Billable Hours Strain Lawyer-Client Relationships. There’s a Fix

Lawyers, how many times has a client asked you to “hurry up” a case, or “cut the small talk”? For many of us, it’s become commonplace for clients to get anxious about the amount of billable hours we’re spending on their case.

While this anxiety from clients certainly isn’t new, it’s a sentiment that’s growing, in part because of a constraining economy. Clients may be feeling less confident in their finances, while, at the same time, most firms are raising their hourly rates. Firms were expected to raise hourly billing rates by 8% in 2023, coping with the impacts of hiring booms, inflation, and more.

While these increases may be necessary to maintain profitability, this model is proving harmful to both parties. The more that clients feel like they’re paying per hour, the more concerned they’ll be about how lawyers are spending time on their matters. This only mounts the immense pressure that lawyers are feeling, which can put a serious strain on the lawyer-client relationship.

The truth is that hourly billing just isn’t cutting it anymore. That’s why firms should consider switching to a different model with more advantages: fixed-fee billing.

Reimagining the Client-Lawyer Relationship

Many of us got into the legal profession for the same reason: to help people. Building meaningful working relationships with clients can be one of the most rewarding parts of the job, and the feeling of providing that support when your client needs it is invaluable.

However, when we operate on an hourly billing structure, the work can tend to feel transactional. Cash-strapped clients will only give you a call when they feel like they really need you. For cases that take longer than expected, clients may feel as though they’ve been taken advantage of by a lawyer who was trying to get as much cash out of them as possible.

That all changes when you switch to a fixed-fee model. You can become a true partner, one who is available to provide counsel whenever your client truly needs it, not just when they feel like they can afford it. At our firm, because we’ve worked on so many small business M&A transactions, our clients will often ring us up for our thoughts on issues that go beyond the typical legal scope—e.g., what resources can I use to find a small business to buy?

One downside of this model is that it’s not always easy to anticipate how many hours you will spend on a matter. If an unanticipated issue arises, lawyers may end up spending more time on a matter and ultimately end up with less compensation than if they had gone the hourly route. However, what we’re describing is a shift in perspective, not just a shift in billing structure. When you’re working on a fixed fee, the entire relationship becomes more focused on providing value, not just tracking hours. And the more matters you work on behalf of your clients, the more you improve at setting reasonable fixed fees based on the actual time required for the particular matter.

Transparency for Firms and Clients

One of the biggest advantages of a fixed-fee arrangement is transparency. When lawyers bill by the hour, they typically quote to potential clients a wide range of how much a matter could cost, based on how different scenarios could play out. When you’re working on a fixed-fee, clients know exactly how much they will be playing upfront. There’s no guessing, and no concerns about a huge bill landing on their desk.

The fixed-fee model also gives lawyers a sense of transparency. Particularly for firms who are coping with the impacts of a strained economy, understanding exactly how much money will be coming in each month is a huge advantage.

Ownership Over Your Time

Paradoxically, whether it’s conscious or not, the traditional billable hour model creates the incentive for attorneys to work slowly. This can lead to long nights spent in the office, and can be a big contributor to attorney burnout. On the flip side, fixed-fee billing creates the incentive for lawyers to be more efficient, so they can turn their focus to other client concerns, or to personal matters that are important to them, such as spending time with family.

At our firm, that business model affords us more flexibility over how we spend our time. Our ability to provide for our families isn’t tied to how many hours we’ve spent in the office, but rather the quality of service we were able to provide for our clients.

In the face of a shifting legal landscape, the adoption of a fixed fee-based billing model offers a promising solution to the challenges faced by both lawyers and clients. By nurturing a collaborative and mutually beneficial partnership, this approach marks a departure from worry-driven transactions, and takes considerable pressure off the many attorneys who are on the edge of burnout from the need to continually bill, bill, bill.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Kevin Henderson is an experienced corporate lawyer with over a decade of M&A, venture capital, and capital markets experience.

Eric Pacifici is a trusted deal lawyer with extensive M&A and capital markets experience.