“Estimating is what you do when you don’t know.”
~ Sherman Kent
A young lawyer named Eve called me today. She had made the same mistake that I made numerous times in my first few years of practice. She had quoted an hourly rate for reviewing and reporting on a draft agreement without providing an estimate, and then issued a bill for her time.
The client said that the bill was too high. Never in his wildest imagination had he contemplated that the job would take that much time. He did not want to pay.
I told Eve that she had made a rookie mistake. What she should have done is provide an estimate and stick to it.
Eve protested. How could she have given a reliable estimate before reviewing the agreement? Here is what I told her:
- Always provide an estimate, even if the client does not request one, with the possible exception of a client for whom you have worked for years, who can afford you, respects and appreciates your advice, and thinks that you walk on water.
- Ask for a copy of the draft agreement before you provide the estimate. Take some time to see what you are dealing with. How long is it? Has it been professionally drafted? Does it look like it is somewhat fair? How much time do you think that you will spend on it? Then provide your estimate. Your worst case is the client will not want to proceed and you will have wasted some time preparing the estimate. That’s okay.
- When you do provide the estimate, clearly set out your scope of work. Tell the client that the estimate covers reviewing the document and discussing your recommendations. After that has been done you will provide another estimate for the next step.
- When the initial work has been done and the client has decided how to respond, you can provide another estimate. There are so many possibilities as to what is going to happen next, that there is no point trying to contemplate this work in the first estimate. For example, the client may decide to:
- walk away;
- ask you to draft some minor changes;
- ask you to make massive changes;
- ask you to draft a letter setting out the required changes;
- ask you to discuss a few points with the other side before doing any drafting; or
- ask you to arrange a meeting with the other side and counsel to work things out.
5. When the other side responds, you can provide another estimate for the next stage of the work.
6. Rinse, repeat, and do it again.
Lawyers get themselves into trouble when quoting fees in two different ways:
- like Eve, they quote an hourly rate and provide no estimate. The client rarely has a number in mind which is as high as the bill that the lawyer wants to issue; or
- they try to provide an estimate for the whole matter at once in circumstances where they cannot know how much work is involved.
Now you know how to do it!