New Survey of Billing Rates for Small and Midsize Law Firms

Are you as a lawyer charging the full value of your services?  How do your fees compare with those of another lawyer at a competing law firm? What is the average billing rate for a lawyer with 10 years in practice in Chicago? Now you can find the answers in Billing Rates and Practices Survey Report, a landmark new study just published by Incisive Legal Intelligence.

In the marketing plans I've written for law firms, I find that many firms don't charge enough money for their services, or they have no facts upon which to base their rates. With this new report, lawyers can look up the top ten practice specialty areas sorted by firm size; average billing rates by firm size; the highest, lowest and average hourly billing rates for mid-sized firms; and the average billing rates by metro area and number of years in practice.

For example, I would use the report to help law firms with strategic planning by identifying which practices command the highest fees.  For example:

• The average billing rate for insurance defense in a law firm of 21 to 40 lawyers is $183 per hour.
• The average rate for intellectual property in a law firm of 21 to 40 lawyers is $279 per hour.

Accordingly, I would advise a law firm of this size to stop hiring lawyers, training associates and marketing its insurance defense practice, and develop an active business development initiative to attract intellectual property clients.

The gold in the research are the tables that a lawyer can use to look up the average billing rates by region or metro area, sorted according to firm size. For example:

• The average billing rate for a lawyer in a firm of 2 to 8 lawyers in the Chicago-Naperville-Michigan City, IL-IN-WI metro area is $175 per hour.
• This compares to $351 per hour for a lawyer in a firm of 2 to 8 lawyers in the Houston-Baytown-Huntsville, TX, metro area.

I would use this information, for example, to advise a law firm in Des Moines that is considering opeing an office in Chicago.

Survey demographics

The report provides benchmarks for lawyers in mid-sized law firms to assess the billing profiles of their competitors, and for corporate counsel to evaluate billing rates across specific segments of the legal profession. A total of 255 firms provided standard hourly billing rate information for 14,248 lawyers. (Sole practitioners are excluded).  

Up to now detailed financial data has been available only about the 200 largest law firms.  This new study focuses on mid-sized firms, with the largest preponderance of firms having 21 to 40 lawyers.

Highlights of the report

The majority of firms bill by the hour, regardless of firm size. The average hourly billing rate for attorneys, nationwide, is $284. The median is $265. The larger the firm, the higher the billable rate. Additionally, as the number of years in practice increases, the average billing rate also increases.

• The average billing rate, nationally, is $284 and the median is $265 per hour.

• It's no surprise that larger firms generally have higher billable rates than smaller firms. But there is an exception of firms with 2 to 8 lawyers. Firms with 2 to 8 lawyers have an average billing rate of $262, firms with 76 to 150 lawyers have an average billing rate of $295 and firms with over 150 lawyers have an average billable rate of $333.

• As the number of years in practice increases, the average billing rate also increases.

• The Middle Atlantic (PA, NY, NJ, CT, RI, MA, VT, NH and ME) division has the highest average billable rates, with an average hourly billing rate of $325. The Pacific (CA, OR, WA, HI and AK) division also has higher billing rates with an average hourly billing rate of $319.

• Billing rates are lowest in Central divisions of the U.S. including, West North Central ($247) and East South Central ($250). New England ($258) and Mountain ($261) have billing rates that fall in the middle of the pack.

• When looking at billing rates by region, the Northeast has the highest billable rate ($319), followed by the West ($296). The South ($276) and Midwest ($264) have lower average billable rates.

• Lawyers in large metro areas report the highest average hourly billing rates nationally, led by Washington DC ($367), Philadelphia ($359), and New York ($354). Rates vary when looking at metro areas by individual firm size.

• The practice area with the highest hourly billing rate is Plaintiffs’ Contingency Litigation ($413), followed by Labor/Employment ($302), "General Law" ($296) and Real Estate/Land Use ($294).

• The specialty areas with the highest hourly billing rate nationally are Other Non-litigation ($454), Other litigation ($384), Commercial/Contract ($379), Insured Defense ($370) and Real Estate ($358).

Alternative fees widespread

In addition to billing by the hour, many firms also offer alternatives to, and variations on, the billable hour. More than eight-in-ten (88%) of mid-size law firms offer alternatives to the billable hour—e.g., fixed or flat fees, contingency fees, retainer arrangements, capped fees, volume discounts, success-based fees, premium billing, equity in lieu of fee, and retrospective fees based on value. Nevertheless, the report offers guidance on when to offer an alternative rate, and when to simply offer a discount.

Larger firms are more likely to offer alternatives and variations to the billable hour than are smaller firms. Contingency arrangements and fixed/flat fees are the most popular alternatives and variations.

Copies of the report are for sale at http://bit.ly/169v6R, with 20% discounts available for subscribers to the Incisive Legal Intelligence database.