the hourly rate: going going gone?

Fees are back on the agenda again this week with the announcement from Cameron McKenna that they have launched an alternative billing campaign for existing and future clients; including an option for clients themselves to decide how much they want to pay, based on their perception of the value of the services they receive. Its a move which has prompted a significant amount of debate.

But the trend towards reengineering legal fees should come as no surprise. There has been talk for some considerable time as to whether the shelf life of the hourly rate is close to expiry. At Legal Edge, we don’t necessarily think this is the case, but Cameron McKenna’s creative approach to providing options to their clients regarding the structure of fees is not only generating them a huge amount of press, but their innovation will also inevitably result in more clients.

In the spirit of client led legal fees, some of you will also have seen the new internet bidding site,
Its a simple premise. Clients list their legal requirements, and firms bid for work. There is also a tool for rating lawyers on the site, to aid clients in their selection process (it will be very interesting to see whether clients plump for cost over recommendation). The site is aimed at all sizes of practice, and all work types, although the balance is in the favour of private client work at the moment. The number of firms signed up is already well over a thousand and they continue to do so at a rate of one every five minutes.

One of the most attractive features to legal practices will be the fees. Bid4fee’s charge of 10% of the value of the successful bid will undercut many of the referral fees currently paid by lawyers by a considerable margin. This, of course, will facilitate lower bids for the work.

Legal Edge have spoken to Lauren Bradley, co-founder of Bid4fees. She explained how they were keen to ensure that the cost of the service was pitched correctly:

“From practical experience, we are aware of the exploitative nature of some referral fees and the negative effect this can have – especially on fee earners at the coal-face. We believe that 10% is fair and will encourage the bid4fees community to grow, without discouraging practical performance.”

Savvy law firms will no doubt look to bid for matters where there is the maximum opportunity to cross sell as well. The value of a client is not just limited to the initial instruction. Those firms who are consolidating their position in the market pre-ABS, have an in-depth understanding of the value of each client to their organisation and have systems in place to maximise the revenue.

The notion of bidding for legal work is not new, but it is surprisingly underdeveloped at the moment. These new facilities are likely to be very attractive to legal practices; offering a halfway house between obtaining clients through traditional channels and paying referral fees. Sites like bid4fees it has to be said, feel more like a portal to new clients rather than a middleman. It will be very interesting to track the consumers’ appetite for dictating the value of legal services in such a direct manner. But with Ebay attracting over 40% of all internet users to its site each month, and being in the top 10 of online retailers, its fair to say that law firms should start to get used to the concept sooner rather than later.

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One Response to “the hourly rate: going going gone?”

  • Andrew Neligan says:

    Very interesting development for all professions and further evidence that as clients are becoming more savy and have access to more information professionals must adapt to demonstrate value for money.

    I see the risk of portals such as bid4fees is that legal services and advice becomes a commodity with firms/individuals entering a price war to gain clients. The likely outcome of this is that everybody loses; firms become unprofitable and clients receive unsatisfactory/inappropriate advice because less qualified or less scrupulous practioners offer the lowest price.

    If you don’t mind me adding: there is a discussion on this on Linked In too:




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