Fee Schedules – Hammering out the details

My first month of solo practice is almost over.  Overall, I am really happy with how it has been going.  I’m pulling in new clients through the marketing I am doing and I am actually doing lawyering work.  Now, along with getting better at lawyering and getting new clients, I feel like I also need to work on how I run my business.

So, I spent the evening doing some market research.  I looked up Texas Bar stats on what lawyers are charging in my area, and I realized that I am not pricing my hourly rate high enough.  Also, I’m doing a lot of flat rate work and working with payment plans, but I haven’t, until now, hammered out the specifics of payments or flat rates.

Flat rates are good for new lawyers

Flat rates are great for new lawyers, because it doesn’t matter how long a task takes me, I am only charging the client for what it should take me.  That said, the problem with setting flat rates without any other stipulations is that I don’t make any money until I finish the project.  Which is great for a short project, but if its a project that will take a month or more, even though my time involvement is fairly little, cash flow gets tight.  It is nice to have the money in my trust account and know that I am owed a certain amount, but I am not always in control of how long a process is going to take and therefore I don’t control when I get paid.

Cash flow issues with marketing

Currently, the most effective marketing I am using seems to be through Unbundled Attorney: they are bringing in a lot of good leads and I am managing to convert more than enough to get a great ROI.  The problem is that marketing costs money.  I am paying for leads, or in the case of Unbundled, I am racking up a bill for leads that is going to come due soon.  And, although I’m engaging new clients, I am fighting with the fact that the money they give me isn’t earned yet, because my flat fee agreements only state that the money is earned for the whole case.  Example:  If I am charging $2500 for a divorce, then I might have money in my trust account to pay that $2500, but the money is still the client’s money until the divorce is complete.  Therein lies the problem, I’m racking up bills, but I am not really getting paid until everything is said and done.

Structuring fee agreements differently

I talked to another attorney that works with Unbundled Attorney about the cash flow problem of flat fees and payment plans, and she had some good insight.  She suggested that I structure my fee agreements so that I am earning money on a task by task basis, so that as the client is paying the money is already earned.  This seems simple, now that I think about it, but conceptually it was a stretch at first.

There are really a couple of ways to make this work, I am tossing around which works best for my practice:

1. Bill hourly, but cap your fees.

Total attorney fees are going to be $2500.  Client is required to make a 20% down payment ($500) and then is required to make weekly payments of $100 until the total amount is paid.  So, after the down payment client owes $2000, which he will pay off in 20 weekly payments.  Engagement agreement states that attorney is earning the fees at $200 per hour, up to $2500, and upon completion of the project the full $2500 is owed.  I just track my time as I do the work, and bill weekly for the time I have spent against the trust balance.

2. Benchmark Fees

Add language to the engagement agreement that sets out fees per task completed.  Pleadings or motions are a certain amount.  Appearances are a certain amount.  Depositions are a certain amount.  Again, cap the maximum fee charged at whatever the agreed upon amount is, and state in the agreement that upon completion of the final order or judgement, the full fee amount is earned.

This is all going to take some time to work out

The problem I am having right now is that I haven’t done enough cases to know what to expect on average.  I know what I have dealt with so far, but it will probably take me a year of doing this solo to have a good idea of how many appearances an average divorce is going to require, et cetera.  Until then, I will keep making tweaks to my agreements to make sure I keep my clients in reasonable fees and don’t run my business into the ground.

Finally, follow Foonberg’s rule where possible

There is a good book by Jay Foonberg called How to Start & Build a Law Practice.  Foonberg has a rule, which I’ll paraphrase to, always get paid in advance.  I like this rule.  Because of the way I’m starting my practice, it isn’t always possible, but I sure like when I get a client who is willing and able to just give me the full retainer for the work I am doing, or going to do, and I can just bill against that, as needed.   Other lawyers on LawyerSmack have suggested that I am going to regret not following this rule more strictly, which I may, but I probably need the experience of losing some fees to let me know that.

Dress For Success

One of the perks of my previous job was that as a senior manager for a railroad construction company, I was able to dress in jeans most days and not feel out of place.  After passing the bar, I tried to wear a suit to work a few times and felt pretty out of place, so I gave up and went back to jeans and a shirt.

