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Flat fee billing another alternative for solos, small firms

Lawyers looking for an alternative billing method to utilize when portfolio billing isn’t right for a client should consider flat fee billing.

Gary D. Sparks, a sole practitioner in Walnut Creek, Calif., started offering his family law clients flat fee options last year.

“It started out of a need to be more flexible in how to offer services to clients who were struggling because of the economy,” he said.

Sparks began researching what it would cost to establish a fixed rate for his services.

“The response has been better than I anticipated,” Sparks said. Of the new cases he’s taken on, almost 95 percent of clients have opted for the flat fee over the traditional retainer format.

“And I just had a retainer client call and ask to switch to the flat fee,” said Sparks, who blogs at the California Divorce Lawyer.

Some clients who have inquired about the flat fee rate and then shopped around have called him back, he said, after realizing that it was a better deal than they could find at other firms.

The basic rate covers clients with less than $500,000 in assets without a business or professional practice to be divided, he explained, and operates under the assumption that the case will settle.

“The basic schedule is based on the assumption that we will not have to go to court on a contested hearing,” he said. So if the other side files a motion for child support and it can’t be resolved without a court appearance, the cost of those pleadings and court time requires an additional charge.

Outside costs – like the initial filing fee, or the cost of an expert like a forensic accountant – are paid directly by the client.

For an uncontested divorce, the basic rate begins at $950; for a contested divorce, the flat fee is $6,000. Additional services are also charged on a flat fee basis.

Similar to attorneys offering portfolio billing (see “Portfolio billing: A valuable option for solos, small firms”), Sparks said that the most important thing to do when drafting an agreement is to define the scope of the work being performed. Link: Portfolio billing story

“Make it very clear to the client what is and what is not included,” he emphasized.

As for every lawyer’s nightmare client in a flat fee arrangement – the needy person constantly calling and e-mailing at all hours of the day – Sparks said that the law of averages will apply.

“For every [needy client], you will also have several very trusting and more passive clients,” he said. “It is part of the risk you take.”

The flat fee format has also offered Sparks, who launched his own firm last year, a chance to market himself in a way that differentiated him from the competition.

“The sales pitch is that flat fees eliminate the uncertainty,” he said. “Whether it takes one meeting or five meetings, five letters or 10 letters, the lawyer will do everything necessary to get the case resolved.”

– Correy E. Stephenson