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Alternative Fee Arrangements ( Afas )

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Despite the growing trend toward alternative fee arrangements (AFAs), most law firms would prefer they were just a passing fad. Clients, on the other hand, are attracted to AFAs because they offer predictability at a time when budgets are under increasing pressure. It’s not surprising, then, that in a 2014 Canadian Lawyer Corporate Counsel Survey, 75.6 percent of corporate counsels say they would be receptive if a firm other than their current external law firm proposed an alternate fee arrangement.
Clearly every firm needs to address AFAs, but before you dive in, be aware of the pitfalls. Some firms are quoting impossibly low fees to win new clients, then skimping on service to maintain a reasonable profit. In the end, the client suffers …show more content…

As you embark on this process, you’ll blend some simple analysis with a measure of judgment. For each client, look at the time billed by partners, associates and clerks, and the pro-rated fixed costs for each file, then place them in one of these four groups:
• High Profit – Low Growth Potential: These are the “Cash Machines”, clients that produce steady, attractive profits for the firm. Keep these clients happy and hang on to them as long as you can.
• High Profit – High Growth Potential: These are the “Rising Stars”, clients producing healthy profits and billings that will grow substantially over time. Nurture these clients and look for opportunities to capture more of their business.
• Low Profit – High Growth Potential: These are clients that produce thin profits, but have great future potential. Look for ways to deliver services more efficiently to this group, and ride the profit curve up as they grow.
• Low Profit – Low Growth Potential: These clients produce paltry profits and have dim prospects for future growth. Trim these clients from your roster.
If it seems like you’re breaking new ground here, know that this is standard practice in most other professional services.
Determine a fair and profitable fee
Litigation work has always been seen as more unpredictable, making it harder to determine a

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