour. You’re paying by the visit whether you’re there for one minute or one hour. And I feel like a lot of times doctors are more chill than because they’ve got this time and they’re like, Hey, how’s it going Adriana, you still in New Orleans? Don’t forget, I went to Tulane. I’m coming to JazzFest this year. It’s different. And I know lawyers don’t like being compared to doctors, and doctors don’t like it either, but the truth is they have a better building model.

Stephanie Everett:

Sorry. No, and our clients don’t want, if you called me and started to chit chat with me, I’d be like, dude, get to the point. The clock’s running, right? I know the clock. And so now I’ve been disincentivized to have a with you my client, which I desperately want because I want you to love and like me and send me more business and all the things. I was going to say

Adriana Linares:

That, yeah, the relationship you’re building is actually, there’s a lot of value there. So the last thing I’ll ask you about then, that was great and thank you, is about staff. Is there going to be some resistance from staff to move to a model like this?

Stephanie Everett:

I don’t think so. I think they’ll welcome it. Most of the time. There could be a transition too. I remind everybody, you’re the chief reminding officer, right? So it’s about you. Anytime we’re doing any kind of change management, which I’m sure you talk about all the time in terms of technology, we know how important user adoption’s going to be when we make changes. So it’s about helping your team understand the why and getting them involved and getting them to see the picture and get excited about, oh, cool, we can build relationships now. We can do these other things that we couldn’t do before. And then getting them excited and a part of that. As much as you can involve them and help them have them brainstorm options with you and have them help you think about

Adriana Linares:

Involve them,

Stephanie Everett:

How can they help us communicate this to our client? What ideas do they have on the back end? I mean, I think this is, and they’ll have them, right? All the things you talked about on my show. So go listen to that too. How do you get them to help you start creating the tech and all the things on the backend to make this whole thing work?

Adriana Linares:

Awesome. Well, Stephanie, it has been a pleasure having you on New Solo. I hope you come back. We can do this again anytime. And don’t forget everybody that the opposite side, the companion episode is over on Lawyerist, where Stephanie talks to me about technology and let me know what you think of this. Did you like this crossover podcast? Leave some notes in the comments or send me an email. You can always reach me at New Solo at legal talk network.com. And if you like what you’ve heard today, please remind everybody that there are great podcasts like this out there and including lawyers that you want to share with your friends. And we’ll see you next time on New Solo

Announcer:

From nine to five. All this time, I was thinking this was the way to go and you put up.

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