Profits Suffer When Firms Use AFAs, Report Shows

Law360 (Link to Full Article, Sub. Req.) A new survey shows that most law firms are making less money on matters using alternative fee arrangements than on comparative matters billed hourly, a conclusion experts say signals that firms are struggling to grow their bottom lines with creative pricing options while competing against a minority of firms that have leveraged detailed budgeting systems to profit from the transition.

In a joint survey of nearly 1,100 private practice lawyers and corporate counsel by Law360 and The BTI Consulting Group, the majority of law firms — 39 percent — said alternative fee arrangements were less profitable than hourly billing, while 22.3 percent said they were more profitable. Of the remainder,16.4 percent said they were the same as hourly billing, and 21.9 percent said they didn't know if profitability was different using alternative fees.