Types of Pricing for Legal Services: Hourly Billing

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 hourly pricing.

Hourly Pricing

Hourly rates are arguably the most commonly used type of pricing in the legal profession. Courts use it when calculating requests attorney's fees, and most clients are familiar with the practice because many other types of services charge by the hour.

To set your hourly rate, you will need to compute the overall costs of running your practice, then divide that amount by the number of projected or actual annual billable hours. This figure will give you a starting point upon which you can base your hourly rate. Refer to the section on Setting Fees for more information.

It is not entirely unreasonable to set differing hourly rates for different types of cases. Alternatively, if you have more than one attorney in your firm, each one may have differing rates depending on experience.

When faced with a choice between hourly rates and some other form of pricing, charging clients by the hour is the most effective billing strategy when the matter has many unknown factors and variables, or when you do not want to accept any risk of the matter's outcome.

Depending on the types of cases you will be representing, hourly may not be the best fit for you. Some cases, such as plaintiff personal injury matters, are frequently handled on a contingency or percentage basis. In general, strong cases with high value may not be optimally suited for hourly billing.