{"id":118859,"date":"2025-05-13T07:02:31","date_gmt":"2025-05-13T15:02:31","guid":{"rendered":"https:\/\/xira.com\/p\/2025\/05\/13\/billable-hour-dying-so-slowly-youd-think-its-billing-by-the-hour\/"},"modified":"2025-05-13T07:02:31","modified_gmt":"2025-05-13T15:02:31","slug":"billable-hour-dying-so-slowly-youd-think-its-billing-by-the-hour","status":"publish","type":"post","link":"https:\/\/xira.com\/p\/2025\/05\/13\/billable-hour-dying-so-slowly-youd-think-its-billing-by-the-hour\/","title":{"rendered":"Billable Hour Dying So Slowly, You\u2019d Think It\u2019s Billing By The Hour"},"content":{"rendered":"
\"\"
<\/figcaption><\/figure>\n

Death, taxes, and the impending demise of the billable hour. Every year, we hear about killing the billable hour and every year, it lives to see another day. But the creeping adoption of artificial intelligence introduces some structural and ethical pressure to the alternative fee movement.<\/p>\n

Still, don\u2019t expect a quick change. You can\u2019t turn a cruise liner on a dime. Though you can run it headlong into an iceberg.<\/p>\n

The latest Legal Trends for Solo and Small Law Firms<\/a><\/em> report from Clio<\/a> takes stock of the billing transition and reminds us that no matter how loudly the clients may want it, the billable hour won\u2019t disappear easily.<\/p>\n

While the report \u2014 compiled through a combination of surveys and Clio\u2019s aggregated and anonymized data from tens of thousands of users \u2014 notes that, \u201cflat fee billing is gaining traction,\u201d and a \u201csignificant proportion of solo and small firms also offer flat fees,\u201d hourly billing remains the dominant model especially among smaller firms.<\/p>\n

\"\"
<\/figcaption><\/figure>\n

But just because the billable hour continues to reign supreme, don\u2019t sleep on those flat fee numbers. Three-quarters of solos and nearly two-thirds of other firms have flat fees in their billing arsenal. One of the biggest hangups for flat fee billing is building the confidence to accurately price out a project \u2014 confidence that\u2019s only going to increase the more firms experiment with it.<\/p>\n

Yet time-based billing still wins. From the law firm\u2019s perspective, hourly billing is\u2026 cozy. It\u2019s tradition, it\u2019s easy to understand, and it rewards inefficiency. And for smaller firms who have to worry about cash flow, the billable hour provides valuable security against the unexpected:<\/p>\n

\n

Hourly billing can provide a more predictable revenue stream for firms based on the time worked. For solo and small firms, which often operate with fewer financial buffers than larger firms, hourly billing can feel like a \u201csafer\u201d option as it provides a better sense of how they are being compensated for their time.<\/p>\n<\/blockquote>\n

Clients, on the other hand, have more of an appetite for change. The report notes: \u201cOver half of potential clients would prefer to pay their lawyers using modern service delivery models, like flat fees or subscriptions.\u201d They want to pay for legal services the way they pay all their other vendors. Facing constant budget pressure, turning in a consistent and predictable cost projection makes life easier for in-house lawyers. <\/p>\n

Artificial intelligence seems like the catalyst to bridge this divide between firms and clients. Lawyers can\u2019t bill for the time saved by shaving \u201c.5\u201d off every update memo. As much as AI enthusiasts like to claim that firms will make up this difference by working more matters, there are only so many clients to go around. The Clio report looks at the tasks most likely to get streamlined by AI \u2014 and not some hypothetical \u201cmagic beans\u201d AI<\/a>, but the sort of practical AI applications we\u2019re already seeing \u2014 and it\u2019s going to take a hefty bite:<\/p>\n

\n

However, spending less time on your files can present a challenge for revenue in some cases. Notably, in the latest Legal Trends Report, we discovered that the three most automatable tasks in law firms generated, on average, at least $36,000 in revenue per lawyer annually. When factoring in how much of this work could be automated, we found that generative AI could put $27,000 of annual revenue at risk for every lawyer who sticks to hourly billing. Adjusting your billing models to better account for the impact of automation is thus a critical consideration for law firms that are significantly adopting AI.<\/p>\n<\/blockquote>\n

