They Laughed When We Killed Hourly Billing (They’re Not Laughing Anymore)
How to Build a Large, Influential Law Firm (Part #12)
This series lifts the kimono and exposes the unvarnished details on how we built Sterling Law from scratch to be the largest, most influential family law firm in Wisconsin in less than 3 years.
I hope our story and the lessons help you build your practice or business.
Just before I drove my dream law firm over a cliff in 2016 and wrecked lives, we changed course.
We managed to turn the business around by obsessing on two priorities. One was killing the billable hour.
Slaughtering the Lawyer’s Sacred Cow
Client’s hate paying lawyers by the hour. If I knew a stronger word than hate (“loathe”?), I would use it.
Conversely, lawyers L-O-V-E the billable hour.
Why?
Because hourly billing protects the lawyer. The attorney wins no matter what.
I am a lawyer who retains a lawyer, and I detest the billable hour too.
A few weeks ago I sent a very simple question to my lawyer. I just wanted a quick answer that I thought would take 15 minutes, max.
I got back a long mailed paper letter (old school) with attached research that made my heart sink. Not because of what was in the letter. My chest tightness came because I knew I would get a huge bill.
Sure enough. I puckered up a week later as I opened his bill.
Yep! Groan. He charged us $487.
It’s obnoxious. I definitely did not get the value.
This is another example of why lawyers have terrible reputations. We deserve it. Makes me sad for me and so many great lawyers and caring people who want the public to respect us.
Enough of my story of whoa. Back to the killing the billable hour.
We chose to kill hourly billing because that is what our clients want.
They Laughed and Said It Wouldn’t Work
Every competitor that I know of charges their clients by the hour.
If the case goes longer than expected, no worries. The lawyer charges more. The client pays more.
If the lawyer on the other side wants to stir the pot so she can soak the client for more money, everyone pays more.
When I asked other lawyers about charging fixed fees in family cases, they said it would never work. The objection was always the same: “how can you charge for work when you can’t predict the time it will require?”
Sell Results, Not Hours
That question/objection is the problem. Most lawyers are selling time. They see the world from their point of view, instead of the client’s perspective.
I wanted us to stop selling time and start selling results.
The client comes to the lawyer and wants a result. The client does not come to the lawyer asking to buy a certain amount of hours.
So, why do lawyers insist on selling something the client does not want to buy?
Awkward Question Lawyers Hate
There’s also another thorny question. Lawyers hate it when “regular people” bring it up.
Here’s the awkward question: “If the client pays the lawyer more the longer the case goes, why would the lawyer work hard to end the case?”
Of course, no lawyer admits to “churning” a case so they can make more and bleed the client dry.
I believe that most lawyers don’t do this, despite all the lawyer jokes. In my experience, the majority of lawyers are ethical and caring people. They really are.
Magic Happens when Goals Align
But, amazing results happen when clients and lawyers want the same result.
This is why we converted to a client-centered firm. We sell results, not hours. We give the client what they want to buy.
When a client comes to our firm, they know what their case will cost. They are not giving our lawyers a blank check or an open credit card authorization.
Once we moved to fixed fees instead of hourly, the clouds opened and the waters parted.
Blissful Events Ensued
Clients were happier. We know this because we surveyed them when we billed by the hour and after we moved to fixed fee. They routinely tell me how much they like fixed fees.
Our support team was happier. They were no longer spending hours every week keeping the billing machine going. They were no longer answering calls from angry clients about a surprise bill.
Our lawyers were happier. They were no longer having constant conversations with clients about their bill. And, they could focus 100% of their effort on serving the client and getting a result everyone wanted.
My banker was happier. We were financially healthier as a firm. Under hourly billing, we only collected 87.5% of what we billed. With fixed fee we are paid in advance.
My partner, Tony, was happier. He found it much easier to attract prospective clients when we could talk about the certainty of fixed fees.
I was happier. We now had matched our firm’s interests with our clients’ interests. My lifelong professional tension was gone.
The stars had aligned.
Everyone Happy, Except Ex-Laughing Competitors
Not everyone has been happy, though.
Many competitors have not been happy because we have been taking their “would be” clients.
It still mystifies me. I have attorneys tell me all the time that fixed fees do not work in family law. Then, I point to the fact that we have grown to 14 family law attorneys in a short period of time. I remind them that we are by far the largest family team in the state.
That’s when they give me the blank stare.
I just shrug and agree with them. “I guess fixed fee does not work in family law.”