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On retainers and payment plans

When potential clients first meet me for their consultation, they are typically desperate for help and willing to make any promises necessary to obtain that help. They commonly want to pay as little up front as possible and scoff at what I ask for as a retainer. I generally estimate my retainer amount based on how much I think the entire case will cost the potential client (for a small case) or how much I think it will cost them for me to get started (for a more complex case).

I explain to potential clients that money paid to me in a retainer is set aside in a trust account and that money belongs to them until the money is earned. The money will not be transferred from the trust account until they have been provided an opportunity to review an invoice reflecting the work already completed. I explain to them the reason I ask for such a substantial retainer up front is to make sure that they actually have the funding to cover the cost of my legal services.

One of the biggest mistakes I made starting my practice was requesting and obtaining too little up front and putting clients on payment plans. Once their case is concluded, clients seemingly lose their incentive to pay and forget all the promises they made at the initial meeting. Tracking down former clients and repeatedly requesting money they still owe is not the best use of my time, and I do not want to make a practice out of suing former clients. From what I have heard, suing former clients increases the chances of having to defend against countersuits and grievance complaints. Suing former clients could also negatively impact potential positive reviews and future referrals.

Even my best clients have had difficulty paying their bill after their case was over, and maybe it’s because they didn’t have the funds to pay at the outset. When potential clients ask for a payment plan or are unable to provide the money up front, it raises a red flag that they may not be able to afford my services. If they need a loan or to borrow money, I would rather they ask a friend or family member than to be the one responsible for collecting future payments from them.

I recently started writing off client debts that were over a year old, and I realized one of the biggest reasons I struggled financially when I started my own practice was not the lack of work but because of the number of unpaid, billable hours I was working. If I collected for all the work I billed, I would have been in a lot better financial situation when I started. My advice for those starting out in their own practice or thinking about hanging out a shingle is to obtain as much money up front in the form of a retainer and to not agree to represent clients you do not believe can afford your services unless you are willing to accept that you may never be able to collect on your fees.