Failure to investigate the law firm your company uses and its billing practices may be asking for unpleasant surprises. Just ask the client who was billed $33.80 for coffee, juice and a danish. Oftentimes, legal fees are arbitrarily based on whatever your company is willing to pay. But keep in mind that when it comes to fees, everything is negotiable–from hourly rates to the price of photocopies.
Afraid of offending their attorney or appearing stingy, some business owners are shy about negotiating. If your lawyer objects to discussing legal fees up front, get another attorney, says Gregory Gorman, a partner with Allen, Matkins, Leck, Gamble & Mallory in Los Angeles. There are various billing methods. Choosing the right one can save you headaches and money:
Flat rate. Flat fees and projected budgets were once used only by small firms. Today, most firms are willing to discuss them. Flat fee arrangements are more practical for boiler-plate matters such as standard contracts and lease arrangements. Any budget or flat fee will probably include variables for glitches, e.g., if the matter requires more negotiations than anticipated. On the downside, flat rates could tempt the lawyer to do only the minimum or use a green attorney or paralegal. Discuss staffing up front.
Blended rate. Here, time is billed at an hourly rate, around the midpoint between the firm’s highest and lowest rates. For example, if those fees are $250 and $125 respectively, your firm would be charged about $185. A blended rate is cost effective if you have various business transactions requiring input from attorneys with varying levels of expertise.
Discounts. If your company has or expects to have considerable legal work, try to negotiate a standard discount. For example, ask for a 10%-15% reduction if the bill is paid by a certain time. But be sure to discuss discounts up front. Attorneys get upset when a client who agrees to a fee structure asks for a discount after he or she sees the bill.
Gorman advises requesting regular status reports, reviewing your bills thoroughly and promptly discussing any questions with your attorney. He also warns that while saving money is important, it shouldn’t come at the expense of quality legal advice. “A less experienced attorney or one with fewer resources can end up costing more if they’re incompetent or unfamiliar with the work you need.”