12/13/2009 01:55:55 AM EST
Alternative Fee Arrangements Gain Popularity
The push for law firms to find creative ways to change billing structures is leading to greater use of alternative fee arrangements. We’ve seen headlines recently about the death of the billable hour and the increased use of new fee structures. LegalBizDev just released the results of a survey of senior partners and executives at the country’s 37 largest law firms. The survey involved a series of interviews with the top managers in the nation’s largest firms. These interviews revealed the following about the use of these arrangements in Large Law.
Last year, the 100 largest law firms generated approximately 7-billion in revenue through alternative fee arrangements.
- LegalBizDev estimates that the percentage of revenue generated in the largest 100 firms through the use of alternative fee arrangements ranged from 1% to 25%, with an average of 11%.
- All study participants said that the use of alternative fee structures will go up, but there were dramatic disagreements about how extensive their use will be, and how significantly this change will impact the way law firms operate.
- Projections for the five-year growth rate in alternative fee revenue ranged from 20% to 900%. There was also a broad range of opinion about how – or whether – alternative fees will change the way law firms operate.
-Some firms are aggressively using alternative fee arrangements to seek new business.
-Other firms are using a more conservative approach to insure profitability.
The LegalBizDev survey also reported that large firm executives say clients are very interested in using alternative fee arrangements to control costs.
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Some clients are also using alternative fees to meet business objectives that go beyond cost control, such as increasing budget predictability.
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At this time, the number of clients who want to talk about alternative fees is much greater than the number who use them.
Jim Hassett is the founder of LegaBizDev.com