I came home last week from a coaching trip and found Nancy had saved the business section of the Dallas Morning News. I looked at the front page article: Few lawyers can charge $1,000 an hour, but the number is growing. Nancy jokingly told me that I must have been in the wrong practice area since I was not able to charge my clients $1000 an hour lawyer.
While technically that is true, it made me think of the few occasions I had been paid $1000 an hour, or could have been paid $1000 an hour if I was motivated by the money. My examples may provide opportunities for you.
When can a lawyer get $1000 an hour? It seems to me the lawyer has to be perceived to be “best in the world” to handle a “bet the company” matter in an industry that is booming. Unlike the energy sector, that was mentioned in the Dallas Morning News article, the construction industry was never booming to the degree that any client would agree on the front end to pay me $1000 an hour.
When did I have opportunities to make $1000 an hour? I remember a time when I received a call from a contractor whose project was shut down because of an alleged violation of law. The contractor told me they were losing $25,000 a day. Because of all the hard non-billable work I had done to understand the legal issue, I knew I could solve the contractor’s problem in less than an hour. If I had told the contractor I would solve the problem for $25,000 flat fee, the contractor would have gladly accepted. I didn’t think of doing that so when I solved the problem in less than an hour, I was paid $250. So, one opportunity to bill a significant amount is billing a flat fee for the knowledge you developed on your own nickel.
I remember another time when I had been recommended to help a Northeastern contractor that was being threatened with debarment and suspension from bidding because he didn’t understand a particular law and had made a stupid, but innocent mistake. The day I met the contractor, he pulled out his check book and told me just to tell him how much to make out the check for. In this instance, I believed I could help the contractor avoid debarment and suspension because of my reputation for integrity and credibility with the government agency. Sure enough, we were able to avoid the fatal debarment and suspension, but I got paid by the hour. Again, the lesson here is clients are willing to pay flat fees based on the value they perceive they are getting.
My third example is my favorite. I worked for a contractor and was able to get a matter resolved for substantially less than the contractor expected. Much to my surprise, the contractor gave me a $100,000 bonus. I will always remember it because it was the only time in my career that it happened.
Finally, the fee arrangement for the last case I litigated, (which will be the last case I ever litigate) was hourly with a not to exceed amount of $750,000 and an additional 20% of anything we recovered over $5 Million. After four weeks of trial and the hourly fees reaching slightly over the maximum, the other side agreed to settle the case for $7.5 million. So, another way to get to over $1000 an hour for a litigator is to participate in some of the risk and cap your hourly fees.
I guess the point of my stories is that I could have never told a client on the front end that I would bill them $1000 an hour. Even if I was “best in the world” on a “bet the company” matter, I doubt any contractor would have agreed to that fee. On the other hand, if I had decided to handle certain matters on a lump sum or other alternative fee arrangement, I could have easily been paid over $1000 an hour.
When you take your non-billable time to thoroughly understand your clients legal issue or build trust relationships with the entity on the other side, billing by the hour inevitably undervalues your services.