Alternative Fee Agreements Gaining Popularity

Many business owners cringe when you mention the word “lawyer.” They know a trip to their attorney’s office is going to result in a bill for services such as photocopies, returned phone calls and research by junior associates. In a challenging economy, it is difficult for businesses to spend large amounts of money on legal services without impacting other aspects of their operation. Corporations are looking for ways to reduce the effect this is having on their bottom line, and one of these methods is the alternative fee agreement.

Law firms have begun to experiment with alternative fee agreements to address some of the concerns being raised by business owners and their in-house counsel. What happens is that businesses and law firms agree to a set price before the legal services are performed, so that the exact cost and needs can be established right away. This could cover a wide range of activities, from complex litigation to simple start-up matters.

Most firms typically charge an hourly rate for their services, and are uncertain how to proceed with a different fee structure. The Association for Corporate Counsel (ACC) has some tips for firms and businesses considering using an alternative fee arrangement for the first time.

The ACC Value Challenge was established to help businesses and law firms connect costs to actual services performed. The program suggests that firms and businesses spend time determining what each business will need, and developing a way for firms to provide these services at an efficient cost. By focusing on needs early in the process, and finding a way to communicate this information clearly may lead to a long-lasting relationship between client and firm.

For business owners, there are many advantages of an alternative fee arrangement. They will be able to accurately determine what their legal needs will cost. Additionally, they will be paying only for the services that are essential to their business, to a firm that has spent time learning how the business operates.

Law firms are billing more and more for work that is performed on a client’s behalf, which can sometimes come as a surprise when it comes time to pay the bill. Business owners and their in-house counsel who are in need of outside assistance from law firms should discuss an alternative fee arrangement with prospective firms before deciding which firm to hire.