Saturday, January 9, 2010

A Better Business-Lawyer Relationship

Never having had any success with this concept in Indiana, I still like its potential. Articles like's Small Law Firm Woos Clients With Monthly Subscription Fees keep me believing that this is the best practice for providing legal services to businesses:

Given the steps they go through to set each client's pricing at the outset, and the flexibility that both sides maintain in the month-to-month arrangement, they don't worry about clients taking advantage. "What if they stay with us one more month or one more year?" Smithline asks. "What if they refer another client?"

Earlier this year, executives at San Mateo, Calif., cloud computing startup Appirio Inc. were looking for a way to cut legal costs. The big firm the company was using wasn't too interested in entertaining flat-fee billing at the time, said Jim Emerich, Appirio's chief financial officer (he declined to name the firm). So the company's work went to Smithline Jha, Emerich said, after a beauty contest that attracted four competitors.


So in early 2008, the firm started experimenting by putting a few longtime clients on a flat-fee subscription. They'd estimate what the client would spend with the firm in a year, and divide that by 12 to arrive at a monthly price. (Depending on the client, they say, a month can cost from $6,000 to about $30,000.)
They've since come up with a way to set a monthly price for new clients, too, by negotiating based on what Smithline calls the exploratory month. At first, "You don't know enough about the client and they don't know enough about you." They charge $5,000 for that initial month, during which the firm does as much work as the client will give and learns how frequent and complex its deals are. Then, they negotiate a monthly figure.

"People think it's really complicated, but it can be a really quick and friendly discussion," Jha said.


To keep it simple, there are no caps or floors, and neither side is bound legally for more than a month at a time. That way, either party can address major fluctuations in work by requesting an adjustment for the following month, Smithline said. He noted that most client rates are not adjusted more than once a year.

Invoices list the assignments and tasks, but not the time spent, and Smithline says the firm doesn't track time spent internally, either.
So why would a business not prefer this type of relationship to one of hourly fees?