1. The Death Of The Billable Hour??? Client demands for value and accountability have changed the landscape of billing for legal services, but is the billable hour dead??? Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

2. Is The Sun Setting On The Billable Hour??? Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

3. Evolution Of Billing For Legal Services “For Service Rendered” Into The 60s. Into The 70s Clients Wanted To Know For What Services And Efforts They Were Paying Their Lawyers. 80s Through 2007 The Practice Of Law And Provision Of Legal Services Was Mostly A “ Sellers’ Market”. Since The Economic Collapse At The End Of The Last Decade, The Practice Of Law Evolved Into A “Buyers’ Market” Where Client Demands Dictated How, And How Much Firms Would Be Paid. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

4. Evolution Of Billing For Legal Services Prior To 2008 The Annual Growth In Demand For Legal Services Was Increasing Between 4% to 6% Per Year. After A Significant Downturn In Demand in 2008 and 2009, Growth Has Been Flat Since. (Peer Monitor/Citi). Not Only Has There Been A Leveling Of Demand, But Realization and Collection Rates Have Also Been Declining. Lots of Pressure On Firms To Adjust To The “New Normal” Of Their Practices. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

5. Many Clients Still Demand Billable Hours Many Personal Services Clients Want To Know What You Did On Their Behalf? Insurance Defense Firms Must Provide Insurance Firms’ Third Parties e-Billing Providers/Auditors (Serengeti, DataCert, Allegient, et al.) Task-Based Billable Hours To Get Audited And Paid. Many In-house Client Litigation Departments Want To Know And Monitor The Billable Hour Effort Their Outside Firms Are Providing. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

6. Many Clients Still Demand Billable Hours In Mass Tort/Class Actions Cases, The Plaintiff Firms Need To Certify To The Courts The Billable Hours They Invested On Behalf Of Plaintiff Clients So They Might Be Paid For Their Efforts. Let’s Get Back To The Issue At Hand... Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

7. Corporate Hierarchies Want Price Control Hourly Billings Do Not Deliver Predictable Costs And Legal Work Outcomes. With The 2008/2009 Downturn, Corporate Law Departments Needed To Reduce Their Total Spend For Outside Law Firms. Corporate Law Departments Want Their Outside Firms To Manage Their Legal Matters, Costs and Attorney Time. Enter Alternative Fee Arrangements (AFAs). Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

8. Many Corporate Clients Are Demanding Innovative Alternatives To The Billable Hour. Alternative Fee Arrangements (AFAs). Agreements Between A Law Firm And A Client To Provide Compensation To The Firm Based On A Structure Other Than Or As An Adjunct To Hourly Billing. Requests For Proposals (RFPs). Reverse Auctions For High Volume Repetitive Work. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

9. Alternative Fee Arrangements - AFAs Aligning Business Interests Of Firms and In-House Counsel. – Billable Hours Promote Inefficiency. – Contingency And Other AFAs Give Incentive To Bring To Fruition At The Lease Cost. Among The World’s Largest Law Firms, About 5% Of Total Revenue Came Through AFAs in 2008 and 2009. In 2015, Fees Through AFAs Increased To 22% Of The Total Fee Revenue For These Firms (ABA Pubs “Making AFAs Work For Any Sized Law Firm”). Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

10. Most Popular AFAs Fixed Or Flat Fee. Blended Rate. Capped Or Collared Fee. Contingency Or Success Fee. Defense Contingency. Flat Fee With Shared Savings. Holdback. Partial Contingency (Success Fee). Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

11. Fixed Or Flat Fee Predetermined Service At A Fixed Or Flat Rate Writing A Will Drafting A Contract Drafting Bank Standard Loan Agreements Reviewing Bank Loan Agreements Residential Real Estate Buy/Sell Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

12. Blended Rate For Services Hybrid Of Hourly Rate Billing – One Rate Applied To All Hours Worked No Matter Who Worked On The Project (Partners, Associates, or Paralegals). Favorite Of NJ State Agencies Some Banks Favor Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

13. Capped Fee Or Fee Collars For A Defined Service, Hourly Fees Will Not Be More Than. For A Defined Service, Hourly Fees Will Be Between X and Y Dollars. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

14. Contingency Or Success Fees Fees Based On Results Achieved Most Plaintiff Personal Injury Cases Are Contingency. Other Examples Might Be A Success Fee Upon Closing Of An Offering Or The Funding Of A Loan. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

15. Defense Contingency Firm Defends Client Against A Monetary Claim. Client and Firm Agree On An Expected Outcome. If Firm Achieves Better Outcome (Client Pays Less Than Expected Outcome), Client Pays Firm A Percentage Of The Savings. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

