Legal Business

The Revenue Impact of Alternative Fees (Part 2 of 2)

Last month, Of Counsel, the Legal Practice and Management Report, published an article based on The LegalBizDev Survey of Alternative Fees, which they described as "the most lucid and comprehensive study that we have seen on this topic." This post reproduces the second part of the article.

Several participants in the first few interviews for our study were reluctant to talk about the percent of revenue that their own firms derived from alternative fees. As noted already, I assumed that it was confidential information, but as I probed deeper, I began to think that some of them might not know the percent in their own firms.

So I added a direct question to the remaining firms about how easy it was to determine alternative fee revenue in their own firms. There were 30 respondents and 67% said it was not easy to determine, 27% said it was, and 7% didn't know whether it was or not.

People who answered no - that their accounting system does not code alternative fees separately - talked about how difficult this figure was to track, as in these comments:

We don't have it. I don't know if we will be able to add that in the future. There are so many different varieties [that] you would probably have ten different ways to code them and an eleventh coming next month.

I think the most complicated part of that process is [defining] what an alternative fee is. Once everybody is in agreement about what that definition is, we have wonderful people in our finance department who are able to do some real gymnastics and come up with numbers.

It's not as simple as one would think to capture all of this accurately, [because] arrangements change over time, definitions can be fuzzy and many arrangements are actually hybrids.

To read the full post, visit the Legal Business Development Blog.