Breaking the Time Barrier, the recent book co-written by Mike McDerment, founder of FreshBooks, is a must-read for lawyers.
FreshBooks, if you don’t know, is a very successful cloud accounting software. My introduction to this book was through a mass e-mail McDerment sent out on June 12, 2013. The first paragraph grabbed my attention: “Before co-founding FreshBooks, I ran a small design agency. I felt like I was on a treadmill billing by the hour and not earning as much as I was worth, so I rethought everything.
The result was powerful: In 2004 I worked 19 days and made over $200,000.”
The book is 70 pages long and a very quick read for many lawyers. I was curious to see what the founder of FreshBooks had to say about the billable hour and how he made $200,000 in 19 days. But I was not the only one. A day later, I received a followup e-mail that said 41,798 people had downloaded the free e-book.
What I found was a very compelling case for value billing. As the
Lawyerist blog’s Sam Glover’s quote in the first section of the book says, “In order to understand the difference between time and value, just read
Breaking the Time Barrier. In about an hour, Mike McDerment will get you up to speed on the fundamental difference between churning billable hours and delivering value to your clients.”
There has been a lot of talk about value billing in the legal profession. Many lawyers are still using the billable-hour model, something McDerment demonstrates can be very limiting in terms of actually earning a living. The solution for some lawyers to make more money is to charge more per hour. However, as we have seen lately, there has been quite a bit of pushback on that model. More importantly, as explained in the book, this strategy still requires you to work the hours and there are only a certain number of them in a week. The book attempts to explain how to leave the billable-hour model behind and how you can justify billings not linked to the amount of time you spend on a file.
McDerment makes a point of stressing that fixed-fee pricing, which some lawyers consider to be value-based pricing, isn’t necessarily that. McDerment explains that value-based pricing is about what value you bring to your client beyond the mechanics of the job. For example, I think about my legal and technology background and how it allows me to add value to a client beyond just my legal acumen. Value billing for me is about applying my legal knowledge but also seeking to understand my clients’ business models so I can really add value to their business. Doing this allows me to actually demonstrate to clients the extra value they’ll receive by retaining my services.
McDerment’s explanation of value billing is fantastic, but how people implement his ideas will vary from professional to professional. Instead of relying on my interpretation of his ideas, I urge you to download the full book and read it for yourself.
Monica Goyal is a lawyer and technology entrepreneur. She’s the founder of My Legal Briefcase and Simply Small Claims. You can follow her on twitter at @monicangoyal.
