Alternative fee arrangements (AFAs) have become increasingly popular among law firms, especially as consumer expectations keep shifting.
AFAs are essentially any arrangement other than the traditional hourly billing.
Some AFAs can also sometimes be referred to as value-based billing.
Here are 10 types of AFAs that you may consider for your practice:
- Portfolio: a lump sum paid for a large body of work, with scope predefined.
- Hard cap: same as hourly billing, but the client will only pay up to a predefined budget.
- Phased Budget-Based Billing: for large transactions, where work is split into phases and a budget is assigned to each phase before its start, similar to software development “Sprint”s.
- Contingent Fees: percentage of client’s recovery or award, common in personal injury.
- Fixed or Flat Fees: preagreed fixed fee for a piece of work over a predefined time period.
- Blended Rates: hourly rates of partners are blended and a single rate is charged to the client.
- Dead Deal Discount: if the transaction fails, the client will not pay the full sum for the case, can be set as a percentage amount or a lump sum.
- Success Fees: fixed or percentage fee paid if the firm achieves a favorable result, can easily be combined with other AFAs.
- Un-bundeled services: allowing your clients to handle parts of the case themselves.
- Subscriptions: recurring monthly charges for a set of deliverables or ongoing support, e.g. fractional general counsel.
Source: https://pro.bloomberglaw.com/alternative-fee-arrangements-glossary/
