With this trend, some firms have proactively proposed other pricing agreements (AFAs) as a business development tool, changing the perception that lawyers only collect hours and give clients a predictable structure of cost control. Generally speaking, other tariff agreements are defined as all kinds of fixed tariff structures. What do AFAs look like in practice? We summarize some of the following variants: Although alternative pricing regimes are considered the closest limit to the profitability of law firms, their introduction has been slower than expected. Below we`ve put together a (non-exhaustive) introduction to the most common alternatives to hourly billing: you need to choose the right deal for your business. They require experience and careful preparation. But as we have seen, these alternative pricing agreements have considerable value for law firms and their clients. 7. Businesses create trust – While this factor is mentioned for the last time, it is perhaps the most important. In the eyes of a customer, trust is essential. Finally, after lengthy negotiations, agreements can be written down, but ultimately the client must have confidence in the delivery of the firm. This factor is subjective, but critical. „Clients end up asking, `Will my firm do the right thing if something goes wrong?` Rynowecer explains. This pricing method is perhaps the most common of all alternative pricing arrangements and allows the customer to pay an hourly rate or an anticipated rate lower than that normally calculated by the company, in exchange for a payback percentage if the business succeeds.
This type of agreement allows customers to reduce their costs and promotes a higher sharing of risk between the customer and the company. While AFAs may have lost some of the momentum they enjoyed in the early 2010s, that doesn`t mean they`ve kept up in terms of importance. „Every sign we receive in our research shows that alternative fees and prices will be more important than ever as clients try to prepare for a record number of cases,“ said Michael Rynowecer, president and founder of BTI Consulting. Every situation is different and we work with our clients to develop tailor-made alternative pricing agreements to achieve the best value and result. Here are some examples of programs we`ve used successfully: An alternative pricing agreement is defined in bulk as any type of attorney`s fee agreement in which a client pays a lawyer something other than a traditional hourly rate for the legal work done. Sometimes alternative pricing arrangements are referred to as „AFAs“ or the more recent term „value-based settlement.“ The fact is that a lawyer is paid for the value provided for the legal service, as opposed to the time required to provide the requested legal service. At Paul Hastings, we`ve worked with our clients to develop risk-sharing solutions and other pricing arrangements to help them address some of today`s most pressing business challenges.