The Fortenberry Legal Value Pricing Model
Value pricing is a term used to describe a pricing model that sets fees based on the value of the work done for the client. Value pricing is done before the work begins so that you know how much you can expect to pay ahead of time.
This firm uses a value pricing model. Here’s how it works:
- You provide the attorney with basic information about your situation, including the facts involved and the goals of the representation.
- You and the attorney discuss the various options available to you. The attorney can help you evaluate the pros and cons of each option and chose the quickest and least expensive way to reach your goals.
- Once a decision is made, the attorney develops a scope of work and gives you a customized, fixed fee before representation begins. As long as the scope of work does not change due to unexpected circumstances, this fixed fee is the amount you can expect to pay.
The up-front fee model allows you to weigh the costs of legal representation against the benefits and make an informed decision about how to proceed with your legal affairs.
Value pricing also encourages open communication between attorney and client. Because you are not “on the clock” for every phone call or e-mail, you can feel free to contact the attorney with your questions or concerns, knowing that you won’t be nickel-and-dimed for every response.
Comparison to Hourly Billing
Value pricing is often distinguished from the more traditional hourly billing model used by most law firms. Instead of focusing on the value provided to the client, this model focuses on the work done by the attorney. While there is nothing unethical about hourly billing, it has a few major drawbacks:
- Rewarding Inefficiency. The hourly billing model rewards inefficiency. The attorney is paid more for putting more time into the matter, even if the additional work doesn’t add much value to the client. Instead of being motivated to complete the matter quickly and efficiently, the attorney is rewarded for taking more time to complete the work.
- Unclear Expectations. Costs are difficult to forecast in the hourly-billing model. In many cases, all that the attorney can say is that the cost will depend on how much time is spent on the matter. Many clients are not familiar with how much work can go into a matter. Without an up-front cost estimate, clients often have unrealistic expectations as to the total amount that they expect to spend. This can lead to unpleasant surprises when the final bill arrives.
- Stifled Communication. Hourly billing can stifle attorney-client communication. When a client makes a 15-minute phone call to an attorney that uses an hourly-billing model, the client will be billed for .25 hours of attorney time. Assuming the attorney’s hourly rate is $250, every 15-minute call will cost the client $62.50. The natural result of this model is to discourage attorney-client communication. Because the client is reluctant to contact the attorney, questions go unanswered and concerns are not addressed.
The value pricing model doesn’t suffer from these drawbacks. It rewards the attorney for being more efficient in handling the matter, it provides the client with an up-front fee quote so that the client knows what to expect, and it allows the client to communicate freely with the attorney, without fear of unpleasant surprises when the bill comes. For these reasons, we believe that value pricing is a better way to do business.