16. Flat Fee With Shared Savings If At Conclusion Of The Work, The Fees Calculated On The Basis Of Hours Worked At Standard Rates, Which Would Be Less Than The Agreed Upon Flat Fee, The Client And The Law Firm Share In The Savings. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

17. Holdback Client Withholds An Agreed Upon Percentage Of The Fee Until An Agreed-Upon Milestone Or Result Is Achieved, Or Until Completion Of The Engagement. The Obligation To Pay The Amount Withheld Is Triggered If The Firm Achieves The Result. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

18. Partial Contingency (Success Fee) Law Firm Paid A Fraction Of Their Fee Under An Hourly, Flat, Or Capped Fee Arrangement, And Receives An Additional Amount If The Result Achieves Agreed Upon Criteria. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

19. Now The Real Prickley Issue... How Do We Decide What AFA Works For Us And Our Clients And Still Make A Profit So That Shareholders/Partners Happy With Their Compensation??? Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

20. You Must Know How Much It Costs You To Do The Work !!! Legal Administrators CFOs Legal Project Managers Pricing Professionals/Officers (76% Of Firms) Does Past Billing History Accurately Predict Future Pricing Certainty? Back To The Billable Hour???? Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

21. How Much Does It Cost Every Lawyer In Your Firm To Do A Billable Hour Of Work? If You Know The Answer To This Question, You Get An “A” And Can Start Your Way Home. If Not, Let’s Look At Ways To Determine That Breakeven Point, Where You Start To Make A Profit On The Rate You Charge Per Hour. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

22. What Does It Cost To Do An Hour Of Billable Work? General Ledger Tells You. Allocation Of All Expenses – Must Be As Granular As You Can Make It. Use Actual Compensation For All Except Partners/Shareholders. Use Actual Historical Hours And Required Hours. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

23. Direct Costs Compensation Firm Paid Payroll Taxes Health Insurance 401(k) Match LPL Premium Secretarial Fully Loaded Cost Automobile Allowances? Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

24. Indirect Costs And Allocation Every Other Cost Item That Cannot Be Attributed Directly To A Timekeeper. – Rents – Administration Costs – Infrastructure Costs Allocation Of Indirect Costs – 1.5 Partner – 1.0Associate – 0.5 Paralegal Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

25. Not Only How Much Does It Cost Per Hour Now, But How Can We Do It More Efficiently? Staffing Models For Various Types Of Services Pushing Down Routine Work Employing Staff At Their Highest And Best Use Project Management – Changing Behavior Of Firm Leadership Is The Challenge. Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

26. Changing The Behavior Of Law Firm Leadership Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

27. Your Firm And Practices Stuck With Billable Hours? How Do I Set Billable Hour Rates? Third, A Third, A Third Easy Rate Calculator For Lawyers What Are Others’ Charging What Will My Clients Pay? Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

28. A Third, A Third, A Third 1 st Salary You Are Paying An Associate 2 nd Overhead 3 rd Profit $100,000 Salary Dictates $300,000 Gross Fees Billable Hours Per Year (40X48 = 1920) $300,000/1920 = $156.25/hour First Years At $165,000 - $259!!! Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

29. Easy Hourly Rate Calculation For Lawyers (Sam Glover, The Lawyerist) - For Solo Practitioners ((Income/.7)+(Expenses*12)/((Hours/5/3)*241) = hourly rate How Much Disposable Income Do You Need?.7 Assumes 30% Of Gross To Taxes Hours = Hours Per Week Willing To Work 5 Days/Week, 3 = Jobs Of A Solo 241 = 365 Less Holidays, Weekends Vaca Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

30. What Are Others Charging? ALM Survey Of Law Firm Economics National Law Journal LexisNexis Enterprise Legal Management Trends Report. Public Records. Your Network! ***Anti-Trust Issues Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

31. How Often Do You Change Rates? Annually With Percentage Increase? Change For All Lawyers In All Practice Areas? How Do You Inform Clients (If At All)? Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

32. Do You Have Any Questions Or Do You Want To Talk About Anything Else Before The Sun Sets On This Presentation? Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

33. And You Know, At ALA You Know You Always Have A Friend... Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com

34. Contact Us The Garver Group, Inc. is equipped to support firms nationwide. Please contact us to find out exactly how we can put our expertise to work for your firm. The Garver Group, Inc. 1103 Laurel Oak Rd. Suite 107 Voorhees, NJ 08043 Phone: 856.435.4909 Fax: 856.435.4738 Email Us Email Us Managed Billing & Bookkeeping for Law Firms | www.garvergroup.com