According to the Mad Clientist (BTI Consulting), this is the formula to memorize for the next normal: Increased Demand > Legal Budgets = Fixed Fees. At ElevateNext, we are quite familiar with this formula. We know from experience that one crucial ingredient that will help clients get out of the "less legal budget" pickle they are in is having total trust in their firms. From a billing perspective, that trust can be best delivered by offering and sticking to a fixed fee arrangement.
Patrick Lamb and I brought AFAs to the market in 2008, through our firm at the time, Valorem Law Group. This was just before that economic crisis, which is looking eerily similar to this economic crisis. Like today, traditional firms offered to provide steep discounted hourly fees to help clients who needed to drastically slash their spend. At first blush, this looked appealing, but clients soon learned that just because a rate is discounted does not mean that the total hours spent will be kept in check. The only true way to secure budget certainty and eliminate surprises is to use a fixed fee. Our favorite is a phased fixed fee with a discretionary bonus–at ElevateNext we call it a "Delight Bonus". We only achieve it if the client is utterly delighted (a core value of Elevate and ElevateNext) with our service.
If you are facing a decreased legal budget, but no commensurate decrease in legal matters, part of the next normal has to be to embrace alternative fees, and make sure your firms are doing so also. After that, you can start focusing on other things needed to thrive in the next normal: using law companies to lower costs and free up in-house time, flexible resourcing, early case assessment/settlement programs, AI/technology and more.
Clients are looking in 3 places to reallocate and manage their spending: Settlements Insourcing Alternative fees Alternative Fees The savings and certainty AFAs bring are just too attractive to pass up. Clients are more comfortable than ever with AFAs – and lean towards the law firms and partners who speak fluent AFA. As you approach your client (because it is more powerful when you bring it up), here are your clients preferences: 64% of clients say they prefer a fixed fee, including a fixed fee for phase of matter 14% of clients say they prefer capped fees – which is more of a budget control tool