Flat Fees for Lawyers: Are They Right for Your Firm?

Deciding how to charge for your legal services can make or break your ability to generate strong client leads. Establishing fair rates for provided services, balancing cost with value, and clearly explaining payment requirements are a few key steps to determining your pricing.

However, finding the middle ground between effective billing practices and predictable payments can be tricky. In fact, 15% of attorneys responding to our 2024 Legal Industry Report shared that getting paid is one of their firm’s biggest challenges.

Clients may delay payments, dispute costs, or struggle with unpredictable hourly charges.

Flat fee pricing is an option that can help mitigate payment challenges, as it can provide better predictability for clients and reliability for your firm.

Read on to learn:

• What a flat fee is for a lawyer
• Lawyer flat fee pricing use cases
• How to structure flat fees for legal services
• Pros and cons of flat rate attorney billing

What Is Flat Fee Pricing for Lawyers?

A flat fee is a type of attorney fee agreement that charges a fixed cost for a service provided. For instance, rather than billing your client per hour, you might offer a contract review for a flat fee of $500, including the initial consultation, document preparation, and other requirements.

When determining your lawyer fees, consider the type of case and the legal expertise it requires. A flat fee pricing structure is most useful for simple, straightforward cases, such as:

• Uncontested divorces
• Basic contract reviews
• Traffic tickets
• Simple wills
• Power of attorney
• Real estate closings

However, there are plenty of situations where a flat fee pricing structure may not be the best option, such as during most litigation occurrences and cases related to criminal defense and personal injury.

How To Structure Flat Fees

Though flat fees allow you to set a fixed cost for a particular service or project, you can also combine flat fees with other pricing models. Below are steps that can help your firm decide whether or not to use a flat fee structure and how to set your price:

Understand the Scope of Work

How many hours might your firm spend on a given case or task, and what is the overall utilization rate? Is this type of project simple, like drafting a will, or more complex, like a contested, messy divorce?

To ensure clarity and avoid out-of-scope work, start by defining the specific actions and deliverables included in your flat fee.

Also, have a contingency plan in case a client needs more support than you originally anticipated. This could mean setting a higher fee to account for possible overages or documenting additional services that you may bill per hour.

For example, you may set a flat rate to oversee a simple real estate transaction but build in an additional hourly charge to account for any unexpected complexities that require more work.

Calculate Costs

When determining your firm's costs, consider various types of expenses: direct, indirect, opportunity costs, and required resources.

• Factor direct expenses—like related tools or materials—into your base price to avoid undercharging.
• Distribute indirect costs, such as overhead, taxes, and firm software, across your overall pricing strategy to help keep your firm running.
• Understand opportunity costs, such as the other cases you pass up due to your work on this project, to help you gauge whether your rate adequately compensates your firm.
• Assess the required resources and build in a buffer to cover unexpected needs, ensuring your fee remains viable without reducing your margins.

Factor in the Market Rate

Setting the right fee isn't only about covering costs—it should also focus on remaining competitive. Understanding what other lawyers charge for similar work helps ensure your pricing aligns with market expectations while still reflecting your value.

Study market rates by researching your competitors' fee structures to understand whether they offer flat fees for this type of work—and at what price point. You can find this information from public legal directories or while networking with other law firms.

While you don’t have to align 100% with other law firms’ billing standards, this provides a benchmark to refine your pricing strategy in a way that can balance profitability with competitiveness

Determine Client Value

Since customer value can be difficult to quantify, start by identifying the tangible benefits of your services. Clients may save money by contesting a traffic citation, building wealth through real estate, or protecting their assets with an estate plan. Estimating the financial impact or cost savings helps you set a fee that accurately reflects the value of the outcome.

Set a Profit Margin

Finally, determine the profit you hope to achieve after costs are covered. Of course, it’s important to be realistic—you’re not likely to see 100% profit from any project or fee structure—but you want your firm to benefit from this work.

Start by calculating your costs, then consider a reasonable profit margin based on your firm's financial objectives. For instance, if the total cost for a case is $5,000, you might shoot for a 20% profit margin, leading to a flat fee of $6,000.

