Note
With fixed fees, the risk is the term, not the price.
The instinct when a fixed-fee matter loses money is to raise the fee. In the data we have looked at, that is usually the wrong lever.
A fixed fee is two commitments, not one. It says what the work will cost, and it says what period that covers. Firms think hard about the first number and inherit the second from whatever felt reasonable.
What the data showed
One firm quoted a fixed fee covering an initial period, then reverted to hourly. The assumption behind the price was that most matters would be substantially done inside that period.
Measured against several thousand matters, almost none exceeded the quoted fee within the fixed period. On price, the firm was comfortably right. But the great majority were still billing well after the period ended — which meant the fixed fee was not covering the matter, it was covering the opening phase of a longer engagement that the firm had not scoped, and in many cases had not re-quoted.
The firm was not underpricing the work. It was underpricing the duration. Those have different fixes, and only one of them is a number on a quote.
Why raising the fee does not fix it
If matters comfortably fit the fee inside the period, raising the fee costs you the matters that would have been profitable, and still does nothing about the ones that run long. You lose at the top of the funnel and gain nothing at the bottom.
The lever that works is the term: a shorter fixed period with an explicit, scheduled re-quote. That converts an open-ended exposure into a known checkpoint — one the client also benefits from, because it is the moment they find out where they stand.
How to measure this in your own firm
- Bucket billing by engagement month — a matter's own first month, second, third — not by calendar month and not across its lifetime.
- Count, per month, only matters that have actually reached that month. A matter three months old is not a zero in month six.
- Compare the cumulative figure at the end of your fixed period against the fee. That tells you whether the price is right.
- Then look at what share of matters are still billing after it. That tells you whether the term is right.
- Do both per case type. A blend across types that behave differently will tell you the average is fine while both halves are wrong.
The second number is the one most firms have never seen, and it is usually the one that explains the problem.
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