Value Billing

This article was written by Hance Law Group principal Larry Hance.

 

People going into a divorce typically would like to know how much it will cost. For a great number of people, divorce is the most involved legal process they’ll undergo, and there can be some sticker shock on just how expensive it is.

 

But when a prospective client asks me how much my divorce will cost, the honest answer is, more often than not, “I have no idea.” I can get a sense of what the client wants, what the obstacles might be, and how far apart the client and his or her spouse are from each other on the issues (at least from this client’s perspective). But once a case starts, any number of factors can either complicate the situation and require more billable time, or can bring the couple to a resolution quicker than anyone expected, including who the other party hires as an attorney, how complex the temporary issues turn out to be, and the mental health of the other party.

 

We offer value billing to our clients in appropriate cases as a way to at least provide some idea of how much the divorce will cost. It’s an alternative to hourly billing that only a small percentage of progressive family lawyers offer their clients, and we provide it as an option for clients where possible.

 

As our website points out in its page on value billing, “Recognizing that clients are obviously focused on getting a task completed, and would like for it to be done at a reasonable price in a reasonable amount of time, some lawyers have moved to more “value-based” billing. The lawyer and client reach an agreement that the lawyer will perform a certain task for a specific fee which client will pay. If the agreed upon fee “feels fair” to both sides, then it doesn’t matter what the billable hours would have been. Both parties have received the benefit of the bargain they negotiated, and both knew what they would pay and what would be received.”

 

The concept of value billing hinges on the idea that clients are paying for value, not time. There’s admittedly some risk for both parties, in trying to predict ahead of time how many hours – from lawyers, legal assistants, and any of the specialists we might bring in – it will take to achieve a resolution of the case. It could take less time or more time than we predict, of course, but we factor in what each client is trying to achieve in making a prediction on any one case.

 

One way that we mitigate that risk is to carefully define the scope of what we’ll do, and offer tiered billing based on phases of the case. If a case can be settled through negotiations without going to court, we would bill at one tier, and if the case requires court, it would be billed at a higher tier. In those cases, the client is incentivized to settle before going to court, and if the client does make the decision to go to court, it’s based on understanding that the extra expense is necessary and worth it. (And, rather than being a nebulous amount dependent in part of what the other legal team does, it’s one fixed price.)

 

I find that people are generally more optimistic than they should be when they estimate how much their divorce will cost. They might be hopeful of an expedient and amicable divorce, only to find that it doesn’t go as quickly or easily as they hope for once they’re in it. With value billing, a client comes into the divorce knowing how much it will cost, and that can help a client focus on the best course of action to resolve a case, rather than making decisions based on worrying about what will add to the bill.