Word-of-Mouth Key In Setting Rates
California Lawyer

Word-of-Mouth Key In Setting Rates

February 2014

With stiff competition for clients now a given in the legal realm, lawyers are using a variety of methods to set their rates and calculate their bills. But old-fashioned client word of mouth and personal relationships are still key factors.

Altman Weil, a legal-management consulting firm, found that almost all 238 law firms it surveyed with 50 or more attorneys in 2013 offered flat, contingency, and other alternative fee arrangements (AFAs), as well as traditional hourly billing, and 68.5 percent said their clients had requested AFAs.

Some firms review specific types of matters they've handled repeatedly in the past and average what they charged to determine a flat fee (sometimes charging separately for particularly costly elements), says James A. Calloway, coauthor of Winning Alternatives to the Billable Hour. And the online service MatterAnalyzer from TyMetrix lets firms compare their rates against a database of $48 billion in invoices from 2009 to the present (updated twice a year), producing a graph of what similar firms in the area charged for similar work on average, as well as rates both above and below. For instance, for regulatory and compliance work, it shows that partners in Los Angeles charged $618 to $896 an hour at the 100 largest firms, says David Gorman, director of business development.

Still, San Diego ethics lawyer David Cameron Carr suggests that lawyers ask clients what they typically pay. Karen Stambaugh took that tack when she and two partners formed the virtual firm mod4 in Berkeley in 2010; they consulted with colleagues, researched the competition online, and then based their starting rate ($250 an hour) on what their clients - including software developers, home businesses, and artisan food makers - could afford. Says Stambaugh: "We try to be really sensitive about what [clients] can pay because we want to continue to work with them."

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