How to Talk About Total Fees With Your Client Before the Work Begins
Tips on explaining to clients how your hourly fee translates into total fees.
While most clients will pay the greatest attention, especially at first, to the hourly rate you quote them, over time they will certainly pay equal attention to the total bill you are asking them to pay. Whenever I discuss fees with clients, which is something I always do at the outset, I try to explain how the hourly fee is likely to translate into total fees. If I’m hired to draft a premarital agreement, I will walk them through the process, giving them estimates of the likely amount of time each meeting and drafting task will take. I then multiply the range of hours by the hourly rate I’ve quoted, so they can see what the likely fees will be. For less sophisticated clients, you should do this with pencil and paper, in front of them, so they can see how the hours multiply into total fees.
Create a Road Map for Total Fees
Part of this task is educational, to help your clients understand how the legal process works with regard to the specific tasks you are taking on. Even when there is great uncertainty, as is typically the case for litigation, you can teach your clients a lot about the most likely trajectory. My approach is to break down the process into three or four components, such as pleadings, fact gathering and discovery, negotiation, and trial. For each component I present a range of likely number of hours—which can be a very wide range—and then I explain how litigation is like a cafeteria line, where you never know in advance when you are going to be “full” (i.e. the case settles), at which time you can get out of line and pay your bill.
Pay Attention to Your Client
The other benefit of doing this sort of explanation in an interactive manner is psychological: You are learning how your clients make financial decisions, and engaging them as an active member of your team. They need to understand how the positions they take in litigation might result in higher or lower fees, and how their own tendencies (i.e. being quick or slow to make decisions, or their level of trust in your advice) will have a direct connection to the amount of total fees that will be incurred.
Reduce the Element of Surprise
Providing an overall scope of likely fees is also the best way to avoid conflicts over fees in the future. If you and your client both understand how much time something is likely to take and how much you will be billing for your time, you will dramatically reduce the element of surprise and resentment when it comes to getting paid. There always is a risk of discomfort and regret, especially when the outcomes aren’t as positive as was hoped for. But if you can explain to your clients what they are hiring you to do and what it is likely to cost, you will have minimized the factor of surprise. Indeed, I often refer back to that first discussion during the course of the representation, especially if the amount of hours has shifted dramatically because of unanticipated events that have occurred.
Update Your Estimate of Total Fees
Talking about fees in this concrete way also sets the tone for how you deal with unanticipated changes in the budget and fee estimate. I always make notes of the range of estimates I have provided to my clients, and in many instances I include them in my retainer letter. Then, as the matter unfolds, I continuously update my estimate. If an entirely new set of conflicts emerge that change the litigation strategy, I tell my clients how that is likely to increase the fees, in detail. The same goes with negotiating a complex agreement: If my clients decide they want to have multiple meetings with all parties before anything is finalized, I increase the projected budget accordingly. I also monitor the patterns of how we work on a continuous basis, so I can point out how the repeated conversations and emails and changes in position have exceeded my earlier fee estimate. Remember, you are the one who is keeping track of your time on each matter. Your clients probably won’t do that until they receive the bill.
Frederick Hertz, an attorney and mediator based in Oakland, has managed his practice for more than 25 years.
"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.