Boost Your Income with Value Billing
Attorneys work with three basic billing structures: hourly rates, flat fees and contingency billing. CosmoLex legal billing software for attorneys can handle all three. However there is a fourth type of billing that is common among various consultants and contractors: value billing.
Value billing on the surface seems similar to a flat fee: the attorney charges a predetermined rate to handle a matter. However, flat fees are calculated differently than value billing. A flat fee is simply the total of the billable hours and expenses you would expect to incur in a normal case. Value billing is much more.
To understand the concept we look at a story about Pablo Picasso. There are variations on the tale but they follow the same theme. A woman approaches Picasso in a café or park and offers to pay him to draw her portrait. He agrees and sketches a beautiful work in about a minute. The woman loves it and then Picasso says the fee is $10,000. The woman is outraged he would charge so much for a minute of his time. His reply is, “You are not paying for a minute, but for the lifetime of experience that let me produce that portrait in a minute.”
There are a host of legal activities such as bankruptcy or probate paperwork that take only a few minutes of the attorney’s time and yet save the clients thousands or even millions of dollars. If you enter that time in your legal billing system then you will get a final invoice that charges a pittance. Is that fair? It makes more sense that your fee be determined by the value of the service to the client. This is the core of value billing.
Rather than focusing on what the matter will cost you in terms of time and expense, you focus on its value to the client. In a similar vein, the fair price for a manufactured item isn’t about the cost of materials, it’s about the perceived worth of the item. In the words of Publilius Syrus, “Everything is worth what its purchaser will pay for it.”
Value billing is tricky for a new attorney who may not have a good feel for what people will pay, but an experienced lawyer will have the knowhow and intuition to set a good price. And frankly if your client’s don’t squawk at the price, then you probably aren’t charging enough.
No matter what billing model works best for your practice, CosmoLex billing software for lawyers can handle it. Try it now to see how simple your billing can become.