This article is PART 1 of a four-part series focused on subscription-based services for law firms.
To meet the changing needs and demands of clients, law firms everywhere are rethinking the traditional per hour billing model. While this often means offering clients a fixed or flat fee approach, some law firms are considering subscription based billing for their clients.
A subscription based legal services model may be worth considering if your firm:
- Wants to simplify time accounting
- Reduce billing to a monthly technological event
- Build a sustainable book of recurring business
Realities about hourly billing and business client relationships
Hourly billing can be frustrating for everyone involved. Lawyers dislike keeping time and rendering invoices. Clients grow frustrated receiving invoices with legalistic time descriptions in fractional increments. Displeased clients often question charges for seemingly worthless tasks, delay their payments or push for lower billing rates.
Clients who do not regularly engage in the legal process typically do not include legal fees in their operating budgets. They do not utilize preventative legal services. Rather, they wait until they have a serious issue to involve their lawyer. This type of clients can require a lot of immediate attention, producing large legal bills in the initial stages of engagement. Since lawyers are typically sheepish about securing large retainers or negotiating payment plans early in the representation, they may find themselves ethically bound to continuing the representation of nonpaying clients.
Understanding your client, their challenges and their disposition toward legal services can help avoid many of these situations and lead a productive, profitable and rewarding legal services relationship.
The Ideal Client
A subscribed services model can work effectively for small and mid-sized companies who can’t afford or do not want an in-house legal team. Typically, these clients have an immediate or growing need for uninsured legal services. While they may not have have legal issues every month, they have enough going on to appreciate spreading out their legal fees over the entire year. Larger clients may benefit from this subscription based approach with the right value-added services. It is more likely, however, that the in-house legal team may resist or compete internally.
General counsel services can cross many practice areas and can create work for other lawyers in a firm. For example, general corporate services can lead to intellectual property, labor, real estate, litigation and other types of legal services, which can fall out of the basic agreement scope.
Since it likely that a subscribed services client will have legal needs beyond any one firm’s capability, we recommend offering to manage the interface with the additional firm. To ensure that a client makes its first call to the firm for any legal need requires the firm to willingly recommend appropriate counsel. This even means suggesting another firm.
SSM’s can also work for discrete parts of a client’s total legal need. For example, loan closings, collections, labor and employment support, and intellectual property. If a clear scope is attainable, the work is consistent, and an outside law firm can provide efficiency, cost advantages or improved quality beyond in-house solutions, an SSM can work.
Check back on our blog soon to read more about subscription based legal services, including:
- Scope Development (PART 2)
- Pricing (Setting Fees)
- Challenges of this type of billing model.