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ItÔÇÖs time to discuss the impact of artificial intelligence on the traditional billing structure in the legal profession. With the rise of AI and Generative AI technology and its potential to streamline tasks and matters, it is crucial for lawyers to consider alternative billing models such as value-based billing. I will discuss what leads me to think now is the time, as well as how embracing these changes can lead to stronger client relationships and a competitive edge. Your time is valuable, so letÔÇÖs discuss.

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Transcript (with a tiny bit of help because I canÔÇÖt look at one big block of text!)
In todayÔÇÖs legal landscape, with everything thatÔÇÖs going on with artificial intelligence and increased technology, as well as competition, and the economy being in a little bit of flux, I think itÔÇÖs safe to say that change is the only constant. I know weÔÇÖve been saying that for a long time, and it can apply at just about any time, but there is so much going on right now that I think we have to talk about what happens when services become more of a commodity, and if the use of artificial intelligence is making tasks or matters not take as long as they used to, what happens to the traditional billing structure?

Well, letÔÇÖs talk about that.

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Welcome To legal Marketing Minutes

Well, welcome to legal Marketing Minutes, where I share short bursts of current marketing news and advice. IÔÇÖm your host, Nancy Myrland. If we havenÔÇÖt met, IÔÇÖm a Marketing and Business Development Advisor, and I specialize in content, social, and digital media for lawyers. Your time is valuable, so letÔÇÖs get started, okay?

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AI In Law firms Is Not New

Artificial intelligence in law firms is not new. There have been artificial intelligence practices and software and other kinds of resources that have been used for many, many years. We didnÔÇÖt think about them because they just worked. Well, now we have these very easy tools in front of us, most of them under the category of Generative AI, sometimes called GenAI, which is a subset of artificial intelligence, that is a conversational tool. We ask it something, we give it something. It does a great job transforming that data into another usable format that we ask for. All right, that was a long story made very short on what Generative AI is, but one of the things we have to talk about is whatÔÇÖs going to happen to this traditional billing structure that we are so accustomed to.

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Why Discuss (Non) Hourly Billing Now?

LetÔÇÖs pretend that there is a certain task that you do, whether itÔÇÖs research, or whatever it might be, but itÔÇÖs something that youÔÇÖre doing when you are not with your client, yet you are in service of your client. And letÔÇÖs say it used to take you 10 hours. Software now makes it quite possible that a particular task will not take nearly as much time. So in a traditional billing model, what are you going to do? Are you going to then say, hmm, this only took us five hours, or, this only took five minutes. I can only bill you for five minutes, or, gosh, whatÔÇÖs the appropriate amount for us to mark that up and still pass that along to the client? And, what are the ethics rules going to say about disclosing the use of artificial intelligence? At this moment, that is still undecided, so itÔÇÖs time to think more seriously, if you havenÔÇÖt already, and many of you already have, about alternative forms of billing and value-based billing.

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Generative AI Is Already Being Used In The legal Profession To Streamline Tasks

There is no doubt that artificial intelligence broadly, not just Generative AI, but artificial intelligence as a whole, is going to streamline routine tasks. ItÔÇÖs already happening. It cannot go back to where it was before. What that is going to do is free up your time to concentrate on delivering other outcomes, or adding additional value for your clients. ItÔÇÖs not necessarily going to kick you out of your job, or take your job away from you, or help your clients see that they donÔÇÖt need you. ItÔÇÖs just going to help you work on additional matters or additional ways of solving your clientÔÇÖs problem. The focus is still on the client. ItÔÇÖs important to remember that clients are seeking value from you. TheyÔÇÖre seeking solutions. TheyÔÇÖre not just looking for hours on an invoice, so talking about alternative billing models very much is in alignment with what clients are expecting from you. And when you can do that, then you are fostering a much stronger and a much, I would say, more enduring relationship with your clients.

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Value-Based Billing As A Competitive Advantage

Also, when you think about alternative forms of billing and value-based billing, it also can give you a competitive edge because when you are able to then focus on a more robust package, if you will, in the time that you have in your schedule to take care of your client in additional, more creative ways, then why would that not be a competitive edge for you? When you do that, all of that bundled together, obviously, is good for you. ItÔÇÖs good for the firm. ItÔÇÖs good for your practice. ItÔÇÖs good for revenue. So again, itÔÇÖs time to talk about this and get serious.

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You Already Have The Tools and The Data To Create Value-Based Pricing

And I know it sounds like itÔÇÖs such a hard thing to do. And how would I even begin to come up with that? Well, it really, if youÔÇÖve done this kind of work before, or if your firm has, it really doesnÔÇÖt have to be as difficult as it may sound. It may feel and probably is causing some anxiety when you think about it. But donÔÇÖt forget that you already have analytics in your firm. You already have an accounting system that you can go to and say, okay, let me look at all of the clients, or even start with one client and one matter. What is the typical amount of time that I and others have spent with clients like this on a similar matter? ItÔÇÖs not always going to be the same. DonÔÇÖt expect for this to be apples to apples at the start because there are differences between people and matters. But pull this data out of your system and ask for help doing this so that you can see what the average matter actually cost your client, what you billed for that, and what you collected for that.

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Collaborate With Finance and Accounting

Gather that data, and collaborate with finance and accounting. Work closely with them. Youre going to, obviously, if you are looking at all of your colleagues on your practice team, then somebodys going to have different billing rates than you. Somebodys going to have collected at a different rate than you have, but you can still pull out averages. Then what I want you to do is to say, all right, lets say that youre seeing a range between 20 and $40,000 for matters just like this. Then you start to look at those and say, okay, which of these looks the most like this type of matter, and this type of client, and somebody who charges per hour what I tend to charge? Then you start to say, does that feel reasonable? Is there enough value for my client if I charge that? It doesnt matter how much time you spent or how much time you didnt spend because you used artificial intelligence tools in your firm that are helping you do it
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