Three years and counting!
Welcome to this month's article of Let’s Be Frank, a monthly newsletter series hosted on LinkedIn and authored by our founder Digby. If you are interested in following along pop over to the Let’s Be Frank LinkedIn page here and hit the subscribe button to have these articles sent straight to your inbox.
The legal industry is clearly at a demarcation point with pricing legal services, as AI and technology are creating incredible efficiencies and the billable hour is becoming an ineffective tool. Today, we feel like we have a three year head start on where the industry is inevitably heading.
Sharing our journey can help others beginning theirs to see what the path forward can look like. With the intention of showing how we did it, where we are at, and what’s next, this article looks back over the last three years (September 2020 - 2023) to see where we have been with Frank Fee and our approach to pricing legal services, without resorting to the billable hour.
How we did it…
March 16, 2020 - The Decision
As the arrival of Covid had created so much worldwide uncertainty, the decision was made on a plane trip back to Canada, that it was the time to bring price certainty to our clients by eliminating hourly billing―something I had been considering for many years but was yet to go all-in on.
March 16, 2020 – September, 2020 - The Process
A manual system was created so that there would be structure to not billing by the hour.
We divided all the work we did at the firm into 40 project types;
We listed factors that would come into play in completing the project (some were value based – client centric and some were representative of the inputs);
We ascribed base amounts to each project type and attributed amounts to each of the factors;
We ended up with a 30 page manual that would be our guide to pricing when we left the hourly model.
We canvassed names for our new pricing model, and having gone through some 30 possibilities, we ended up with “Frank Fee”, which we love as it is descriptive but fun!
September 8, 2020 - Goodbye Hourly!
We launched Frank Fee and left behind the hourly billing model for good.
Our historical billing realization rate with the old model had been around 88% for years - which is actually higher than the industry average.
We were optimistic, but didn’t know what to really expect, as we were charting our own course with no example to follow.
Within the firm, our team embraced the change and we were off and running.
We created an “outlier” program, so at the end of each month we would debrief on which files led to higher realization rates and which led to lower ones.
We quickly discovered a lot. As an example, we looked to see if it mattered if projects were completed primarily by a lawyer with a little assistance from a paralegal. We discovered if most of the work was completed by a paralegal with oversight from a lawyer as necessary, the billing realization rates were generally much higher.
This also lined up with which project types we had built the best systems for, and where we had the right people doing the right work.
October, 2020 - Introducing Technology
With my two sons, we decided to build a SaaS product to support the legal industry in moving away from the hourly model. We incorporated the company AltFee Solutions Inc. and started the tech development process.
October, 2021 - Pilot
AltFee was piloted in our firm and a handful of other firms, and we moved away from the manual system that had got us started.
February, 2022 - The Launch
AltFee became available for other law firms worldwide.
Where we are at…
2022 - It’s Working
Our new pricing system and AltFee had firmly taken hold.
Our billing realization rates had risen to about 110%. We knew what type of projects could consistently be completed efficiently.
We were defined by “continuous learning” and we had pretty much lost track of the way we used to price.
2023 - Expansion
This year has been defined by expansion as we add more project types all the time and build systems to support the work. We follow the mantra that if we do a new project, we build the new system at the same time to support our future work.
What’s next…
This year has also been marked by the AI buzz. It is interesting to observe how the legal industry is coming around to the thought that to remain competitive, you are going to have to become an adopter of technology and focus on building efficiencies.
The interest we see in our approach to pricing has really ramped up over the last few months, as the legal industry has begun to take note of the impact of incorporating technology into the practice of law.
Law firms are starting to consider that if they are going to take less time to get a project completed, do they still want to bill by how long it took? If law firms don’t adapt to the new world, their revenues will decline significantly.
I have long believed there was a better way to price than the billable hour, and the time is finally here. It is nice to have a head start, but looking forward to “next”.
Stay tuned for my next article, where I will take a deeper look at what has been learned in the last three years.
Until next time,
