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The Art of Getting Paid

What is the Appropriate Hourly Rate for Your Market?

When setting an hourly rate, consider these four factors.

By Frederick Hertz  |  November 25, 2015

The process of setting your hourly rate should never be taken lightly. Many implications flow from this decision, both financial and otherwise. There are deep underlying issues of client perception, customer satisfaction, your reputation with your colleagues, and your own sense of the value of your time. And, of course, your hourly rate has everything to do with how much you earn each year. In general, there are four core factors that shape this decision.

Your Financial Goals

If you are hoping to make a decent income each year, you should start the process by assembling a budget that reflects your likely amount of hourly work and your projected expenses, so that you can estimate what you’ll need to charge to reach your financial goals.

Make sure you take into account that not every invoice will be paid in full, and that you might be taking on some reduced-fee or pro bono clients, and that you certainly can’t guarantee how much work you will have each year. You also need to take note of how much time you will spend managing your office. It’s impossible to be precise, but creating a budget along these lines is the best place to start in figuring out what your minimum hourly rate should be.

Blog Art of Getting Paid: Set Billing Rate/Deserve Pay

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Your Client’s Expectations

You’ll never make a dime if you don’t get hired by a client, so you always need to be mindful of how your hourly rate is going to look to your likely clients. This depends to a great degree on what range of fees your competitors charge in the particular town and sub-market you are trying to develop. Gathering this sort of information is a bit tricky, but you should find a way to ask around to learn what others are charging in your location and specialty, for your level of expertise.

If you are charging significantly less or more than the range that exists in your territory, clients are going to be suspicious. You also want to have a good sense of what elements go into the specific rates. For example, how the age and experience of the lawyer affect the rates, and whether the size of your office should be taken into account.

The Value of Your Services

Your business won’t succeed if you don’t take into account what you are doing for your clients and how they are going to value your services. If your customer base includes low-income clients seeking a divorce, you can’t expect them to pay more than what is at stake in the dispute.  Conversely, if you are representing high-end employers or owners of valuable real estate, they will understand that retaining effective legal counsel can save them significant resources.

I try to get a clear grasp of what my clients are earning and spending in their own lives and work, and in general terms what they are worth, so I can be sure that my financial goals and expectations are in sync with theirs.

How the Hourly Rate Affects Total Fees

It always amazes me to hear how uninformed clients can be about the relationship between the hourly rate and total fees. For example, I’ve been drafting co-ownership agreements for decades, and I formerly litigated co-ownership disputes. Over and over again I’ve been amazed at how slowly some of my colleagues work, or perhaps, how many hours they think they can bill for a relatively simple task. I’m also surprised at the billing practices of many of my colleagues, who think nothing of billing a quarter-hour to read a two-line email that doesn’t require them to do anything but take note of the information.

It’s important that you take the time to explain to your clients how your hourly rate relates to the speed with which you work, and how it translates into the overall fees.  Granted, sitting in court waiting for the hearing to start doesn’t go any faster for lawyers with twenty years’ experience, but for much of what we do, a higher hourly rate is meant to reflect the greater efficiency of ones’ work.

Frederick Hertz, an attorney and mediator based in Oakland, has managed his practice for more than 25 years.

The art of getting paid

"The Art of Getting Paid" is a one-year series of blog posts that provides a comprehensive training to lawyers on how to get paid.

We welcome your questions and comments – and of course, your suggestions on how to master this insufficiently respected aspect of practicing law.

How to Talk About Total Fees With Your Client Before the Work Begins

3 Examples of Retainer Letters That Can Help Document Fee Estimates

View the full series »

Reader Comments

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