Losing $27K in revenue per lawyer is significant at any level, but for solos and smalls that\u2019s a devastating hit.<\/p>\n

When that billable time starts evapoating, lawyers are going to have to find a way to get the same bucks for their bang. And while the idea of charging $10,000\/hr makes headlines<\/a>, it\u2019s going to be less palatable to a client than charging one flat fee that generally mirrors what the firm would charge in total hours billed today. <\/p>\n

So you\u2019re never going to stop logging your time, but it\u2019s increasingly likely to be an exercise in accurately estimating flat fees \u2014 either for whole matters, or specific projects, or subscription billing \u2014 as opposed to a direct pass-through to the client.<\/p>\n

Advancing technology has promised to undermine the billable hour before, only to be proven wrong. \u201cOnline legal research will save all that time in the library!\u201d Well, no, it just gave the attorney easy access to more cases they have to read. \u201cSpeed\u201d was just a means to the end of giving lawyers an opportunity to provide a \u201cbetter\u201d answer. Across practices, computers just added as much (or more) work as they\u2019ve saved. But the automation potential for generative AI isn\u2019t promising lawyers \u201cmore\u201d or \u201cbetter\u201d results as much as a replacement for time-consuming steps in the workflow. Generative AI still saddles a human with more checking on the back end \u2014 or sanctions<\/a> \u2014 but the draft gets into that partner\u2019s hands by replacing 10 hours of junior associate work that was about to get a vicious red pen markup.<\/p>\n

When minutes and hours start shifting to AI, firms that don\u2019t adapt their billing models will see money go out the door. The sooner firms can begin the process of flat fee billing \u2014 if only to start accumulating data points to set prices down the road \u2014 the better.<\/p>\n

\n

\"Headshot\"Joe Patrice<\/a>\u00a0is a senior editor at Above the Law and co-host of Thinking Like A Lawyer<\/a>. Feel free to\u00a0email<\/a> any tips, questions, or comments. Follow him on\u00a0Twitter<\/a>\u00a0or Bluesky<\/a> if you\u2019re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search<\/a>.<\/em><\/strong><\/p>\n

The post Billable Hour Dying So Slowly, You\u2019d Think It\u2019s Billing By The Hour<\/a> appeared first on Above the Law<\/a>.<\/p>\n

\"\"
<\/figcaption><\/figure>\n

Death, taxes, and the impending demise of the billable hour. Every year, we hear about killing the billable hour and every year, it lives to see another day. But the creeping adoption of artificial intelligence introduces some structural and ethical pressure to the alternative fee movement.<\/p>\n

Still, don\u2019t expect a quick change. You can\u2019t turn a cruise liner on a dime. Though you can run it headlong into an iceberg.<\/p>\n

The latest Legal Trends for Solo and Small Law Firms<\/a><\/em> report from Clio<\/a> takes stock of the billing transition and reminds us that no matter how loudly the clients may want it, the billable hour won\u2019t disappear easily.<\/p>\n

While the report \u2014 compiled through a combination of surveys and Clio\u2019s aggregated and anonymized data from tens of thousands of users \u2014 notes that, \u201cflat fee billing is gaining traction,\u201d and a \u201csignificant proportion of solo and small firms also offer flat fees,\u201d hourly billing remains the dominant model especially among smaller firms.<\/p>\n

\"\"
<\/figcaption><\/figure>\n

But just because the billable hour continues to reign supreme, don\u2019t sleep on those flat fee numbers. Three-quarters of solos and nearly two-thirds of other firms have flat fees in their billing arsenal. One of the biggest hangups for flat fee billing is building the confidence to accurately price out a project \u2014 confidence that\u2019s only going to increase the more firms experiment with it.<\/p>\n

Yet time-based billing still wins. From the law firm\u2019s perspective, hourly billing is\u2026 cozy. It\u2019s tradition, it\u2019s easy to understand, and it rewards inefficiency. And for smaller firms who have to worry about cash flow, the billable hour provides valuable security against the unexpected:<\/p>\n

\n

Hourly billing can provide a more predictable revenue stream for firms based on the time worked. For solo and small firms, which often operate with fewer financial buffers than larger firms, hourly billing can feel like a \u201csafer\u201d option as it provides a better sense of how they are being compensated for their time.<\/p>\n<\/blockquote>\n

