The Basics of Getting Paid - Part 1; How Much Should I Charge?

One of the biggest problems with being on your own is the ability to generate revenue. This is difficult regardless of your career field, but more especially in costly service fields, like law. With the challenge of new generating revenue, also comes the task of collecting the money before or after services are completed. I'm going to make a series (is 2 considered a series?) of blog posts dealing with the dirty issue of making money, because, face it, this business (or any) is about making money.

This first post will deal with some of the challenges you'll face in selling your services, and setting prices for your services. The second post will deal with collection matters, including the issue of whether you sue your client. If you have questions along the way, or would like me to talk specifics, please let me know.

How much should I charge?

The question that drives fear into every new solo's heart is, "how much do you charge?" This is especially true for recent graduates who hang their shingle. I remember when my first client confronted me with the question, and how my heart sank when I had to respond.

Sure, I'd talked to others about their fees and hourly rate, but without much else, I knew little about the market for new attorneys. Some friends I knew who worked at big firms boasted about being billed out at $250 per hour, that seemed extravagant to me though, especially when I knew most of these associates had little or no practical legal skills.

As I talked, many people offered the practical advice that I should bill $100 per hour, based on the number of decades in practice. For instance, since I had practiced law less than 1 decade, my hourly rate should be $100.

Finally, I settled on a slightly higher hourly rate that I felt confident could benefit me in two ways. First, the slightly higher rate would discourage "bargain seekers" from hiring me. In my experience, client seeking bargains can never (yes, I said never) appreciate the value of your services. Moreover, the bargain seeker will consistently challenge your decisions/suggestions, and most likely will make unreasonable demands to resolve the case. You will soon regret the lower hourly rate. You will find that a client who accepts your higher rate will become your ideal client. Believe this fact too, there's plenty of other attorneys who will take these clients, don't despair.

Second, a higher rate would allow me to adjust, my fees for the "pro bono" client, while still making enough to keep the doors open. Trust me when I tell you that you'll have plenty of opportunities to give away your services. Whether you offer discounts to friends/family/good clients, through genuine pro bono services, or to your "charity" clients (mine are kids), the opportunity to help someone will be there. What's more, these clients will appreciate your "discounts" much more than the others will.

What about flat fees?

I love flat-fees (or one fee for all services). They're the heart of my practice, and are especially valuable to clients.

The problem with the flat-fee billing method is that it's extremely difficult to "value price" your services, and account for specific, and often time consuming, nuances in cases. I found early on that it's a good idea to "bill" for everything you're doing on the flat fee case (I use QuickBooks Pro to tally time, mileage, and case expenses). This helps to give you a general idea of how "difficult" a case is, and provides a good reference point for future cases.

For instance, for a "simple" or uncontested divorce I charge $1,000. I arrived at the amount because I learned early that $500 and & $750 did not adequately compensate me for the amount of time I spent dealing with issues in the case. When I finished my first "simple" divorce (which I took for $500), I ended up making $5.75 per hour. Not even minimum wage!!

Granted, because this was my first divorce case, I cost myself more time by not knowing particular shortcuts. Moreover, because I "bill" for everything (time, postage, mileage, telephone calls, hourly casework), I increased my rates.

The important thing I learned though was that I needed to have more money to make the cases worth the time, effort and costs. Remember, you're in a business, despite the idealistic mantra your professors gave you. If you're not making money, you're not going to survive.