1. How Does a Fixed Pricing Work?
2. General Retainer vs Special Retainer
3. How Can You Determine the Price of a Flat Fee Legal Service?
4. How Can You Determine the Price of a Flat Fee Legal Service?

When determining fixed price legal services, you'll need to consider various options. You may charge your clients different pricing options, such as fixed fees, hourly billing, alternative fee structures, and contingency fees. A flat fee arrangement or fixed pricing is a set amount that the client pays at the beginning that covers all work that needs to be done. This model is often used in misdemeanor and criminal cases.

How Does a Fixed Pricing Work?

Because of the time-insensitive and intricate nature of dealing with criminal issues, lengthy pleadings, unforeseen motions, and numerous court appearances, some criminal cases won't be appropriate for hourly rates. The use of contingency fees is prohibited by ABA Model Rule 1.5(d)(2).

The same model is helpful for matters that are form-intensive where the type of work is usually predictable. This includes the following:

  • Will drafting
  • Regular immigration matters
  • Uncontested divorce
  • Personal bankruptcy

These cases are made more complicated due to the circumstances of the client, so the correct questions need to be asked before taking a case for a flat fee.

General Retainer vs Special Retainer

It's easy to get confused on retainers, as there are a variety of different ones. General retainers get paid to attorneys so they're ready for services to be performed. Special retainers often have a type of security from which payment gets deducted when it's earned or an advanced fee that's for any work in the future that is performed. The retainer for the advanced fee is comparable to the concept of the flat fee. The retainer amount needs to show a specific number of billable hours for an hourly rate.

Various kinds of retainers are used in different types of cases. However, the arrangement's parameters should always be thoroughly defined. You should consider several questions, such as if the goal of the retainer is to secure the availability of the attorney, what will the payment arrangement be for work that's performed? You'll also want to know what the parties consider completion of the work if the retainer comes from security where earned fees are taken out. It also needs to be stated what happens when that retainer is exhausted.

If the retainer will be replenished, what will that amount be? Do benchmarks need to be reached by the attorney before the retainer can be replenished? Also, what is covered if the retainer is payment for an advance fee?

The cost of service or for a product needs to be somewhat loosely tied to what the value is that the customer receives. If the difference between the value and cost is too great, customers will not pay and you will go out of business. Clients don't want to pay for your time, and it's irrelevant to the client how much time you spend performing the services. However, they won't mind paying for a value they get from working with you.

This doesn't mean that you need to lower your prices, however. You might even get more out of charging a flat fee versus charging per hour in some cases. Finding a starting point for deciding the flat fee price for legal services shouldn't be based on the time it takes to perform the service. Instead, this needs to be based on what the value is that your client gets.

The most difficult part of this pricing approach is figuring out how to measure the value a client gets from their legal services. It's more of an art than it is a science, and there is no magic formula to use where you plug in numbers and calculate it. You need to be more creative by looking at how clients will benefit from having a relationship with you. After that, you can try your hardest to put a dollar amount on the benefits.

Clients can benefit in value from legal services by having an increased income or wealth. They can also benefit if there's a financial gain that's direct. This most commonly happens with services that are contingency based instead of with a flat fee.

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