Types of Legal Services Pricing: Fixed Fee and Retainer
After calculating how much your small law practice needs to make a profit and your reasonable hourly rate, you are ready to consider the available pricing options. There are various ways to price your legal services. This article discusses fixed fee and retainer pricing.
Under a Fixed Pricing, or "Flat Fee," a fixed amount paid is paid by the client up front prior to any substantial work being performed. This model is most commonly used in criminal and misdemeanor cases. Due to the intricate and time-intensive nature of handling criminal matters - multiple court appearances, lengthy pleadings and unforeseen motions - criminal cases are not well suited for contingency fees or hourly rates.
This model is also useful for form-intensive matters that do not require an excessive amount of your time, such as straightforward personal bankruptcy, uncontested divorce, and routine immigration matters. Very often, these kinds of cases are complicated by the client's circumstances, so prior to accepting a case for a flat fee, it is important to ask the right questions during client intake. These questions should help uncover any red flags that would make a flat fee a disadvantageous pricing arrangement.
Similar to fixed pricing, a retainer is money paid in advance by the client. Ideally, the retainer amount should reflect a certain number of your billable time at a given hourly rate. By accepting the retainer, you are agreeing to represent the client until the retainer amount has been exhausted.
Retainers are commonly used in recurring client-attorney relationships, where the requests for services is not strictly matter-driven and may encompass a multitude of legal tasks. For example, if the client is a small business, they may need you to write letters, apply for permits, perform business formation activities, and debt collection.
This pricing model has positive cash-flow advantages because the money is provided in advance of services. On the other hand, the client may expect you to perform services that exceed the retainer amount. Thus, prior to accepting a retainer, you and the client should discuss what will happen when the initial retainer has been exhausted. Will you charge on an hourly rate? Or will you require another retainer?