Long before ‘billable hour" accounting became the norm in law firms, lawyers would price projects based upon what was fair to both the client and the lawyer.  That is not to say that billings based on time is unfair, only that it can be unpredictable.  Billable hour accounting dictates accountability which is and will remain a reality for all law firms now and into the foreseeable future. However, trying times demand flexibility from both the client and the lawyer. Clients, both entrepreneurial and institutional, desire certainty from their vendors to permit accurate project budgeting. Lawyers and law firms understand that to be and remain relavent to their clients and potential clients they must remain or become a client’s "business partner, " add value and be perceived by their clients as a "well worth the expense."

Litigation matters have been priced by lawyers using contingency and success fees for many years. Rarely, do we see transactional matters priced using such tools. However, alternative fee arrangements such as tiered fixed fees, capped fees and blended rate fees all based upon size and complexity of transactions are being offered by law firms more frequently.  Law firms desire to build and maintain client loyalty. An alternative fee arrangement can be one tool in the law firm tool box to generate client loyalty and deliver legal services in a cost efficient manner; but, alternative fee arrangements are not appropriate for every client and every situation.

Successful alternative fee arrangements: (i) dictate that the client and the lawyer share intimate information about the proposed assignment, goals of each and their cost structures; (ii) should represent the client’s valuation of the matter compared to the reasonable fee to the lawyer structured to take advantage of the law firm’s resources and efficiencies; and (iii) should not be static arrangements.  In other words, be structured to change as the assignments and relationship changes.  

Look for the business partner who is the "value proposition" which will enable the achievement of the goals of the business plan and with a "long term" perspective on relationships.
 

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Brad Kaplan

Brad assists Owners, Operators and Receivers of Hotel, Office and Industrial properties with their Real Estate, Finance, Leasing, Construction and Organizational challenges; specifically, negotiating and drafting hospitality, purchase, sale, financing, leasing, construction, franchise and management agreements. He has in the past and presently…

Brad assists Owners, Operators and Receivers of Hotel, Office and Industrial properties with their Real Estate, Finance, Leasing, Construction and Organizational challenges; specifically, negotiating and drafting hospitality, purchase, sale, financing, leasing, construction, franchise and management agreements. He has in the past and presently serves as general counsel and national real estate counsel to several domestic and internationally based public and privately held companies. Brad represents foreign businesses doing business in the United States and U.S. businesses doing business abroad; and is a former Chairman of World Services Group (www.worldservicesgroup.com) an international consortium of legal and other professionals. Brad has achieved the highest rating, AV Preeminent®, from Martindale-Hubbell®. He is an active member of the Illinois Bar and maintains an office in both the firm’s Cincinnati and Chicago offices. Brad is the editor of the Real Estate Advisor Law blog, a tool that highlights articles and observations of Ulmer & Berne attorneys on various trends and opportunities affecting the commercial real estate and construction industry, and is a frequent speaker on internet and social media issues.