Small Firm Woos Clients with Monthly Subscription Model

With all the buzz about moving away from the billable hour, the question is, "What actually works as a replacement."  For one firm, it is a monthly subscription model.

In a Law.com article, Small Firm Woos Clients with Monthly Subscription a 5-person San Francisco firm talks about how they are now getting 90% of their revenue from a subscription based model:

When lawyers Todd Smithline and Raj Jha negotiate terms with a new client, they never bring up the billable hour anymore. For the last two years, their five-lawyer San Francisco firm, Smithline Jha, has made an almost complete switch from traditional billing to a monthly subscription model.

"We did find all this tracking of hours and dealing with conversations around rates to be distracting, and we didn't think the billable hour was a good way to measure the value of the services we provided," said Smithline, who estimates that more than 90 percent of the firm's revenue can now be attributed to such monthly subscriptions.

Having spent most of my practicing years in a contingency fee practice, billable hours have never seemed "natural" to me.  In fact, the few times I worked on hourly billed cases, it felt unnaturally confining to me.  Instead of worrying about how I could most effectively and efficiently solve the problem, I was concerned about how do justify every 6-minutes of my time.  Efficiency is punished not rewarded because you are not billing as many hours (or "rewarded" with having more work poured on).  The motivation just seemed backwards.

The subscription fee, while perhaps not right in all cases (what is?), strikes me as a great model from an incentive standpoint.  The firm and associate are incentivized to be efficient for the client - if you can solve the problem quickly, you get, in essence, a bonus.  The firm gets a steady income stream.  The client gets predictability and that predictability would naturally translate into happier clients and far easier fee collection.  I think the model has promise and can probably be effectively used in many billable hour situations.

For the full article:  mall Firm Woos Clients with Monthly Subscription.

- Peter H. Berge

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