08 May

How I Calculate Fixed Fees

How do I come up with a fixed fee for a forensic accounting engagement? I’ve been doing fixed fees for 18 years, so I’ve developed a pretty good formula.

With a fixed fee, a client is paying for a result, rather than buying my time. In most of my cases, the “result” is an expert report.

The following things go into the fee:

  • volume of work (how many transactions go into a database, how many documents to review, in what detail I’m reviewing them)
  • assessment of the quality of documents (lower quality scans are more difficult to get into a database and cause a higher fee)
  • amount of time spent on meetings, correspondence, phone calls, etc.
  • ease or difficulty of getting all the documents I need
  • complexity of analysis required
  • special costs related to the engagement such as subcontractors, legal copy service, travel, etc.
  • type of case (more specialized cases garner higher fees)
  • availability of other experts (some experts don’t like to take certain types of cases, so my services become more valuable)
  • timing of the case (“rush” work means a higher fee)
  • value to the client (when more is at stake in the case, my services may be more valuable to the client)

How do I double check my figure to see if it’s reasonable? Sometimes I do a calculation using hourly billing rates. While I don’t typically bill clients hourly (because I’m not in the habit of selling my time; I want to sell my expertise), it is something that is familiar to the attorneys I work with. I know that by default, they will be thinking about my fee in terms of how many hours at what billing rate.

Other times I just have a gut feel about what the right fee is. I now if it’s reasonable based on other similar cases I’ve worked on, or just my knowledge of expert witness work in general. And sometimes my client will tell me if it’s reasonable. I have no problem asking an attorney how much they think a project should cost or how much their client is willing to spend. I’m not going to try to spend the entire budget, but it is nice to know what their sense of the fee is.

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