On any given day, you have a lot of obligations and tasks to fulfill as a lawyer. Some take longer than others, but they are necessary for your attorney's duty. How do you know how much time each task should take?
For some lawyers, billing by the hour is a natural choice. You might have a profession that lends itself to hourly billing because it's the only way to get paid. Or, bill hourly because it's the easiest way to track your time and expenses every month.
Read on for more information about billing as an hourly rate with all lawyers.
What Is Hourly Billing?
Billing by the hour is a way of charging clients for your time working on their cases. Billing by the hour is standard among attorneys who practice transactional law (real estate, finance, etc.) or litigation.
It's also common among attorneys whose clients pay by the hour. For example, attorneys who work on contingency (personal injury attorneys, etc.) often bill hourly.
There are other methods for structuring your hourly fee, but the most typical is to bill by the hour at a defined rate. If you charge $250 per hour, you'll bill $250 for every hour you work on a client's case.
Pros Of Billing By The Hour
- It's easy to track your time: One of the most significant issues with billing by the hour is that knowing how many hours your client deserves to be billed for can be challenging. You can avoid this hassle by billing by the hour.
- It's easy to get paid: Hourly billing has the advantage that clients know exactly how much they'll have to pay you. There are no surprises when figuring out how much they'll owe.
- It's easy to budget: When you are paid by the hour, you know exactly how much you will be paid and can construct a budget based on that knowledge.
Cons Of Billing By The Hour
- It's hard to know how much to charge: One of the most significant issues with billing by the hour is that it's hard to know how much you should be setting your client. Some people may view your hourly rate as too high and not hire you, while others may view it as a bargain.
- It's hard to know what to include in your time: Another issue with hourly billing is that it's hard to know exactly which hours you should consist of. If you spend an hour researching a case before it goes to court, should you bill that time? What about the time you spend reviewing your client's legal contract? It's hard to know exactly which hours you should include in your time.
- It's easy to lose sight of your value: When you bill by the hour, it's easy to start thinking about yourself as a "human resource." You become a wage-earner rather than valuable professional skills in a specific field.
When Is Hourly Billing A Good Idea?
- You work in a transactional field. While hourly billing is standard in litigation, it's also common among lawyers who work in finance and real estate. You can bill by the hour if you spend most of your time reviewing contracts or real estate documents.
- You have clients who will pay by the hour. Some clients pay by the hour rather than the flat charge. Doctors who perform surgery, mechanics who repair cars, etc., may prefer to pay by the hour rather than a fixed fee. If you work with clients who will pay by the hour, it's a good idea to bill by the hour.
When Is Hourly Billing Not A Good Idea?
- You want to charge a set rate: Hourly billing is a bad option if you want to assign a fixed rate for your services. You may charge a set rate to make it easier for clients to budget for your assistance.
- You want to bill for your value: If you're going to charge a set rate for your services, but you want to bill for your weight, there are better options than hourly billing. You want to charge your clients for what you're worth, not for how many hours you spend working on their case.
- You want a long-term relationship with your clients: If you want to build a long-term relationship, there are better ideas than billing by the hour. Clients may view your hourly billing as a sign that you don't care about them.
Clients want to know that you're committed to them and their case, to the only bill as many hours as possible.
Strategies For Optimizing Your Hourly Rate
- Figure out your market rate: The first thing you need to do is find out what your market rate is. What do other lawyers in your area charge per hour? What do people in other professions with a similar skill set cost per hour? Once you know what rate is typical in your area, you can decide what fits your skills and experience best.
- Charge the market rate: Once you know your market rate, it's time to start charging that amount for your services. Keeping the rate, you used to charge is necessary to have the value to back it up. To build a great relationship with your clients, you must assess your worth.
- Be upfront about your hourly rate: If you bill by the hour, you must let your clients know.
You want to avoid springing it on them and billing them for every hour you spend working on their case. Your clients aren't stupid; they know how many hours you spend on their patients. They want to know, so there's no reason to hide your hourly rate from them.
Conclusion
Billing by the hour is something only some lawyers should do. It's a good idea when you know your market rate and want to charge the market rate. It's also a good idea to have clients who wish to pay by the hour.
There are some downsides to hourly billing, but they can be overcome by knowing your market rate and being upfront with your clients.
