Around 3 years ago now I made the decision that it was time to do away with time based billing systems in my law firm. Fast forward 3 years and we have made the shift, but not without many learnings along the way.
The professions of Law and Accounting are amongst the slowest of the professions to change. Despite much talk of innovation and disruption only a handful of firms have made the shift to billing structures that are anything other than the traditional ‘time for money’ model.
In order for legal and accounting practices to stay ahead of these changing times, I am firmly of the view that we need to move away from the outdated ‘time based billing’ models that our professions have survived on for many generations. Time based billing structures sadly reward inefficiencies- the slower a piece of work is done the higher a firm may be able to charge. If we step outside of Law and Accounting and consider the many industries of business, very few connect their ‘price’ to the time it takes to get something done.
Why I decided to throw away the time sheets
There were two primary drivers in my decision to move away from time based billing-
The first, my clients. I am a family lawyer working mostly with individuals during divorce and separation. At the heart of my practice style are close and meaningful relationships with the people I am assisting. To build these relationships takes time and in particular it takes up time that in a traditional billing model might be considered ‘unbillable time’. Similarly, from a client perspective, time spent with a professional discussing their fears, worries and concerns outside of the legal realm of issues might also seem a ‘waste of money’.
The second, me. Time based billing models reward inefficiencies. The focus is on the ‘input’ (the time taken) rather than the ‘output’ (the ultimate result). Further, the mere act of recording your day in 6 minute increments is both time consuming and something that, simply put, made me unhappy. After connecting with many friends who run innovative online businesses in marketing, web development, e-products and courses I started to see that their pricing or billing structures had absolutely nothing to do with the time it took them to produce the outcome. I knew I needed to change how we worked for my own happiness and the future of my business so I started looking for different ways of doing things.
The decision to lose the time sheets and move my firm to fixed and value pricing models was a long thought about but quickly implemented decision. 3 years down the track, I can share with you my 4 biggest learnings, in the hope you might spare yourself some of the struggles I experienced.
1. If you make the shift, stop time recording now!
When I first announced at Brisbane Family Law Centre that we would from that day forward only be dealing in fixed price quotes on all matters, I made one fatal error- we kept entering our time. Part of this decision was habit and part of it was that at the time I was not certain what I could and couldn’t get rid of while still complying with the various rules we solicitors are required to comply with. As such, I soon found us facing a significant challenge in my new process
By recording time we were still focusing on the ‘inputs’ and whilst I was talking to my team about the need to be efficient and to focus on the outcome, I was still tying them to time sheets and those ‘inputs’. We had one foot in each camp and as a result neither system worked well.
A short while later (after checking the various rules!) we threw away the time sheets and suddenly fixed pricing took hold in our office with confidence. It no longer became about how long it took to achieve something but instead the focus became entirely about what our clients were trying to achieve. Our team worked quicker, collaboration increased and outcomes were being reached in a much more timely manner.
2. One price doesn’t fit all
Early in our fixed pricing shift we undertook a ‘stocktake’ of financial data- looking at the cost to date of various different types of matters in our firm. Whether this was right or wrong, I will never know but it gave us a sense of how much things had cost in the past and a way of starting to price when this was foreign to us.
Initially we had a ‘one price fits all thought process’ which just didn’t work. The type of work might be the same between matters but the variables such as urgency, level of understanding, client efficiency to name a few vary significantly between each file and so now we price each matter and each client differently- on their own merits taking into account their needs, their budget and what really matters to them.
3. It’s all about the scope!
If you want to engage in fixed and value pricing, scoping will become your new favourite thing to do! A scope will be a detailed plan of all the tasks or steps you will (or won’t) be doing to get to achieve the client’s goals. Our early mistakes in value pricing led us to having basic scopes, that were not specific enough nor time limited. Now we find smaller stage scopes, that are highly detailed and time limited work best for us and our clients.
You will find yourself ‘re-scoping’ with regularity if you move to this model and be warned, it will take up a lot of your time before a client has engaged your firm. However, once the client does engage, you have a detailed and thorough work plan that can then be implemented with each.
And be ready to scope, re-scope and re-scope all the time! We learned the hard way that the key is identifying the moment a matter is moving away from the original scope, to take the time to ‘rescope’ before moving on, which is easier said than done during a busy work day.
4. It will make your business so much better!
What does ‘so much better’ mean? Well for me it has meant-
- No debtors
- No fee arguments after work is complete
- Cash flow predictability
- A culture of innovation, collaboration and efficiency
- And a happier boss and team.
Having no debtors in a legal practice is often a pipe dream but we have achieved it thanks to this model. That has significantly assisted when it comes to cash flow predictions and management in the firm. We can also manage and monitor work flow amongst team members with much more certainty as the ‘scoping’ system enables you to establish a project management plan for each file, predicting the time frames and steps of each stage.
And our team are happier. Not having to enter time, being able to focus on building strong client relationships and keeping our attention on the overall client goals has led to a ‘happier’ workplace where efficiencies, collaboration and outcomes are valued above anything else.
The shift from time based to value pricing has taken 3 solid years of hard work, mistakes and many learnings but I would not look back. As a boutique practice we might be more nimble than some and whilst we had never had a culture of strict time billing or high billable targets, the shift was still not easy for us all to make. Like any change in a team, changing the way a whole business records and values the work that it does will take mindful action. I am sure we still have many learnings to make but in the meantime and if you haven’t already taken the leap, I would encourage you to lose the time sheets and make the shift as you won’t look back once you have.
Would you like to learn more? Get access to our sample documents, workshops and webinars
Fixed and Value Pricing – a topic I am forever being asked about by my lawyer friends!
A few years ago my firm made the switch to fixed fee and value pricing and I will say now, it was no easy shift to make! We made many mistakes, learned the hard way but even still, I would not go back!
And so this year I have put together a few resources to help you implement fixed pricing in your firm too from webinars to workshops and even sample document packs including cost agreements, scopes and tax invoices. You can learn more about these resources here.
If you have considered throwing away those time sheets or just want to better understand how fixed and value pricing might work in your firm then these resources are for you! (Hopefully I can save you from making the same silly mistakes we made in the early stages!!)
This article is an excerpt of a workshop produced for members of ‘The Club’ an online mastermind for entrepreneurial lawyers worldwide. If you are a lawyer, running a practice and looking to make the best of your life in and outside of law, you can learn more about ‘The Club’ here.
Clarissa Rayward is a Divorce Lawyer and the Owner of Brisbane Family Law Centre. Over the past 14 years, Clarissa has worked with over 2000 families during separation and divorce. She specialises in assisting her clients to experience a dignified divorce- staying away from the Court process and finding sustainable agreements for the future. This past year Clarissa has begun to tackle the challenging issue of unhappiness in the legal profession through her writing and weekly Podcast ‘Happy Lawyer Happy Life’ where once a week she interviews lawyers who have found a way to maintain a successful career in the law while not giving up their life outside of their career.
In January 2017 Clarissa published her second book, ‘Happy Lawyer Happy Life- How to the be Happy in Law and Life’ and launched the first ‘Happy Lawyer Happy Life’ online course, helping lawyers nationwide to better understand how they can drive happiness in their careers.
You can order a copy of Clarissa’s Book or find out more about her Online Course and Podcast below.