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What do Lawyers charge?

Rob Green

published 

January 27, 2024

We are often asked what lawyers charge - often by other lawyers, who are looking to see if they are pitched at the right level

Here are 5 common billing methods used by law firms to charge clients:

  1. Hourly billing - The most common method. Clients are billed by the hour, with different hourly rates for different attorneys/staff based on experience. The law firm tracks time spent on the client's case on an hourly basis and bills accordingly.
  2. Flat fee billing - The law firm charges a predetermined fixed amount for undertaking a specific task or case, regardless of how many hours are actually required. This can provide certainty to clients on costs.
  3. Contingency fees - Fees are based on a percentage of the total amount recovered on behalf of the client. So the lawyer only gets paid if the case is won and money is collected. Typical in injury or accident cases. The contingency percentage can range from 25% to 40%.
  4. Retainer (or Monthly Retainer) - An upfront fee to commit the law firm to provide its services whenever needed by the client. Then client is billed against the retainer until exhausted, at which point a new retainer is funded.
  5. Value billing - The fee is determined based on the perceived value of the service provided to the client, including the result achieved. Less focus is placed on hours expended. So a successful result = a higher fee.

Corporate.

For a large M&A transaction like a $1 billion acquisition, most law firms would charge based on hourly billing rates rather than taking a percentage of the deal value. Some key reasons for this:

  • Deal values can be variable and contingent on certain performance criteria, making a percentage fee tricky to define upfront.
  • Big law firms will have very high hourly rates for senior attorneys working on major deals. For example, rates could be $1,000+ per hour for top partners. So hourly billing alone will generate substantial revenue.
  • Billing by hourly fees gives law firms more control and better captures the complexity of the work involved. Large deals can have complex negotiations stretching months/years.
  • Taking a percentage of deal value (such as 0.1%) is atypical for corporate transactional work. It's more common in plaintiff litigation/awards. Deals involve established corporate clients less receptive.
  • Legal fees are generally a very small component of large deal costs. Paying 0.5% of a $1 billion deal ($5 million) seems disproportionately high compared to the work involved.

For the full article please visit - https://globallegalmarket.substack.com/p/what-do-lawyers-charge

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