FIXED FEES and AFAs
When you put a stake in the sand and agree on a figure, the cost risk moves back to the firm.
There has been a significant migration towards fixed fees for what is seen as commodity work. Clients are now demanding fixed fees with complex commercial transactions and even litigation.
Fixed Fees & AFAs
It won't have escaped any practitioners attention that there has been an inexorable move towards fixed fee arrangements. Generally speaking this has not been a development that has been enthusiastically embraced by the profession. Rather, it has tended to be driven by clients motivated by dissatisfaction with and distrust of the hourly rate regime coupled with a desire for greater cost certainty and manageability.
Conversely, many in the profession struggle to respond appropriately when put on the spot for a fixed price. It is not hard to understand why. Under the old model, all of the cost risk rested with the client. When you put a stake in the sand and agree on a figure, the cost risk moves back to the firm. The firm then has a vested interest in undertaking the work efficiently and cost effectively.
Fixed Fees = Low or No Profit
Many law firms have found that undertaking legal work on fixed fees is only marginally profitable or unprofitable, the firm ends up wearing any blowout in costs and the arrangements often prove challenging at best and extremely unsatisfactory at worst. Fortunately, this need not be the case and with appropriate training, skills, processes and tools, practitioners can undertake fixed fee work with considerably greater confidence and profitability.
Fixed Fees on the Rise
Not only has there already been a significant migration towards fixed fees for what is seen as commodity work, clients are now demanding fixed fees with complex commercial transactions and even litigation. As with all of the changes impacting the profession, these new expectations from clients can either be seen as an unwelcome challenge to the status quo or an opportunity for firms to differentiate themselves from their competitors.
We firmly believe that practitioners wanting to embrace these opportunities will be the ones who will not only survive but prosper. We have developed a number of very effective and proven strategies, tactics, processes, checklists and documentation to assist practitioners confidently and profitably take on the challenge of fixed-price legal work.