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“Do you require the fixed fee to be paid in advance always? Or do you allow exceptions when someone can pay maybe half down and the rest over a few months in monthly installments? How firm is your policy on getting the money up front?”
Great question. Thanks for asking. There are lots of right ways to handle getting paid and one wrong way.
The Wrong Way to Get Paid
Let’s get the wrong way out of the way.
The wrong way to get paid is to do work without getting paid. Yeah, it’s that simple. If you’d have made just as much money sitting on a rock on the Irish coast watching the waves crash against the rocks, then you’re doing it wrong. You with me? Getting paid is good. Not getting paid is bad. It’s simple.
The Right Way to Get Paid
Personally, I’m all about getting paid before doing the work. That way, I don’t have to worry about whether I should have been doing the work or watching the waves. I suppose there are situations where it makes sense to trust that you’re going to get paid after doing the work, but in my practice area, those situations are few and far between (like sunny days in Ireland). Can you tell I’m in Ireland and that it’s raining?
So how do you structure fixed fees?
Do it any way you like so long as you meet these requirements:
1. Get paid in advance.
Be sure you’re covering the cost of whatever you’re doing. At a minimum, be sure you’ve already collected something that would, using an hourly rate, cover the cost of the work. I’m not a fan of cutting it close. I’d rather collect a substantial amount in advance so there’s never any concern about the profitability of the work.
2. Give yourself room to get out.
When they stop paying, you need to pack your stuff and head to your rock on the coast. Unfortunately, that may involve filing a motion to withdraw. Each jurisdiction will have different requirements on how much time before a hearing is necessary for you to be able to withdraw without prejudicing your client. Be sure to collect a fee that’s sufficient to cover you once you enter that period where you won’t be permitted to withdraw. Don’t get yourself trapped in a case without getting paid.
3. Minimize your collection cost.
One of the big advantages of using fixed fees is avoiding the expense of building a system for collecting fees. If you start taking installments, you’ll have to pay attention to collections. You’ll need records and, eventually, people to follow up on the payments. It’s an expensive hassle. Before you know it, you’ll be presiding over a bureaucracy designed to collect those payments.
4. Minimize client upset.
Another big advantage of fixed fees is avoiding client upset. Having to collect fees each month gives clients another opportunity to get angry about the unhappy parts of their life. That unhappiness is often directed at your law firm when you call to ask for money. Build a system that requires fewer unpleasant interactions. That’ll improve your reputation by keeping clients happy. There’s a direct negative correlation between the number of payment installments and client satisfaction.
5. Just say no.
During the fee discussion, it sometimes becomes apparent that there’s nothing you can do to make this particular client happy. Fee discussions present an excellent opportunity to judge a client. Pay attention. Look for that flash of anger in the client’s eyes. In the discussion, you’ll see the client that you’re going to be managing down the road. Fees bring it out in them—watch for it.
So should you allow a client to pay “half down and the rest over a few months in monthly installments?” We don’t. We structure our fixed fees around the work that’s coming. We make sure the payment covers that work, and we work toward resolving the matter so that additional work becomes unnecessary. We’re not willing to stretch payments over a period that extends to a point that requires us to run a deficit.
What’s the Right Approach?
All lawyers find a different approach that works for their clients, practice area, and market. There are as many options as there are lawyers, and your willingness to find an arrangement that meets the needs of everyone involved is admirable. Find a system that meets your clients’ requirements as well as those detailed above, and you’ll have a workable approach that serves everyone involved.
Unfortunately, you won’t be able to find a fee that works for every client in every situation. When there’s resistance to your approach, be willing to stick to your system. Sometimes you can’t find an approach that’s acceptable to you and to your client. That’s when you need to find your rock on the coast, sit down, settle in, and watch the waves crash.