IN THIS ISSUE

Landmark Study of Billing Rates and Practices at Solo Practices and Smaller Firms

Just as the year was ending, we finally sent the ALM Research Survey Report: Billing Rates & Practices to the printer. This was our first-ever survey of billing rates and practices at solo practices and smaller firms, and it was a huge effort, starting last spring when we did a test survey of Illinois lawyers. During the summer we sent invitations to lawyers all over the U.S. to take our web survey. Ultimately, over 5,000 law firm lawyers participated, most of them the leader, manager, partner, shareholder, or owner of their firm.

And what did we find? About 98% of the respondents volunteered information about their hourly billing rates—highs, lows, and averages. The average billing rate, nationally, is $240 and the median $225. Some conventional wisdom about billing rates was confirmed—the larger the firm, and the more years in practice, the higher the billing rate. Billing rates are higher among lawyers on both coasts than they are in the middle of the country, and highest in New York City and Beverly Hills, Washington, DC and San Francisco, and New York’s Long Island region.

Study finds disparities in billing based on gender
But other findings defied explanation. In particular, we found that female lawyers rather consistently bill at lower rates than males, regardless of firm size, years in practice, geography, and—with a few exceptions—practice area. Why is this? Perhaps that is the subject of another research study.

Alternative billing practices are popular
Although there have been many resounding calls and announcements over the years for the “death of the billable hour!” our study seems to show that the practice of billing by the hour is very much alive. On the other hand, so are alternative billing practices—e.g., fixed or flat fees, contingency fees, retainer arrangements, hybrid fees, blended hourly rates, capped fees, and so on. A large section of the survey was devoted to exploring which lawyers offer alternatives to, and variations on, the billable hour, what types of alternatives were most popular, and the percentage of revenue derived from these alternative practices.

A significant majority (88%) reported that they offered alternatives to the billable hour, with 37% of their annual revenue, on average, derived from these alternatives; 69% reported offering variations on the billable hour, with 29% of their annual revenue, on average, coming from these variations. However, the percentage of revenue obtained from these alternative billing practices was significantly higher for solo practitioners than it was for lawyers from small and midsize firms.

Interestingly, male attorneys were more likely to offer alternatives to, and variations on, the billable hour, regardless of the type of alternative or variation offered, with only a few exceptions.

The ALM Research Survey Report: Billing Rates & Practices is now available through ALM Research Publishing. Print copies, which include a PDF of the report, are $550; the PDF only version sells for $495. Participants in the study are eligible for a 20% discount.

The report provides a cross section of billing data segmented by firm size, geography, practice area, number of years in practice, client industry, gender, and several other variables. And, wherever possible comparisons to large firm billing practices are made, using data from the NLJ Billing Survey (more on that below).