New Year, new look

I have enough suits to wear a suit every day for work.  I’ve lost some inches since I bought some of the suits, so I probably need to get the ones that don’t fit quite right fixed up so that they fit me properly.  That said, since I am hoping to spend a lot more of my time in court this coming year, I am going to try to wear a suit to work every day.  I might take Fridays off if I don’t have court, but I don’t think I’m going to be able to pull off jeans much anymore.

I feel like clients expect a certain something

I think clients expect their lawyers to be well dressed.  I know that I see people dressed in suits around town and I immediately think they are lawyers.  In fact, I am often surprised when I see people wearing a suit and tie for work that aren’t lawyers.  This Thursday I was in my office in jeans and a tee because I didn’t expect to do much client-facing work that day, and got a request for an appointment which led me to go home and change into something more professional.

Not only does it look good, suits seem to change my attitude

When I put on a suit, especially a good suit, I feel more formidable.  More confident.  The idea that a simple wardrobe change would make a difference in the way that I carry myself seems a little bit silly to me, but I am conscious of  the occurrence.

Where to get decent suits cheap?

I don’t like wearing cheap suits. I have a couple of really cheap suits that I wear as a last resort, but I really prefer a decent suit to work in.  Buying decent suits is a pretty serious investment, but I imagine it will be worth it in the end.  My favorite suit right now is one that I purchased on Indochino.com, in what I’ve heard called “heteronormative blue”.  I think that describes it pretty well.  Men’s Wearhouse has a pretty decent selection of suits as well, but their business model of 2-for-1 makes buying suits from them costly because you have to buy two at a time.

First Real Day At The Courthouse

Jefferson County CourthouseI’ve been down to the courthouse a few times before to check a property record or go to a hearing, but I haven’t really ever gone to make my presence known before.  Today I was finished with all the CLEs that I needed to get on the appointment lists that I wanted to get on, and had some spare time, so I decided to spend my day at the Courthouse meeting Clerks, Judges, and other staff.

First stop, Local Bar Association Office

I had a form I had to turn into the Local Bar Association, so I decided that would be my first stop.  I’ve met some of the Bar Staff, but never gotten a chance to really introduce myself to everyone.  I had been told how helpful the bar would be, so I decided to talk to them.  I was greeted immediately by one of the staffers that I knew and I got to talking.  They gave me some great pointers on who to talk to and different lists that I should get involved with.  I had neglected to get my Ad Litem certificate from the State Bar before this outing, so they offered to order me the course so that I could take it through them.  I took them up on the offer and then wandered to the different Courts that they suggested.

Lunchtime is not the right time for the Courthouse

I chatted with the Local Bar staffers for longer than I expected, so by the time I headed for any of the Courts it was past noon.  No one was in any of the Courts, so I went to the basement of the Courthouse to get some lunch.  I wasn’t disappointed – Courthouse Cafeteria knows how to cook.  I filled up on unhealthy choices and waited for 1pm to come around.

Judges are here to help

I had been told that all the Judges in our county are very helpful, but I was still surprised at how willing they were to meet with me and talk about what I need to be successful in their Courtrooms.  I met with a Family Judge who lined out when I needed to be in his Court and what kinds of cases I should expect to get.  I didn’t get to the County Judge for the Probate Court, but his Coordinator was really friendly and lined me out for what I needed to expect for that Court. Finally, I talked to the Coordinator for the Criminal Courts who walked me through the paperwork to get signed up, then brought me to one of the Criminal Judges.

The Criminal Judge I talked to kept me in his office for over an hour talking about how he likes to his courtroom to run, rules that he expects followed, and even a arraignment-to-sentencing walkthrough of the process in that particular Court.  He then walked me through how I should be charging for my Court Appointments and where to turn in the payment slips.  I was honestly surprised at how hands on these high-level elected officials were, and how willing they were to help a new lawyer get his bearing.  The Criminal Court Judge then brought me to the other Criminal Court Judge’s office and introduced me.

Feeling a little relieved

Other lawyers have told me how helpful the Judges were, but I was still really astonished by it.  That said, I don’t doubt that once I’m in their Courtrooms they will be pretty strict in how the process runs, but I can really respect that.  I had been putting off meeting the judges and getting more involved in the Courtroom setting because I was apprehensive about the whole interaction, but after meeting everyone today and getting a chance to talk to them, I am more excited than ever about starting to practice law as a new solo.