Cost Accounting and Portfolio Pricing for Fixed Fees

On April 4, 2025, I presented live on the topic of the shifting paradigm of billable hour and serving new legal market opportunities. I presented alongside Clio’s Lawyer in Residence, Joshua Lenon. Here are the top 5 takeaways:

* AI Will Automate a Large Portion of Legal WorkUp to 75% of all hourly billable work in law firms is projected to be automatable by AI in the coming years. This shift is already underway, with rapid adoption of AI tools across firms of all sizes, especially in mid-sized and larger firms.

* The Billable Hour Model Is Becoming ObsoleteAs AI drastically reduces the time required for many legal tasks, the traditional billable hour model is increasingly unsustainable. Flat fees, subscriptions, and value-based billing are emerging as more client-friendly and profitable alternatives, especially as clients become more aware of AI’s capabilities.

* The Latent Legal Market Is a Massive OpportunityThere is a huge unmet demand for legal services—estimated at over $1.3 trillion in the US alone. By leveraging AI and moving away from billable hours, lawyers can serve more clients, offer greater pricing certainty, and tap into this latent market.

* Industry-Specific AI Tools and Data Security Are EssentialGeneric AI tools are not reliable sources of truth for legal work. Lawyers should prioritize industry-specific AI solutions that use retrieval augmented generation (RAG) and ensure privacy, security, and compliance (e.g., SOC 2, HIPAA). Using the right tools helps avoid ethical pitfalls and increases accuracy.

* Client Expectations and Legal Practice Are EvolvingMost clients either prefer or are indifferent to their lawyers using AI, and younger generations are especially open to it. Lawyers must focus on delivering value, efficiency, and transparency. Adopting AI and new billing models not only meets client expectations but also positions firms for future success.

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Here’s a link to the slide deck that goes with the presentation.

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