What is a lawyer worth? Why does this “New-School” lawyer still charge by the hour?
Law is a service profession. As much as fancy-pants lawyers want to pretend they are special, paying for legal services is no different than hiring a mechanic, electrician, or plumber. We pay for services for three reasons: (1) we lack the knowledge, skills, or tools required to achieve the desired result; (2) we lack the time to perform the task or obtain the necessary knowledge, skills, or tools; or (3) we don't want to perform the task.
Think of it this way:
You can't pull an engine without some know-how and a lot of tools. You can't conduct case research without some know-how and access to a legal research platform.
It'll take you a heck of a lot longer to wire a house than it would take an electrician. It'll take you a heck of a lot longer to do regulatory compliance research than it will take a lawyer.
A few YouTube videos and you could certainly figure out how to replace an old clay sewer pipe rotting in your backyard ... but would you want to? A few YouTube videos and you could probably figure out how to handle some government fillings ... but do you really want to?
What is a service worth? It is worth the value that is passed on to the client. In reality, that amount is a fixed fee of some kind. Some people would pay $1000 for an oil change if there was no alternative and it meant they didn't have to crawl under a car. Others would never pay a dime. That fixed fee is driven up by demand and reduced by competition - welcome to Capitalism 101.
If the true value of a service is fixed, why do lawyers, electricians, plumbers, and mechanics often charge by the hour? Here is my answer: even though the theoretical true value to the client is fixed, the opportunity cost to the service provider is not. In other words, my time is worth money. If I encounter unpredicted issues on a fixed-fee matter, I lose the opportunity to spend my time on something more lucrative.
When it's clear what the service entails (estate planning, entity formation, government filings), you get a flat rate. If I can't accurately predict how much of my time the service will take (contract reviews, complex and ever-changing transactions, compliance research), I'm billing you by the hour at a rate competitive in my market. As a remote transactional lawyer licensed in Washington, California, and Texas, I operate in several “markets.” They fall into two categories. There are large metropolitan markets like the Silicon Valley & San Francisco Bay Area (where I currently live), the greater Seattle area (where many of my long-time friends, family, and colleagues live), and Austin (where I’m building a business network). There are rural markets like Eastern Washington (where I grew up), Central California (where my wife’s family hails from), and massive swaths of Texas.
In theory, I might be able to get away with charging $700/ hr in the Bay Area, $600/hr in Seattle, and $500/hr in Austin. There are two reasons I don’t do that.
I don’t want to leave rural clients and small businesses out to dry! Should a person in Ritzville, Yakima, Tri-Cities, Spokane, Paso Robles, Fresno, or rural Texas pay $700/hour to have a contract reviewed? Should a small service-based business in Silicon Valley pay venture capital startup prices just because they’re located in San Jose? Probably not.
In general, the cost of legal services is unnecessarily high. The entire legal market is a bubble on the verge of bursting. As technology improves the ease of addressing legal issues and allows more consumers to obtain legal services, demand will drop – and so will service rates! I’d rather operate at a price I think is fair to the client than one that pushes my rate to the max just because I can.
Since I became an attorney in 2022, I’ve charged $225/hour. I came to that number based on what I thought was a fair rate for a competent 1st-year associate (newly-licensed) attorney in Spokane at that time. Today, 2.5 years later, I’m raising my rate to $300/hour (a total increase of 33%). Part of the reason for that increase is inflation (around 9.58% cumulative predicted between 2022 and 2025; this is the calculator I used, assuming 2.5% for 2025). But where does the other 24% come from?
In a traditional law practice and many other professional service industries (e.g., accounting, consulting, etc.) it is common to have a strict system for increasing the rates of associates on an annual basis (e.g., inflation rate plus 5% each year). The assumption is that one year of experience equates to a fixed percentage increase in value to the client. Frankly, it’s a silly, unsophisticated system. Billing rates should be based on competency – the speed and quality of service – not the amount of time a service provider has held down a job. These systems are shortcuts used by folks who are either too lazy or not creative enough to come up with ways of assessing individual performance.
I’ve always provided quality work product. I’m now charging $300/hour because I think it’s the going rate for an attorney in Eastern Washington who can provide similar quality work in a similar amount of time. At that rate, my Silicon Valley, Seattle, and Austin clients get a screamin’ deal and my rural clients get access to a fully remote attorney at a competitive price.
– Tyler O’Brien –
P.S. Existing clients and potential clients who booked a consultation or received a quotation before October 15, 2024, will receive my old rate ($225/hour) through the end of 2024.