Hourly vs. Flat Fee Billing

Law firms will often use an hourly rate when cases need more flexibility as an alternative to flat fee billing. For example, hourly rates can help ensure your firm receives compensation for time spent on last-minute changes or unexpected work.

Uses for an hourly rate include:

• Cases where the time investment correlates directly to the value received, such as a consulting role
• Ongoing work or legal advice provided on an as-needed basis with an uncertain scope or timeline
• Cases where clients want a transparent record of time spent on particular tasks

Pros of Flat Fee Billing

Flat fee billing has plenty of benefits for clients and firms. Below are some of the most common pros of flat fee billing.

• Predictable costs for clients: Clients want to know exactly what they’ll pay and what they’ll receive from lawyers. This also mitigates the risk of future fee disputes.
• Improved efficiency: With a flat fee, lawyers can streamline their workflows and implement process improvements without worrying about how time spent impacts their income. For example, if a lawyer develops a more efficient process for contract review, they can finish the task in less time but still earn the same fee.
• Better cash flow: You’re paid in full, and there is no need to chase down clients for payment throughout the process.
• Stronger trust: The relationship starts with clarity about costs and deliverables for both sides, setting up the relationship for trust from the get-go.

Cons of Flat Fee Billing

Flat fee billing has its challenges, too, including the difficulty of setting pricing and the potential for limited profits. Below are some of the most common cons of this pricing structure.

• You may experience pricing challenges: Flat fee billing seems simple, but it can actually be much more difficult to price than other fee structures.
• There’s a potential for loss: Underestimating the required resources or time commitment may result in loss or reduced profitability.
• It may require lawyers to minimize case time: Because a flat fee model rewards efficiency, you may feel pressure to work faster or streamline processes rather than give a case the appropriate time it needs.

Download our guide, "The Billable Hour Reimagined," to learn about the importance of offering flexible fee structures, leveraging technology for streamlined billing, and tailoring billing to client needs.

Best Practices for Attorneys Using Flat Rates

Using a flat fee as a lawyer can improve firm/client relationships and enhance efficiency, but you should have the right setup to ensure the most success.

A few best practices to consider include:

• Practice open and honest communication: Be clear upfront with your client about the charges, what they cover, and when they may need to pay an additional hourly rate. Of course, regardless of the fee structure, you should keep your clients updated throughout the process.
• Use project management tools: Leverage project management software to stay on top of tasks, deadlines, and resources needed. This can also help you keep track of time spent on particular tasks, which gives you visibility into efficiency even if you're not charging by the hour.
• Foster a culture of continuous improvement: Bolster team productivity by monitoring opportunities to improve workflows and client service. You can also assess past projects to see if there are areas to reduce inefficiencies or refine processes.
• Continuously evaluate—and adjust—your pricing models: Regularly analyze and update your rates based on changes in overhead, market rates, and case complexity.
• Leverage automation: Using software that helps automate parts of the workflow can increase productivity and efficiency, maximizing the value of your projects.

Example Lawyer Flat Fee Agreement

Below, you’ll find an example of a flat fee agreement to help illustrate these best practices.

This sample agreement is made available and provided for individual review and analysis, and it is delivered without warranty or representation of fitness for specific use or compliance. The receiver hereof is advised to make any necessary modifications or adaptations which may be required for the user's specific needs, or for compliance with the user's applicable disciplinary rules or other practice rules.

Source: LawPay and Contra Costa County Bar Association

Easily Manage Flat Fees With LawPay

A flat fee pay structure can help your firm simplify pricing, strengthen client relationships, and improve efficiency. By understanding the challenges/benefits and best practices, you can set your firm up for success and profit.

With LawPay’s legal billing software, your firm can streamline your billing process, helping you manage flat fee payments while also tracking expenses and your firm's cash flow. LawPay also simplifies payment processing, generates detailed reports, and reduces manual work—which opens up more time to focus on helping your clients with their legal needs.

To learn more about how LawPay can benefit your firm, schedule a demo.