Posted by: johnocunningham | May 24, 2015

Alternative Fee Arrangements: Still Growing

According to a recent report from legal service management consultants at Altman Weil, the use of alternative fee arrangements or AFAs is still growing. More than 90 percent of firms now use fixed fees or some other form of non-hourly billing at least some of the time, and 82 percent of firm leaders envision this form of billing as “a permanent trend going forward.”

Interestingly, close to 75 percent of firms that proactively offer AFAs report that AFA work is as profitable or more profitable than hourly work. Thus, most law firms have figured out how to answer the client clamor for non-hourly arrangements without hurting their own profitability.

In my experience, sophisticated corporate clients report that they still favor hourly billing on most projects, but they also say that law firms must be receptive to AFAs in appropriate circumstances to keep their business. They also love it when a law firm proactively figures out and offers up a way that some form of non-hourly billing can be made to work for both sides.

Thus, communication about AFA capabilities should be a part of many law firm pitches and marketing communications.

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