Even within the relatively short life span of Linkilaw, we’ve seen a significant shift in consumer expectations with commercial legal services and in particular, how to control costs.
The traditional timed billing model worked well for lawyers, able to shift commercial risk onto the shoulders of clients, who were then at risk of paying for their lawyers inefficiencies.
But with the legal market opening up and new entrants challenging traditional “rules” and expectations, competition has come to the legal market, both in terms of cost but also the revenue model.
Fixed fees have been a hot topic for some time with one off purchases but, it’s increasingly the case that established businesses with a regular need for and understanding of legal services are looking to create greater certainty with their legal spend by negotiating retained fee agreements with law firms.
Turn Off That Taxi Meter
One of the major points of resistance for business owners to get in touch with lawyers is the concern that every touchpoint with a law firm will result in an invoice.
Far better to find a law firm who are willing and capable enough to provide a retainer arrangement that includes quick and easy access to advice and guidance. What is included within that retainer is open to negotiation and based on what both parties think is realistic within the likely scope of future work. It can provide something simple like basic set of documents and/or access to basic telephone advice through to a pre-set monthly agreement on hours, costs.
The smart agreements enable both parties to then reflect on what actually took place and adjust the monthly payments accordingly – in both directions.
From the lawyers perspective, clients pay in advance of a service being provided, enabling the firm to have forward visibility on income. It should enable them to provide a discounted rate on the basis of receiving a relatively stable revenue source.
From the business owners perspective, they have direct access to great advice without fear of running up hefty and uncertain fees. They might also benefit from discounted legal fees on the basis that law firms are often willing to provide a reduction on the basis of being paid up front.
We’ve seen examples where 10%-20% of legal costs has been saved by transforming ad-hoc instructions, into a retained fee agreement.
From our direct experience – a number of mutually beneficial returns emanate from this type of agreement;
1. There is a possibility of more work from the same business. One firm having been retained by an entrepreneur decided to send in additional work, over & above the retained fee structure;
2. It’s highly likely that a business will send most (if not all) of it’s work into that firm – across different sectors. Whereas the internet is driving more aggressive competition into the market so there is a risk that one off purchases won’t all arrive at the same firm;
3. Greater budgeting for legal expenses/income (for both parties)
Quality vs Cost?
Whilst the legal sector might have got away with charging too much money, often for very little, it can be a false economy just to select on cost. Good quality legal advice comes at a cost, be careful what you wish for if driving every legal document on price.
How To Scope A Retained Fee Agreement?
We suggest conducting an audit of recent legal activity and spend within your business – depending on how much legal churn you have in the business, extend back from 3-5 years.
Accepting that some legal purchases can be distressed and might have to sit outside the agreement, scope out your likely requirements for the next 12 months.
Then set out a “beauty parade” set of criteria that you want to ask each of the firms pitching for your work and around which you can easily compare and come to an informed conclusion. You might want to ask a range of different questions ….
1.Are they specialists in anything?
2.Any disputes with former clients?
4.Plans for expansion?
6.Success in court?
Whatever matters most to you and your business, can be included within a template Q&A conducted with each of the competing firms.
We’re moving into a very different era of legal service pricing & charging, one where the consumer has much greater negotiating power and can start to create a measure of up front certainty about budget & spend.
Free Audit / Retained Fee Agreement
Linkilaw provide a service that helps businesses achieve best value from fixed and/or retained fee agreements. Having audited your legal spend – past, present and future – we will set up the Q&A template and on your behalf, manage the tender process from start to finish as pre-approved law firms pitch for the work.
Book a free Startup Legal Session to find out more about this retained fee agreement in your business.