I wish I knew how to quote for jobs
20 April 2012
One of the most problematic and sensitive areas for any lawyer is the end of transaction billing conversation.
That is because, at least in the world of property transactions, we don’t have access to a crystal ball and it’s incredibly difficult to quote accurately at the outset. Generally, either client or lawyer ends up unhappy. More often than not, it’s both. For a profession whose raison d’être is protecting clients’ interests, this is one area where those interests are not aligned with our own.
We have all been there. The client phones for a quote on Transaction A. The lawyer (already feeling anxious) knows that Transaction A doesn’t really exist and that it will be Transaction B, C or even Transaction F. No point saying that to the client. They don’t care. And how do we bridge the gap between the clients’ requirements for certainty and the lawyer’s reluctance to take a bath? Hmm.
There are a number of assumptions one traditionally adopts when assembling a fee quote. I’m sure these appear on your list too. Here are a few old faithfuls:
“Transaction as initially described”
What is “described” by the client as a “straightforward purchase of a leisure centre in Hull” for example, doesn’t give you a lot to work with. And don’t you just love the use of the word “straightforward”? If they really go to town and give you a sales brochure, you might gather that there are a number of leases. But the brochure doesn’t tell you whether those leases are 40 pages or 90 pages long, or whether they are all alike. Or indeed whether they are drafted by an idiot, which many are.
“No unexpected issues”
Again, when did a transaction not contain an unexpected issue? From planning breaches to rights of light; from tax structuring to contamination- there are myriad issues, all of which the client regards as fairly normal but each of which involves massive amounts of extra due diligence and which will completely mess up your beautifully crafted estimate.
“No tax/structuring advice to be given”
That’s all very well, but inevitably the transaction will need the tax ’once-over’ whether by a lawyer or a client’s own tax adviser and even more inevitably, the tax adviser will raise some issue which will need your lovely structure chart to be amended yet again, until it ends up looking like a diagram for genetic coding. Possibly more complicated than that. SDLT forms? Wash your mouth out.
“The transaction proceeds in a timely manner and within the timescale originally envisaged”
Oh, indeed. One lawyer’s idea of ’timely’ is another’s idea of slow death. Quick and dirty is how we want it. A real deadline with real money penalties that concentrates the mind and makes the transaction zip along is what we want, every time. Flexible deadline? Straight to the ’client isn’t screaming’ pile. Not that any lawyer would admit to having one, mind you. And then, the inevitable passive-aggressive ’not my fault’ email, copied to the world, heralding the start of the defensive arse-protection dance and the end of the civilised transaction.
Transactions that go past their natural sell-by date are always the most painful and contrary to client jibes, delays are really not about lawyers looking to drag the transaction out. They are - mostly the result of lack of preparation on one or both sides of a transaction - often caused by unrealistic client expectations as to the work involved or the classic client command to ’make haste slowly’ while they organise themselves.
So, what’s the answer? I have come to the somewhat depressing solution that there simply isn’t one, at least not in property. So what do we have??
Charging on time? You can’t charge simply by the clock, because often it isn’t fair, either to the client, who may be paying for an assistant’s learning curve, or to the lawyer, who may be incredibly quick but who may add huge amounts of value through the quality of the advice.
A fixed fee? Fine as long as you can gauge the unknowables, but in tricky areas such as development agreements, that’s incredibly hard to judge. And a percentage can be fine, but I find the clients tend to start shaving it once the values increase.
Market price? There does seem to be a ’going rate’ for certain kinds of job and one can often guess what other firms might be quoting. It’s incredibly hard, though, trying to quote realistically for a job based on your experience without scaring the horses. To get the job (and to compete with the low-ballers) we invariably quote on plain vanilla and then, when the transaction becomes Rocky Road, we have to readjust. Unhappy client.
Negotiation? This is my favourite. All the others end here too, in any event. I have persuaded some clients to trust me and not make me spend hours finessing a fee quote that will inevitably be ignored right till the end, when I want to change it. Yes, yes, I do indeed deal with this in my client care letter.
For those clients who get it (and this takes years of trust - on both sides) I don’t quote at the outset, other than giving a very rough gut feel estimate. I do the job then we have a discussion at the end. You can’t really know what’s reasonable until it’s all done.
The final proposal will be based on a combination of time, performance, value and fairness. It’s the modern equivalent of what we used to do in pre-history i.e. when I started, before the world of the billable hour. Weigh the file and see what it felt like.
Nicky Richmond is managing partner of Brecher