I often see lawyers debating on LinkedIn about the merits and disadvantages of hourly billing versus value-based pricing. I don’t see it as a question of doing it one way vs. the other. Each client will have their own unique needs regarding how they prefer to be billed. And it doesn’t have to be just one way. The right way to price/bill is the one that best meets your client’s needs.
We need to start offering options: that could mean two or three different options, including hourly billing or value-based pricing, or a hybrid billing option, which includes a monthly retainer plus hourly billing, etc. This is my twist on “Price the client, not the work”, as Ron Baker recommends.
Clients Have Different Needs, So Give Them Different Options
Some clients still prefer hourly billing. Others want predictability through flat fees or monthly retainers. Some are open to value-based pricing or outcome-contingent models. A few are even willing to pay a premium for guarantees or guaranteed availability.
All of these models can coexist. Your job is not to convince every client to fit your preferred pricing/billing method. Your job is to understand what the client values, then design a fee structure that reflects that.
In Implementing Value Pricing, Ron Baker lays out a clear, eight-step process for moving firms toward value-based pricing models. But even Baker doesn’t argue that it’s all or nothing. Instead, it’s about moving along a continuum, away from pricing based on effort, toward pricing based on value.
Hourly Billing Isn’t Going Anywhere, But It Shouldn’t Be the Only Option
Let’s be realistic: hourly billing isn’t disappearing anytime soon. And that’s okay. What we can do is evolve from relying on it as our only pricing model.
Hybrid models are often more practical and better aligned with both firm and client interests. A client might be on a monthly flat fee for routine advisory work, with defined scope projects priced at a fixed fee, and a litigation file on a success-based arrangement.
The point is flexibility. And when you build tailored fee structures, you change the conversation from “what’s your hourly rate?” to “how can we work together in a way that makes sense for both of us?”
Unique Pricing Drives Unique Value and Breaks the Race to the Bottom
If your pricing model looks like everyone else’s, then you’re just another commodity. That’s when clients start comparison shopping based on price alone.
But if you’re structuring your pricing based on deep knowledge of the client’s goals and preferred ways of working, you’re no longer interchangeable. You’re delivering something tailored and valuable. You’re a legal professional, not a plumber.
And most importantly, you’re helping the client win, which means you’ll win too.
Track Your Time Even When You’re Not Billing It
One more essential point: I believe you should still record time, even when using non-hourly billing models.
Time tracking isn’t just for billing. It’s how you understand your internal costs, opportunity costs, and profitability. If you abandon time tracking altogether, you lose visibility into whether a fixed fee or value-based arrangement is actually working for your business.
Think of it as managing a portfolio. You need data to know what’s sustainable and where the value really lies.
Value Pricing Doesn’t Mean Taking All the Risk
A lot of firms resist alternative billing because they think it means giving up control or taking on all the risk. But that’s not the point.
A good pricing model finds a win-win. The client gets predictability or performance incentives, whatever they need most. The firm gets fair compensation aligned with results and client satisfaction.
Bartlit Beck LLP, the original poster child for alternative billing, still did 50% of its work on an hourly basis in the early years. Why? Because not every client was ready to make the shift. Some simply weren’t comfortable. And even the most visionary firms need to meet clients where they are.
Stop Arguing. Start Listening.
We don’t need to keep arguing about which model is superior. Hourly billing is not the villain. Value pricing isn’t a panacea. What matters is what your client wants and needs.
If you build pricing options around that, you’ll build trust and long-term success for both you and your clients.
References and Further Reading:
- Ron Baker, Implementing Value Pricing: A Radical Business Model for Professional Firms
- The American Lawyer (1995), Diamonds Are This Firm’s Best Friend – Profile of Bartlit Beck and its hybrid approach to alternative fees
