Pricing Policy
The price does not only provide income but also defines profitability, transmits an image, builds a brand, and serves as a sign of quality. Therefore, it plays a key role in both customer loyalty and the recruitment phase. In times of crisis, defining a “good price” becomes even more important because a fair and competitive price can attract more clients, leaving the rest—the hard work of maintaining those clients—up to the lawyer’s dedication and service quality.
Never make the mistake of mixing “fees” and “expenses.” These are two completely different concepts and must be treated separately. Fees refer to the lawyer’s professional remuneration, while expenses are the costs incurred on behalf of the client. For this reason, a separate reference to expenses, which must be supported by the client, is essential. Typically, a written agreement between lawyer and client includes prior authorization from the client allowing the lawyer to make these expenses, which the client will ultimately bear. This authorization should ideally be obtained before making the expenses; otherwise, it becomes difficult for the lawyer to justify them later. A lawyer should never advance expenses that are meant to be paid by the client, as recovering these amounts afterward is much harder than obtaining funds beforehand. The best solution is to have the client pay expenses directly, without the lawyer’s intervention, and all expenses should always be properly documented.
Both the agreed price and the authorization for expenses should always be made in writing. Likewise, lawyers should record their working hours, preferably through a reliable cloud-based management program. This is important not only for internal control—helping to assess client profitability—but also as evidence in case a client questions the hours worked, especially in hourly billing arrangements. Written records also serve as legal protection in case a client fails to pay. Having a written fee and expense agreement signed by the client, and preferably notarized or witnessed, can serve as valid proof of debt in court. For example, under Portuguese law, such a signed document allows a lawyer to initiate direct legal execution against the client without first going through a separate case to establish the existence of the debt.
The “price per hour” should be defined based on past work references and actual performance. To calculate it, the lawyer should take the total value received from clients in the previous year, divide it by 11 months, then by 20 working days per month, and finally by 6 working hours per day. For instance, if a lawyer earned €50,000 in one year, the calculation would be €50,000 ÷ 11 = €4,545 per month; €4,545 ÷ 20 = €227 per day; €227 ÷ 6 = €37 per hour. Therefore, the lawyer’s hourly rate would be €37. This calculation should be done after deducting office costs, ensuring that the rate reflects true net income. Every lawyer should know their own hourly rate, even if they don’t use it for client agreements, as it provides clarity on their work value and profitability.
When presenting a price to a client, several factors must be taken into consideration: fixed and variable costs, desired profit margin, productive capacity, and the number of billable hours. Lawyers should also consider their level of competence, the perceived value of their services to the client, and how sensitive the client may be to price. The purpose of the price—whether it is for market entry, customer retention, or long-term loyalty—should also be factored in, along with rate variations depending on client location, urgency, discounts, or specific circumstances.
There are various methods for setting legal fees. The first is by hourly rate, a common Anglo-Saxon practice that requires recording time spent per client. While it simplifies billing, it can cause anxiety for clients who lack a clear sense of total cost. Excessive billing pressure may also lead to inflated hours, known as “padding.” On the other hand, some argue that hourly billing discourages efficiency and penalizes experienced lawyers. A better approach may be to establish a maximum number of hours per service to reduce client uncertainty.
Another method is the fixed or “flat” fee, where the lawyer charges a set amount for a particular service. This approach reassures clients by giving them certainty about total costs and promotes efficiency and productivity. However, it transfers the risk to the lawyer if the project becomes more complex than expected. It is best suited for standardized or predictable work, where the scope and conditions are clearly defined, and any exceptional circumstances are specified in advance.
Retainer fees are fixed, prepaid amounts charged for a defined period or specific services. They are effective in maintaining client relationships and ensuring predictable income. Contingency fees, on the other hand, depend on the outcome of the case, where the lawyer receives a percentage of the client’s success or financial gain. Although full contingency arrangements are prohibited in some countries, partial success-based fees are often accepted, especially in litigation, real estate, and financial matters. A variation of this is the “success fee,” often used in corporate mergers and acquisitions, where a base fee is paid for due diligence and an additional amount is tied to successful outcomes.
A modern approach, known as Legal Project Management, defines legal work as a project with specific steps and deliverables. This method allows lawyers to communicate pricing more transparently and align their language with that of clients, helping both sides better understand scope, progress, and value.
In conclusion, there are multiple ways to reach an agreement with clients regarding legal fees. Each lawyer must determine the pricing method best suited to the specific nature of their work and the client’s expectations. Although I personally do not prefer the “price per hour” model, I believe every lawyer should at least know their own hourly value to understand how efficiently they are working and for what return.
