Last week, practice management company 8am released billing data from more than 60,000 small and midsize law firms. One number stopped me: 48% of firms bill only by the hour, 42% mix hourly and flat fees, and just 10% bill only flat fees. Across all invoices, flat fees made up about 15%.
Now set that next to Clio’s 2026 research on solo and small firms: 71% of clients say they prefer fixed or flat fees. And 86% of solo firms haven’t changed their pricing at all, even as most of them now use AI in their legal work.
So clients are asking for one thing, and most firms are selling another. That gap is an opportunity, and it’s one you can test with a single practice area in the next 30 days.
Why this matters more now than it did two years ago
Here’s the part that worries me for hourly firms: AI is making routine work faster. If a demand letter, a trust package or a discovery response used to take you four hours and now takes one and a half, an hourly firm just cut its own fee on that task by more than 60%. The client is happy. Your P&L is not.
A flat fee lets you keep the value of your efficiency. The client pays a known price for a known result, and every hour you save goes to your margin instead of disappearing from the invoice.
There’s a cash flow angle too. In the 8am data, estate planning (a practice area where flat fees are common) had 68% of invoices paid in full within a month. Family law, which bills flat on fewer than 3% of invoices, had the highest overdue rate at 32%. Plenty of things drive that difference, but anyone who has chased a family law receivable knows that billing after the work is done is harder to collect than billing before it.
How to price your first flat fee without guessing
Most attorneys I talk to don’t avoid flat fees because they love the billable hour. They avoid them because they’re afraid of underpricing. Fair. So don’t guess. Use your own numbers.
1. Pick one repeatable matter type. Choose something you handle at least a dozen times a year with a fairly predictable path: an uncontested divorce, a basic estate plan, an LLC formation, a DUI first offense. Not your most complex work. Your most routine.
2. Pull your last 20 closed matters of that type. From your practice management software, export the hours recorded and the amount actually collected on each one. Collected, not billed. That’s the real number.
3. Price off the 75th percentile, not the average. Let’s say your last 20 uncontested divorces took a median of 11 hours, but a quarter of them ran 14 hours or more. Your realized rate after write-downs and slow payers was about $300 an hour. Price off the 14 hours: 14 x $325 (a modest bump for the certainty you’re giving the client) = $4,550. Round to $4,500.
Under hourly billing, the median matter brought in roughly $3,300 (11 x $300), and you had to chase some of it. At $4,500 paid up front or in two installments, you collect more on the typical case and you’re covered on the slower ones.
4. Write the scope like a contract, because it is one. List exactly what’s included (for example, one round of revisions, up to two court appearances, filing fees billed separately) and what triggers a change order (contested custody, a new asset discovered, opposing counsel lawyering up). Clear scope is what keeps a flat fee profitable.
5. Track it for 90 days. Keep recording your time internally, even though you don’t bill it. After a quarter, compare effective hourly rate per matter to your old realized rate. If you’re ahead, expand. If one matter type keeps blowing past scope, adjust the price or the scope.
The number to watch
The goal isn’t to abandon hourly billing overnight. It’s to know your effective hourly rate on every type of work you do. Many firm owners discover that their “lowest rate” matters are actually their most profitable once they’re priced as a package, and that their highest-rate hourly work is eaten alive by write-offs and collections.
One more practical point: flat fees come with trust accounting rules that vary by state, including when a fee is considered earned and whether it can go straight into your operating account. Talk to your state bar or ethics counsel before you change your engagement letter.
Start with one matter type: Run the numbers on 20 files. You’ll learn more about your firm’s profitability in that one afternoon than in a year of watching the hourly rate on your invoices.
Want help figuring out which of your practice areas is quietly losing money? Book a strategy call with our team