Are lawyers guaranteed a profit?
I like the thinking of Patrick J. Lamb who, in August 2008, said that a lawyer can negotiate a fixed fee even in litigation. In other words, he contests the old rubric that since one doesn’t know what the “other side” will do in litigation, fixing a fee is not possible. He also suggests that creating a budget for litigation doesn’t guarantee a profit, just that the lawyer will not bill more than the budget.
But, the point that Mr. Lamb raises is that no business is guaranteed a profit. Yet, …
… lawyers tend to view themselves differently. They seem to feel that an hourly fee will guarantee their profit. Of course, they would have to know their cost structure; few do. They would have to collect the fee; more are having difficulty. And few produce a realization rate of 95% or better.
Recently, I received a phone call from a person who wanted to buy a law practice. He visited my web site and saw several law practices I represent or have represented that are for sale. His thinking was that he could buy the practices at a low price, have the seller finance the sale and thereby earn the kind of money to which he would be entitled once he passed the bar exam. I cringed when I heard the word, “entitled!” That is the underpinning economic value of far too many people in our country today … If the current economic crisis does nothing, it may knock that value out from under us … and that would be good.
I believe that is what Patrick Lamb was getting at … that lawyers feel entitled to earn a profit. Yet, he fails to acknowledge the frightening statistic that more than 50% of the lawyers in a California study (and in NY and by extension most other places as well) earn less than $100,000…and more than 25% earn less than $50,000 per year. Many people, even many lawyers, would give a great deal to earn these sums, no doubt. But, after so many years of schooling and foregone opportunity revenue, it doesn’t sound like much. And certainly doesn’t allow one to live lavishly.
Running a practice using the principles of The Business of Law® will guarantee that the lawyer will have the best chance of making a profit … but the principles must first be implemented to attain and maintain profitability!Tags: Cash & Finances, Management, Personal Thoughts