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Flat Fee and Up-Front Pricing, Death to the Billable Hour

by Kristina Haymes

From the blog Mediation Marketing Tips

Kristina Haymes

The ABA Journal picked up an article originally published by the Boston Globe about a Boston area employment lawyer, Jay Shepherd, who has banned the billable hour in his law firm.

Not surprisingly, Shepherd says revenue is up and his firm’s lawyers are more efficient.

Many mediators have asked me, is it possible to offer flat fee mediations or offer up-front pricing?

The answer is a resounding YES! The top of the mediation market is a flat fee of $10,000 per mediation. (There are only a small handful of mediators who charge this, the top 1% of the field). Although, I recently heard about a mediator getting a $50,000 fee for mediating a pre-litigation dispute where two companies were at an impasse on a business deal and both sides were interested in getting a deal done. In a multi-million dollar deal, $50,000 is less than the legal fees and if it can ensure the parties can get to the finish line, then it makes good economic sense for everyone involved.

Some people refer to it as value pricing.

I’ve written about pricing in general here but didn’t discuss the flat fee concept.

In some markets like Los Angeles, for example, most mediators charge a daily fee or half day fee. What about charging a flat fee for the mediation? I have offered this to clients and most still compare it to hours for dollars. Others are happy to have any risk (of a large number of hours) taken out of the equation. Just as with lawyers, when parties know they are paying a flat fee, they don’t worry about how long something takes and know you will do what needs to be done to get the job done.

You can define the scope of what is included in the flat fee and if new circumstances arise, propose to change the original agreement.

It makes more sense in the mediation arena to offer flat fees than in the legal arena since there are far fewer contingencies for mediators.

Flat free pricing is a form of risk reversal for clients and if they are getting good value from you then this pricing approach should meet with little resistance.

In some newer mediation markets where everyone else is charging by the hour, mediators I have talked with are hesitant to be the first to offer flat fee pricing.

There are a lot of good reasons to be the first. Follow Shepherd’s lead, it appears to be a win-win for everyone.

NEVER GIVE UP!

Kristina Haymes

p.s. Many mediators have complained about the incentive that defense lawyers have to bill the file before they go to mediation. So, if more firms like Jay Shepherd’s shun the billable hour, could this be good for mediation?

Of course, there are many other sound reasons why a case needs worked up a bit before mediation is worthwhile. Many defendants will want a deposition or two before mediation and the exchange of documents. Some discovery can be very helpful for everyone involved. Having mainly done defense legal work but also some plaintiff’s work, and having mediated disputes, I think some discovery is often necessary.

Biography


Kristina R. Haymes is a mediator of litigated and non-litigated cases.  She has successfully assisted parties in resolving employment, real estate, commercial and family business & estate disputes.

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Website: www.kristinahaymes.com

Additional articles by Kristina Haymes