Pricing fixed fees with confidence

Pricing fixed fees with confidence requires something most transactional firms do not have in structured form: a clear picture of how long similar matters actually take, where time overruns occur and how the negotiation dynamic on a deal of this type affects the total effort required.

The fixed fee risk

The standard approach to fixed fee pricing in a transactional practice is to estimate from experience, add a contingency and hope that the deal does not become more complex than anticipated. This works well for the deals that proceed smoothly and badly for the ones that involve several rounds of contentious negotiation, a counterparty who demands extensive changes, or a client who requires frequent calls and briefings throughout the process.

The result is a portfolio of fixed fee matters where some are well-priced, some are priced too low and produce losses the firm does not fully account for, and the average outcome is acceptable only because the profitable deals subsidise the unprofitable ones. This is not a sustainable basis for growing a fixed fee practice.

What accurate fixed fee pricing requires

Accurate fixed fee pricing requires knowing how long similar matters actually took, not how long the team thought they would take or how long was recorded in the time recording system. It requires understanding which deal variables drive time overruns: which counterparty profiles, which clause types, which transaction structures. And it requires some ability to predict, from the characteristics of the new matter, where it sits on the complexity spectrum.

This is the kind of analysis that is very difficult to do manually but becomes tractable when the firm has a structured record of deal history, time allocation and negotiation patterns built up over dozens or hundreds of matters.

How AI assistance changes the calculation

AI-assisted drafting directly reduces the time-at-risk on a fixed fee matter by making the first draft and counterparty review faster and more consistent. A deal that previously carried significant overrun risk because of unpredictable drafting time becomes more predictable when the first draft is produced efficiently from firm precedents and the review of the counterparty's markup is accelerated by automatic identification of departures from the firm's standard positions.

Lower and more predictable drafting time means more confident fixed fee pricing. To explore how Scriptum affects the economics of fixed fee work for your practice, book a demo and we can walk through the numbers.