Setting Your Hourly Rate

Value billing.  The words alone sounded so good in 2000-whatever or 1990-something. But transitioning from concept to reality?  It was never easy and still isn’t.

Keeping it 100

Here’s the reality: everyone who uses flat fees or AFA/hybrid fee arrangements referenced or started with an hourly rate.  That’s the math, folks.  Unless you’re a 100% contingent fee lawyer who never intends to change practice areas, you need to have a sense of how to price your services on an hourly basis.  Here’s how to go about it.

The Anecdotal Approach to Pricing

We could also call this: “If Susan down the street charges $200 per hour, so should I.”

If you’re basing your hourly rate on what one, two, or a handful of other lawyers are charging, your sample group is too small.  Period.

I’m not saying don’t gather anecdotal data.  It can be informative.  Most of us can learn a lot from talking to colleagues or mentors about pricing and billing practices, especially if we’re new to an area.  But anecdotal data needs to be balanced with something more.

Use the Data the Bar Gave You

Every five years the Oregon State Bar conducts an economic survey.  If the bar adheres to its quinquennial pattern, the next survey will occur in 2017.  For now, use the 2012 survey. The important data on billing practices begins on page 29, “Hourly Billing Rate by Total Years Admitted to Practice,” reported by years of practice and geographic region. To use this data effectively, find where you fit based on years admitted to practice and area(s) of law, then scroll over to your region of the state.

Billable Rates by Years of Experience: Lawyers Admitted 0-3 Years

  • In 2012, the lowest hourly rate billed by this group was $113 in the lower valley versus a high of $246 per hour in Portland.
  • Statewide, lawyers admitted 0-3 years billed an average of $156 per hour.
  • While there are a few geographic blips here and there, the data bears out what common sense would predict: the longer you practice, the higher your billable rate.

Next, jump ahead to page 31, “Hourly Billing Rate by Area of Practice.”  Find your area(s) of law, then locate the rates for your region of the state.

Billable Rates by Areas of Law

  • The average hourly billing rates ranged from a low of $190 per hour for civil litigation-insurance defense to a high of $291 for civil litigation-defendant (not including insurance defense).
  • Other statewide average rates were:  Bankruptcy $269, Criminal $214, Family Law $214, Real Estate/Land Use/Environmental $283, Tax/Estate Planning $239.

Keep on Keeping On With the Law of Averages

Once you know the average hourly rate based on years of admission and area(s) of law, tally the rates and take the average again.  Once you know this number, feel free to reflect back on the anecdotal data you gathered.  If your anecdotal data differs wildly from what the survey says, go with the survey.  Use this hourly rate when calculating flat fee and hybrid fee arrangements.

Cultivate Confidence

Some lawyers low ball their rate because they don’t feel they can charge “what the survey says.”  Newer lawyers often fall into this category.  But perspective is everything: if you did the same work as an associate for a firm, rest assured they would bill clients in the average to high ranges documented by the bar.  Why, intrinsically, should your rate as a solo be any lower?

Nonetheless, part of the process of setting your rate is finding a comfort zone for what you charge.  If you can’t quite stomach the average and need to take it down a tick or two, I respect that decision [even though I may try to talk you out of it].

Either way, you must be able to face potential clients and communicate your rate in a matter-of-fact, businesslike, manner – with confidence and without hesitation.

[All Rights Reserved 2016 Beverly Michaelis]

 

 

 

One thought on “Setting Your Hourly Rate

  1. Pingback: The Best Legal Blog Posts of 2016 | Oregon Law Practice Management

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