Lawyers: How $75 Costs $25,000

Written by Mike Moore

Aug 26, 2013

legal billingThere is nothing quite like receiving a bill from a lawyer for less than an hour of billable work. Never has a lawyer successfully communicated so many messages by using so few words.

To clarify a bit, I’m not referring to a lawyer passing me a bill from a third-party court reporter, or for reimbursement for an out-of-pocket expense incurred on my behalf. I mean a straight up bill for legal services rendered. A bill that looks something like this:

Telecon w/Client; follow-up email.” 0.25 $75.00
TOTAL FOR SERVICES RENDERED: $75.00

From my perspective, that of a consumer of legal services, here’s a few things this bill accomplishes:

First, it earns my lawyer a cool $75.00. Gratz.

It also manages to establish the point that every time we interact, or that any time you interact with my matter – no matter how significant the interaction – the meter is running at full speed. And it doesn’t exactly require Dr. Phil to predict the psychological impact that type of behavior is likely to cause. Nothing says “please stop calling me” quite like receiving a peanut-sized bill for the chat. A quick call for some advice, for an opinion, or an insight causes an almost audible ringing of an invisible cash register.

So you might be thinking: wait a minute, that “insight” is my business. The time it takes me to deliver it: that’s my inventory, mixed in with years of education and experience. That’s precisely what the client should be paying me for. And yes, you’re right – sort of.

In my own experience as a consumer of legal services, I’ve come to realize several things. First, one of the things I truly appreciate – and certainly one of the things I miss most from practicing law – is the ability to bounce a quick idea off a respected colleague. Not just someone smart, but someone smart who can appreciate the subtle legal nuances and implications of a particular fact pattern. Better yet – someone who knows an answer to a discrete legal question right off the top of their head that would otherwise take me hours to research on my own. The best lawyers I’ve worked with are happy to take those kind of calls “off the meter”, in fact they encourage it. They play what some call “the long game”.

They know: (1) my modus operandi is not a dude looking for a consistent stream of free legal work – I don’t call everyday, I don’t try to invite them to dinner and turn the dinner into a game of legal Jeopardy!; and (2) that when I need help on a major project, it’s very likely that they are the lawyer I’ll call. And perhaps an even bigger understanding: if there is a potential project brewing that could require legal services, there’s a good chance I’ll call to ask about it – thereby creating an opportunity for them to identify (and even recommend and define) the actual work that ought be done – rather than having me independently cut it off at the knees by never surfacing it at all. Gosh only knows how much actual great, interesting legal work exists that never sees the light of day solely because of short-sighted billing practices.

After over 15+ years of working closely with entrepreneurs, many who have become good friends, I can say that the biggest complaint they have about lawyers is the “nickel and diming.” It’s not the billable hour system per se, though that’s clearly not popular, but rather when the billable hour system is applied in a rigid, mechanical way.

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These entrepreneurs, who can be machines for generating interesting legal work, usually don’t complain much about rates (they are often themselves intelligent, educated, and understand that professional services justifiably command a reasonable rate), they don’t gripe much about work quality. Instead, to a person, each has had many good things to say about their own lawyer’s intellect, strategic thinking capacity and advice. However, they admit that they clearly have had situations in which they haven’t involved their lawyer, and otherwise would’ve, but for fear of the “talk fast – you’re on the clock” mentality. Today, when competition for quality legal services is extreme, and alternatives – regardless of how prudent they are – are plenty, there is still a huge amount of quality legal work available to lawyers who avoid nickel/dime billing and instead “invest” in relationship building.

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In almost any business it’s usually easier, and more cost-effective, to get more business from existing clients than it is to try and get new clients to walk in the door. It can be the same for legal work. The lawyer who is looking to generate incremental business is the lawyer who encourages clients to call, and who reduces the points of friction in doing so. And that kind of lawyer? You can be certain her name travels fast in those entrepreneurial circles I mentioned.

When I’m thinking about the specific $25,000 legal project I have to outsource, or perhaps more to the point, thinking about something that might evolve into a $25,000 legal project, who is going to get the first call? We know who isn’t.

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