Clients, on the other hand, have more of an appetite for change. The report notes: \u201cOver half of potential clients would prefer to pay their lawyers using modern service delivery models, like flat fees or subscriptions.\u201d They want to pay for legal services the way they pay all their other vendors. Facing constant budget pressure, turning in a consistent and predictable cost projection makes life easier for in-house lawyers. <\/p>\n

Artificial intelligence seems like the catalyst to bridge this divide between firms and clients. Lawyers can\u2019t bill for the time saved by shaving \u201c.5\u201d off every update memo. As much as AI enthusiasts like to claim that firms will make up this difference by working more matters, there are only so many clients to go around. The Clio report looks at the tasks most likely to get streamlined by AI \u2014 and not some hypothetical \u201cmagic beans\u201d AI<\/a>, but the sort of practical AI applications we\u2019re already seeing \u2014 and it\u2019s going to take a hefty bite:<\/p>\n

\n

However, spending less time on your files can present a challenge for revenue in some cases. Notably, in the latest Legal Trends Report, we discovered that the three most automatable tasks in law firms generated, on average, at least $36,000 in revenue per lawyer annually. When factoring in how much of this work could be automated, we found that generative AI could put $27,000 of annual revenue at risk for every lawyer who sticks to hourly billing. Adjusting your billing models to better account for the impact of automation is thus a critical consideration for law firms that are significantly adopting AI.<\/p>\n<\/blockquote>\n

Losing $27K in revenue per lawyer is significant at any level, but for solos and smalls that\u2019s a devastating hit.<\/p>\n

When that billable time starts evapoating, lawyers are going to have to find a way to get the same bucks for their bang. And while the idea of charging $10,000\/hr makes headlines<\/a>, it\u2019s going to be less palatable to a client than charging one flat fee that generally mirrors what the firm would charge in total hours billed today. <\/p>\n

So you\u2019re never going to stop logging your time, but it\u2019s increasingly likely to be an exercise in accurately estimating flat fees \u2014 either for whole matters, or specific projects, or subscription billing \u2014 as opposed to a direct pass-through to the client.<\/p>\n

Advancing technology has promised to undermine the billable hour before, only to be proven wrong. \u201cOnline legal research will save all that time in the library!\u201d Well, no, it just gave the attorney easy access to more cases they have to read. \u201cSpeed\u201d was just a means to the end of giving lawyers an opportunity to provide a \u201cbetter\u201d answer. Across practices, computers just added as much (or more) work as they\u2019ve saved. But the automation potential for generative AI isn\u2019t promising lawyers \u201cmore\u201d or \u201cbetter\u201d results as much as a replacement for time-consuming steps in the workflow. Generative AI still saddles a human with more checking on the back end \u2014 or sanctions<\/a> \u2014 but the draft gets into that partner\u2019s hands by replacing 10 hours of junior associate work that was about to get a vicious red pen markup.<\/p>\n

When minutes and hours start shifting to AI, firms that don\u2019t adapt their billing models will see money go out the door. The sooner firms can begin the process of flat fee billing \u2014 if only to start accumulating data points to set prices down the road \u2014 the better.<\/p>\n

\n

\"Headshot\"Joe Patrice<\/a>\u00a0is a senior editor at Above the Law and co-host of Thinking Like A Lawyer<\/a>. Feel free to\u00a0email<\/a> any tips, questions, or comments. Follow him on\u00a0Twitter<\/a>\u00a0or Bluesky<\/a> if you\u2019re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search<\/a>.<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Death, taxes, and the impending demise of the billable hour. Every year, we hear about killing the billable hour and every year, it lives to see another day. But the creeping adoption of artificial intelligence introduces some structural and ethical pressure to the alternative fee movement. Still, don\u2019t expect a quick change. You can\u2019t turn […]<\/p>\n","protected":false},"author":3,"featured_media":118841,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[16],"tags":[],"class_list":["post-118859","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-above_the_law"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/xira.com\/p\/wp-content\/uploads\/2025\/05\/Headshot-300x200-36JZYG.jpeg?fit=300%2C200&ssl=1","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts\/118859","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/comments?post=118859"}],"version-history":[{"count":0,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts\/118859\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/media\/118841"}],"wp:attachment":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/media?parent=118859"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/categories?post=118859"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/tags?post=118859"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}