Negotiating Legal Fees
Business people are fairly savvy when it comes to negotiating prices for supplies, rent and other products. However, when obtaining professional services, such as those of attorneys and accountants, many executives do not know how to select the best professional for their needs, let alone negotiate appropriate fees. Too often, fear of the cost leads some to "go it alone" rather than to invest in a good attorney to review their contracts, personnel and other matters.
Knowing the different ways that professionals may bill for their services can help you negotiate a fair price. For example, legal fees are based on a variety of factors including a lawyer's overhead, an attorney's experience and knowledge, and the price an attorney believes the market will bear. The highest fees are usually charged by senior partners in large, well-known and well-outfitted Washington, D.C. firms. Better rates frequently are found with experienced lawyers working in small, often suburban firms that have lower overhead. Five common forms of billing for legal services are:
The Hourly Rate. Billing by the hour, plus expenses, is one of the most common ways attorneys bill for their services. In the Washington area, hourly rates range from a low of $100+ dollars per hour to $400-$500 per hour. If open-ended hourly fees make you nervous, attorneys sometimes will provide an estimate of the number of hours the work will take. However, you should ask to be kept informed of how they are doing with respect to the estimate and to inform you if they expect to exceed it.
The Hourly Rate with a Cap. One step better than a fee estimate is asking an attorney to cap his or her fees for a specific project. This means that while they may be charging you $150 per hour, they agree not to charge more than $600 (or four hours) for the entire project. This type of arrangement provides the security of knowing the maximum fees you will be charged.
The Flat Fee. A flat fee may be available for basic legal requirements, such incorporating and filing for tax-exempt status for an association's educational foundation.
The Flat Retainer. It used to be common for attorneys to quote an association client a flat fee, i.e., 5K, 10K or 20K for annual representation (excluding litigation). For this fee, the attorney or firm would provide all the legal services the association needed. This method was desirable because it allowed the client to adopt a fixed legal budget for the year. However, it has lost favor because too often it became a lose-lose situation; clients would pay for more legal services than they used or the legal retainer ran out before the client's legal needs did.
The Hourly Retainer. A new form of retainer agreement has evolved under which the client and attorney sit down and estimate the association's legal needs for the year. Then they determine an appropriate hourly rate for the services to be provided and multiply that rate by the total hours. Typically, if the client needs more hours later in the year, they continue to pay at the agreed hourly rate. If they need less time, some or all of the overage is credited to the next year or refunded.
The important thing to remember is that law-firm pricing is flexible and negotiable. As with any professional service, look for the most knowledgeable and experienced professional you can find and with whom you feel comfortable. Then talk price. After all, lawyers are people too, and many of them genuinely want to help.