When patent and commercial litigation firm Buether Joe & Carpenter first opened its doors in February of 2010, the firm billed all its business by the hour. Now, three and a half years later, the Dallas firm only bills about 25 percent of its business by the hour, and has a goal of eliminating hourly-fees all together, says member Chris Joe.
“We have done flat fee deals, we’ve done monthly set fees, we’ve done partial hourly with a contingency kicker,” Joe says. “We’re open to just about anything for our client. If you can think of it, we’ve thought about it or we’ve done it.”
Alternative, or non-hourly billing, is used by 89 percent or 82 of the 92 firms that responded to Texas Lawyer’s 2013 Salary and Billing Survey. While the firms are balancing the risk and reward of alternative billing, 80 percent are also offering discount fees or rates to their clients. [See chart "Percentage of Firms Using Discounted or Alternative Billing Methods" ].
Discounting and alternative billing are not the sole purview of large firms charging $500 plus per hour. Small firms are also finding ways to use creative billing strategies and discount methods.
“We’re certainly open to some discounting, it just depends on each case,” Joe says. “We do provide some volume discounting for long-time clients who send all their business to us. If we have a commitment to get business from the client, we will provide them with that deal.”
The firm has grown from its initial three lawyers to nine lawyers. Joe predicts a strong revenue increase for 2013.
“We’re halfway through the year and have already surpassed last year’s gross revenues,” he says. “The firm doubled its revenue in 2012 compared to 2011 and is on track to double it again this year.”
Intellectual property and patent litigation firm Skiermont Puckett does almost no hourly billing. The firm was formed two years ago, in July 2011, by Paul Skiermont and Donald Puckett. Now the Dallas firm has ten lawyers.
“We have a couple of defense-side clients that do prefer hourly billing,” says partner Skiermont. “If a client is going to insist in paying by the hour, we are not at the point yet to insist on a particular form of payment.”
The boutique does both plaintiff and defense work, Skiermont says. Firm fees have remained relatively constant since opening its doors. During its first few months, when the firm was trying to get established, it offered some discounting to build its customer base, he says.
“After the first six months or so, although every fee agreement is different, all are geared toward the same type of fee structure and amount for the firm,” Skiermont says.
The firm does no volume discounting, since it usually is handling just one matter per client, he says. Where Skiermont Puckett uses discounting is when the firm is negotiating a fee agreement with a client and determining the amount, or percentage of the fee, that will be held back and paid upon the firm’s success.
“We try to put some of our skin in the game, so that when the client wins, or does better, we do better,” he says. The firm expects 2013 revenue to exceed 2012 and is looking at adding one or two more lawyers this year, he says.
For those firms using hourly billing rates, median increases in hourly rates for firms participating in the survey ranged from zero percent for first-year associates to 4 percent for fourth-year associates. [See chart "Hourly Billing Rates"].
MacIntyre McCulloch Stanfield Young in Houston is an eight-lawyer boutique firm that is almost seven years old and handles probate, trusts and guardianships. The firm bills 90 to 95 percent of its business on an hourly basis, says partner Robert MacIntyre.
“We have a couple of contingency cases, and we do some work on a flat fee, but not a lot.”
The firm might quote a client a flat fee for a package that includes wills, powers of attorney, medical powers of attorney, and other documents, he says. Each of the firm’s partners decided whether to increase their hourly rates for 2013, he says. Rates that did increase were less than five percent, says MacIntyre.
The firm discounts some business — on individual cases where warranted — or when working with banks and trust companies that administer trusts.
“We do a lot of work with a couple of banks and trust companies in town,” MacIntyre says.
In some cases, for example, the firm might discount its usual hourly fee by $50. Also, the firm will often respond, without charging, to questions by bank and trust officers, he says.
MacIntyre predicts the firm’s 2013 revenue will be greater than its 2012 revenue. He notes the firm is not opposed to alternative billing, but says it is just not requested by clients.
“I believe that every billing situation should be responsive or compatible with the circumstances of the dispute,” he says. “And so if it requires flexibility or creativity we are certainly amenable to that.”
Eighteen months ago, two-lawyer firm Glenn Adams and Associates in McKinney, began charging by the hour for its family law matters. Traditionally, the firm, which has been in business for about 20 years, charged all matters on a flat fee basis, says partner Lindsey Pruitt. The firm’s business is half criminal defense law and half family law, she says. Pruitt says that the flat rates were too low for the work the firm was doing handling divorces, child custody cases and other family law matters.
Although it’s hard to predict the firm’s annual revenue, the firm generated more revenue during the first six months of 2013 than it did during the same period in 2012, she says.
“With the criminal law matters we always just charge flat rates, depending on whether or not it goes to trial,” she says.
The firm will offer a discount, for example, if a client has several criminal cases and they can be bundled together, she says.
“Sometimes it’s needs-based,” she says. “If somebody comes in, and they’re on hard times, we’ll give them a break.”
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