Chinn & Associates has implemented unique, customer friendly pricing for our services. The basic feature of our pricing is that we work carefully with our clients to arrive at a customized price for specific services. Before the representation begins, our clients know the amount they will owe and the maximum amount of resources they will have to dedicate to the matter. This method of pricing is relatively unique to divorce practice and is designed to foster extreme customer satisfaction.
Most lawyers charge for their services by the hour. What this typically means is that the lawyers keep track of the time they spend on the case and then send the client a bill for the service, based upon the time spent. Lawyers keep track of their time in intervals, such as quarter hour or tenth of an hour. When they bill the client, they typically put the date the work was completed, a description of the work and a statement of the time. A bill might look like this:
|6/9/06||Telephone conference with client||0.25|
|6/10/06||Receive and review correspondence from opposing counsel and telephone call with client||0.50|
|6/20/06||Receive and review interrogatories, correspondence to client;|
prepare Motion to compel
|Total Time||2.25||X $300 per hour=$675|
Often, attorneys request an initial “retainer” from the client. This “retainer” is placed in a client funds account and the attorneys charge for their time against the retainer until it is exhausted. Once the retainer is exhausted, clients might be asked to replenish the retainer or pay the remaining monthly bills from the attorney upon receipt. On occasion, clients misunderstand that the “retainer” is not the total cost of the case, but only an initial deposit. While Chinn & Associates has employed this method in the past, we believe a better method of pricing exists in the form of what we call “Value Pricing.”
The Change to Value Pricing
Chinn & Associates made the decision to change because charging by the hour focuses the lawyers thoughts on time and procedure instead of mission and results. After nearly thirty years of experience with clients with legal problems, we believe that clients care about how they are served and about the results that are being achieved rather than what amount of time was spent. As a matter of fact, many people, both in and outside of the legal profession, believe that the billable hour method creates incentives for delay, unnecessary procedure, and increased expense. Chinn & Associates eschews such a method and believes the value pricing method is the method of the future from a client satisfaction standpoint. The positive attributes of the value pricing method include:
- Customized Price. Chinn & Associates works with each client to carefully determine the options available, and the costs and benefits of each course, and works with the client to develop a clear mission. Once the mission is developed, the price is developed in careful consulation with the client, to make sure the price fits the client’s mission, the value to the client, and the resources necessary to complete the project successfully.
- Certainty. Chinn & Associates will customize a price for specific work which specifically lists the price for the work.
- Clients are Not Misled. Our experience has proven that neither clients nor attorneys fully grasp what the final cost of a case might be when the hourly billing method is used. Thus, even though an attorney might warn a client that the cost is unpredictable, the client is mislead into thinking the cost is manageable because the initial retainer is often low compared to the final cost of the case. For example, attorneys charging under the hourly billing method might ask for a retainer of $3,500 but the total cost of the case when it is finished could be more than ten times that amount. Each hourly-based bill the client receives can become somewhat of a shock or a surprise. With value pricing the charges to the client are clear. This gives clients the opportunity to better assess–at the outset–if the matter is worth the resources that will have to be applied.
- Goal Orientation. Prices are customized with results in mind, not time and procedures. These prices, along with the “caps” create strong incentive to the Chinn & Associates team to act with a clear mission in mind and to get results expeditiously and efficiently.
- The Cap. Chinn & Associates places a cap on the total amount of charges under the contract. The client will never receive a bill for services which is unexpected or beyond the amount set forth in the contract.
The American Bar Association and Other Leaders Support “Value Pricing”
Work on this topic began with the ABA Law Practice Management Section Task Force on Alternative Billing Methods in 1989. This Task Force published Beyond the Billable Hour: An Anthology of Alternative Billing Methods. In 2002, the ABA Commission on Billable Hours published its report. The report contained a Preface by ABA President Robert E. Hirshon which discussed the many reasons for abandoning the billable hour. In the first sentence of his Preface, he opines that “many of the legal professions contemporary woes intersect at the billable hour.” He writes that the billable hour is responsible for a lack of balance in lawyers’ lives, negative impacts on lawyers’ families, loss of professional mentoring, decrease in lawyer service, less collegiality and a loss of focus on efficiency. No less an authority than The Honorable Stephen G. Breyer, Associate Justice, Supreme Court of the United States, weighed in on the side of dumping the billable hour, writing in the Foreword of the report, in part: “The villain of the piece is what some call the ‘Treadmill’–continuous push to increase billable hours…The Committee’s technical task, then, …is difficult. Yet I believe it is a challenge that cannot be declined, lest we abandon the very values that led many of us to choose this honorable profession. ” There have been three important ABA publications on alternative billing: Beyond the Billable Hour: An Anthology of Alternative Billing Methods, Winning Alternatives to the Billable Hour, and Billing Innovations: New Win-Win Ways to End Hourly Billing. In Winning Alternatives to the Billable Hour, ABA President Hirshon writes, “The billable hour, such as it is, encourages too many of the wrong principles and suppresses too many of the right ones.” Foreword, viii. In Billing Innovations, author Richard Reed minces no words about the demise of the billable hour: “[I]t is probable that straight hourly billing (billing by hours spent without limit and without regard for the benefit conferred) will virtually disappear in the years ahead….The time has come to say goodbye to time as the sole criterion for measuring the value of legal services.” Lately, a new force has entered the picture, CPA and author, Ron Baker who has authored several books on the subject, including, the following: Baker, Ronald J., Pricing on Purpose: Creating and Capturing Value. New Jersey: John Wiley & Sons, Inc., 2006. Baker, Ronald J., Professional’s Guide to Value Pricing. 5th ed. New York: Aspen Publishers, 2004. Baker, Ronald J. and Paul Dunn, The Firm of the Future: A Guide for Accountants, Lawyers and Other Professional Services. Wiley, 2006 In his first work, Value Pricing, Baker traces the history of hourly billing to the 1940’s when large Wall Street firms adopted time sheets. Baker argues emphatically for the demise of the billable hour and presents a lengthy “how to guide” to practitioners on how to convert from hourly billing to what he calls “Value Pricing.” Baker argues that customers do not buy efforts; they buy results. Value Pricing, at 82.