Law Firms Profit by Being Proactive

In these challenging economic times, it’s imperative that law firms offer alternative fee arrangements in addition to the standard billable hours model. A month ago, the fourth annual Altman Weil Law Firms in Transition Survey was published, with some notable results about the AFA movement. The survey indicates that while nearly all law firms offer AFAs, only 14% report that they are seeing higher profit derived from non-hourly projects, compared to hourly. However, the firms that are approaching AFAs proactively instead of reactively (33%) are “more than three times as likely to enjoy higher profitability on their non-hourly work.”

More than three times as likely is substantial. So why aren’t more law firms taking this approach? Perhaps law firms feel that being reactive – offering AFAs when clients make it clear that they need them – is enough. But it’s not. Negotiating an alternative fee, especially in a situation where consulting a legal professional is not a matter of choice, but of necessity, can be cumbersome. And while you might reach a mutually agreeable fee structure at the client’s request, if the process of requesting and negotiating an AFA was unpleasant, they may not wish to return the next time they need legal counsel. By proactively offering AFAs before your clients ask, you’re putting their needs first. And in putting yourself in their shoes and partnering with them, you’ll be building a collaborative relationship while rewriting their preconceived notions about dealing with lawyers, which is what will have them returning to you and recommending you when their friends need a lawyer.

The opportunity is there for law firms to become more profitable with a proactive approach to AFAs. Offering up non-hourly solutions for your clients will set your firm apart from those that are resisting this inevitability, or accepting it only reactively. And standing out – in a good way – is never a bad thing.

Are you one of the firms proactively offering AFAs? Please share how it’s working for you below.