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  • Northeast Wisconsin
  • April 2018
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Death of the billable hour

Over the course of history, law firms have made money by selling the time of their employees. It’s called billable hours. Most of you are aware of how they work. The biggest problem with billable hours? They promote inefficiency!

Let’s look at an example:

Joe Smith comes into XYZ Law Firm and tells them he wants a trust to hold his family cottage. The attorney takes down a bunch of information and gives Joe an estimate based on the projected billable hours. Let’s say the attorney and support people work together well and finish the project ahead of schedule. Joe is happy because he got exactly what he wanted and it even cost a little less than what they originally told him.

Steve Wilson comes into XYZ Law Firm the very next week with the same request: he wants a trust to hold his family cottage. Herein lies the problem, though: Joe and Steve’s requests were exactly the same, but will be treated like they were completely unique. A firm that needs to bill hours will start Steve’s trust from scratch, even though they have a template (Joe’s) that could be used to do the project faster. Under the billable hours system, there is no incentive to be efficient! The whole concept is incredibly ambiguous and outdated. Nobody is going to challenge an attorney that says a trust is going to take 10 hours to draft.

I will concede this: There are absolutely times when a case is so unique that there is no avoiding a billable hour system. But for most of you, this whole system is like going online to “Nike ID” (customize) a pair of sneakers online, but instead of creating something totally unique/different, you decide to create the same colorway that you could just buy off the shelves for 40 percent less. Nobody does that! But we’ve done it in “lawyer world” for a long time because the terminology is confusing and we don’t know any better.

The end result: legal services cost more than they need to.

Nobody tries to find better ways of doing things and people generally work “just hard enough.” The thought of that drives me insane!

An alternative:

Let me apologize in advance. Once you read the alternative you’re going to be mad at me for even trying to explain the billable hour system.

It’s so simple. So obvious. I almost don’t even want to say it…

The answer is: products.

Instead of quoting billable time to a client, quote a flat fee for the creation of the product. Trust = $2,000. The more efficient the firm is in delivering that trust, the more profitable they become on the project.

It really isn’t groundbreaking. In fact, it’s how 99 percent of the world works.

You don’t go to Menards to buy a hammer and get a quote on how long they think it will take to make one. They are already made for you, you just have to compare prices and buy what you want.

Now, it will never get all the way there. But, as time marches on, legal services will start to look more and more like legal “products.”

I would strongly encourage you to seek out a law firm that is ahead of the trend. One that offers “flat rate” pricing options. It’s far more consumer-friendly.

As for you, Mr. Billable Hour, you sir, have officially been put on notice: we’re coming for you.

Kelton Dopp

Kelton Dopp started his career as a Financial Advisor, prior to joining Epiphany Law’s team as a Project Specialist in 2017. One of his greatest passions in life is finding ways to make the complex simple. Epiphany Law, LLC. Is located at 4211 North Lightning Drive, Appleton. For more information, email [email protected] or call 920-996-0000.

 

Website: epiphanylaw.com

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