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Off The Clock

Need an attorney? New fee structures offer alternatives to the billable hour.

Any time you use a lawyer, chances are you'll be coping with uncertainty. That's certainly true in litigation cases where you don't know what the judge or jury will decide. And when you're putting together a business deal, there's always the question of what might go wrong and whether the contract covers that possibility. What shouldn't be uncertain, though, is what to expect when you receive the lawyer's bill. To properly budget, you should know how the lawyer computes the bill and what a given matter is likely to cost.

Especially for business law, lawyers traditionally charge an hourly rate for legal services. That system came under fire from business circles about five years ago, with critics charging attorneys with inflating the number of hours worked. Although most respected lawyers are scrupulous about keeping track of hours and attempting to get the best results in the shortest time possible, articles in business and legal magazines trumpeted abuses by big-firm lawyers caught padding their bills. Distinguished judges blamed the hourly billing system for detracting from lawyers' professionalism and commitment to their clients. They argued that someone paid by the hour has less incentive to use that time efficiently or strive for the highest quality of work than someone whose payment is tied to results.

In the wake of all this, businesses and entrepreneurial lawyers began drafting new methods of billing designed to reward efficiency and excellence: contingency fees for business deals, value-based billing, fixed fees bid in advance and various other hybrid forms. "People thought it was the end of the billable hour," says Elbert Kram, an attorney with Bricker & Eckler LLC in Columbus, Ohio, who specializes in business law. As it turns out, the changes haven't been that dramatic. "It's difficult to track costs if there are no billable hours," Kram says. Nonetheless, many lawyers are willing to make creative arrangements to suit their clients' needs and desires.

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This article was originally published in the September 1997 print edition of Entrepreneur with the headline: Off The Clock.

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