Traditionally, law firms have billed by the hour. Lawyers often claim not to know how long tasks will take, and they often don’t reveal how many lawyers will be needed on a “team” to deal with your matter. And sometimes those lawyers will have very different billing rates. This leads to a few negative consequences for both your business and the lawyer as well.
Huge Bills are Nasty Surprises
Because the total time needed for the project is unspecified, the number of lawyers needed for the project is often unspecified, and because billing rates vary between those lawyers, you face great uncertainty from traditional billing methods used by outside law firms. Legal bills can pile up and add unplanned stress and financial burdens to your business. This is pretty much unnecessary, because lawyers have done your kind of work many times before, and they know approximately how long it can take. They can also provide a safeguard by specifying the maximum number of hours is included. Anything above that will be extra, but they anticipate that it shouldn’t take longer. Also, they can specify how many lawyers will work on your project, and what that lawyer’s billing rate will be. But traditional law firms don’t usually take those measures, and that’s where small and mid-sized businesses experience nasty surprises when they get the lawyer’s bill.
Hourly Billing Disincentivizes Using Lawyers When They Are Needed
If lawyers bill by the hour, business people and employees of companies are disincentivized to consult them when they need to. That’s because every time they pick up the phone, they know that the lawyer will bill them, even for small increments of time (one-tenth of an hour, the increment at which most lawyers bill, is every 6 minutes or even a substantial portion thereof, for example, 4 minutes). So you just won’t pick up the phone to the attorney even when it might be a good idea. The alternative would be to charge a monthly retainer that covers up to a certain number of hours. As long as a company is within that, its employees can utilize the lawyer’s services without fear of 6-minute billing. But again, this solution is very seldom used by outside legal counsel.
Hourly Billing is Lousy for Lawyers
It is better for lawyers to be focused on what makes them good: serving clients efficiently and wisely. Hourly billing has nothing to do with that basic task. If they are not focused on the stopwatch every 6 minutes, they can better concentrate and be creative and efficient for their business clients.
Fractional General Counsel In-House Is a Good Solution
The problems with hourly billing are solved by using a fractional general counsel service. Fractional in-house legal counsel solves the problem by working for a low monthly retainer that covers up to 10 or 20 or 30 or however many hours your company needs. Your business can utilize the lawyer’s services naturally, just as they would a full-time general counsel, but without the high cost of a full-time in-house lawyer.
