What is Value-Based Pricing for Legal Services?
Though the long-standing tradition is that law firms bill clients by the hour, the legal industry is starting to see a shift by some law firms to value-based pricing for legal services. The value-based pricing model has been widely used in the business world for more than 50 years. In recent years inflation and rising costs for legal services have prompted some attorneys to look to viable alternatives to the traditional time-based billing method.
How Does Value-based Pricing for Legal Services Work?
Value-based pricing for legal services uses set fees based on a number of factors that look to the client’s specific situation. Things considered are:
- The type of legal matter or case
- The value of the matter which considers the actual economic value of the case and the financial impact of an unsuccessful outcome
- Geographic location and jurisdiction of the matter (i.e., federal court, state court, etc.)
- Incentives for risk-sharing–so clients receive better value, while the law firm earns more for outstanding results.
Types of Value-Based Legal Fee Arrangements
For value-based legal services, the typical fee structures are:
- Task-based: A task-based fixed fee is ideal for a specific task like completing and filing a trademark application.
- Tier or Category-based: A fixed fee can be assigned to legal work that is easily divided into value-tiers.
- Scope-based: A fixed fee that is scope-based is ideal for project work with set deliverables or defined work over an established timeframe.
- Unit-price Metrics: Instead of the unit-price dollar per hour metric, an alternate value-focused metric can be used (e.g., dollar per document or dollar per deposition)
- Fixed-fee by Phase: For litigation, the fixed fee by phase approach is typically used since this allows for more flexibility to accommodate the changing dynamics typical in litigation
Benefits of Value-Based Pricing
Today the law firms that have started to use value-based pricing for legal services are finding this method to be a win-win situation. Some of the benefits reported by both clients and attorneys include:
Pre-established pricing allows clients to weigh the cost of legal representation against the benefits
- Scope of work defined in advance leaves no surprises at the conclusion of representation
- Encourages open communication between attorney and client without the fear of incurring a charge every 6 minutes
- Clients have the ability to make an informed decision regarding the value of hiring an attorney for their situation
Alfred Abel Law Offices Provides Skilled and Experienced Legal Services
The attorneys at Alfred Abel Law Offices are dedicated to providing clients in Philadelphia and the surrounding areas with practical and effective legal advice. With more than 30 years as a practicing personal injury attorney, Alfred Abel, Esq. has the necessary expertise and skills to meet the diverse needs of clients in personal injury cases, bankruptcy matters, and business law. Contact us at 215-517-8300 for more information or to schedule a consultation.
Tags: attorney