What will you say “no” to?
1. What strategies, initiatives and activities will you say no to?
2. What measurements will you not pay attention to?
3. What customers will you not target?
4. What people will you not keep?
5. What competitors will you not follow?
6. What will you remove from your web site?
7. What money will you not spend?
8. What meetings will you decline?
9. What trips will you not make?
10. What slides will you not create?
11. What will you not say?
12. What thoughts will you not entertain?
and as seen at the nonbillablehour web log
A new approach to collecting your fees, that is, those fees that have already been billed but are languishing in the aged accounts receivable file, was suggested by Sean Carter.
His wife wanted to refurbish their house and he thought he had a clever way around agreeing … Tell her to collect the outstanding bills and she could have anything she wanted! A novel approach, indeed.
Sean highlights, in a humorous way, one of the most significant challenges facing today’s law firm: Collecting Your Fee.
Another significant challenge that comes before collecting is billing. Studies have shown that unless the lawyer bills his/her time as she/he proceeds through the day, there is a minimum 10 to 15% loss of revenue. Couple that loss with the further loss by having a realization rate on collecting that is less than 100% and you have a most deplorable situation.
With diligence and a greater focus on self-interest, the lawyer can increase his revenue and earn that to which he/she is legitimately entitled — and the client agreed to pay!
Ed Wesemann in his book, THE FIRST MYTH OF LEGAL MANAGEMENT IS THAT IT EXISTS, suggests that small clients disproportionately drain the resources of law firms while providing a disproportionately small contribution to firm profits. I agree that the size of the client is important; everyone wants to serve larger clients.
I am all in favor of seeking larger clients with more money and more interesting challenges. This effort, however, must be balanced to assure that the firm doesn’t wind up with only a few clients, larger though they may be, who put the firm at risk if they should leave.
But, be sure that no long-term capital or other expenditures are made at the behest of such larger clients without some type of assurance or guarantee that the business will stay with you until at least the amortization for the new expenditure is completed. In the longer term, a strategy based on fewer, larger clients will almost always lead to disaster.
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives.
Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don’t have enough time. But just as a builder won’t begin construction without a blueprint, eager business owners shouldn’t rush into new ventures without a business plan.
The Small Business Administration advises that, before you begin writing your business plan, consider four core questions:
-What service or product does your business provide and what needs does it fill?
-Who are the potential customers for your product or service and why will they purchase it from you?
-How will you reach your potential customers?
-Where will you get the financial resources to start your business?
See The Business of Law and The Profitable Law Office Handbook specifically designed to help lawyers create a business plan.
A good way to start the new year, by cleaning out your old files.
Lawyers know they have to retain, indefinitely, the valuable property that belongs to clients where they are unable to return such property to the client.
The better approach, of course, is to return such property and not pay the storage costs in an escalating real estate market.
The best way to handle this, it seems to me, is to have a provision in one’s engagement agreement that allows the attorney to return the valuable documents and property to a last known address at the conclusion of a matter or by a date certain (e.g., in estate planning matters), whichever first occurs.
Valuable client property includes documents such as original notes or securities. This also includes original wills and settlement agreements.
There is another category of items, however, which is seldom discussed. That’s the notes of the attorney and related items used by the attorney to represent the client, though not matters of original origin. What are the rights of the attorney to destroy these items?
Massachusetts Bar Counsel states the conclusion as succinctly as any I’ve seen: “…a lawyer may dispose of those parts of the closed file which do not constitute ‘records of the receipt, maintenance, and disposition of [clients’] funds and other property’ and are likely to have no continuing value or future use to protect the client’s interests. Examples include copies of pleadings, correspondence, and other work papers…”
With real estate costs continuing to rise, it may well be worthwhile to cull old files to reduce required space for retaining old matters. Another approach being used by some is to image all old files and then destroy everything but original documents. One large firm in the Chicago area pays for its photocopy machine by the number of pages printed. However, the machine allows documents to be scanned without charge if paper is not used to print the image. And, the scanned documents are then stored on disks which are searchable … much easier than finding a “needle in a haystack!”
The cost of labor is offset by the reduced real estate storage costs! And, documents which had to be physically searched for in the past (and often depended on the memory of an attorney as to which file the desired item might be located) can now be searched for electronically at a much faster speed.
See more from the Massachusetts Bar Counsel.
Ed Poll was quoted in the Los Angeles Business Journal of December 6th to the effect that bonuses will vary upward while salaries will not be changed. Sullivan & Cromwell LLP, New York, started the move early by doling out larger than usual bonues for first year associates. Now the pressure is on other large firms to match that move or become otherwise creative to satisfy associates in their ranks.
Only time will tell what will be the ripple-down effect for other attorneys — and then to watch the continued pressure to raise fees to clients.
The American Bar Association recently asked leading members of the profession to prognosticate their perspective of the legal profession 20 years into the future, the year 2005. I was asked to participate. The results will be published in a forthcoming edition of Law Practice Today, the electronic publication of the Law Practice Management Section.
Following are my responses to the questions:
1. What will be most different about the practice of law twenty years from now? Why?Law firms have always mirrored their clients. As clients got larger, so did law firms in order to match the footprint and be available to serve the clients’ needs wherever they were/are. As law firms continue to get larger, because their clients are getting larger, and the process of mirroring continues, law firms will come to look more like the corporate model they represent.
Look at the corporate model today and you will see a semblance of the law firm of tomorrow.
The rules of professional conduct require that a lawyer be competent to handle a matter. The definition of competency is essentially based on a community standard. While never yet tested, I suspect the standard of competence for an urban lawyer may be different than that of a rural or country lawyer. Thus, in a large, metropolitan area, lawyers are technologically sophisticated. To be marketable, and to be deemed competent, then, the lawyer will have to invest many dollars in technology.
The more sophisticated an office is, technologically, the faster the lawyer can perform her/his service. The faster the service, the lower the revenue if based on an hourly billing basis. This assumes that, despite increased rates per hour, there is a competitive limit on hourly rates. With lower revenue (due to increased speed of production) and increased costs (due to increased technology investment), there is reduced profits … and even losses for the lawyer.
The only way around this would be to charge a fixed fee (value billing) which allows the lawyer to do the work and benefit from his/her increased efficiency without having to pass that increased efficiency on to the client (as is now the case).
For this to work to everyone’s best advantage, extensive communication is required and this is one of the skills that lawyers will have to enhance in order to be successful.
3. What will law firms look like in twenty years? Mega firms, virtual organizations, or what?There will be all manner of modalities. The very large firms will exist for the very large clients. There will be boutique firms to work in specific niches of practice that are not required by major corporations, but still provide important services. (Immigration is one example of this.) There will be the regional firms. And there will be the sole practitioners and small firms that will represent individuals and families in consumer matters such as family law and the like.
More will be done with technology; some believe that much of the law will be commoditized. I believe, however, that technology will permit lawyers to do the mundane quickly and then focus their energy on their real skill, problem solving and interpretation of the complexities our modern society presents in our daily living.
4. Will computers replace most of what lawyers do in twenty years? If so, how and what will be left for lawyers?Computers will never replace lawyers; they will merely make their jobs easier. Some services will become commoditized, but this will release the bulk of lawyers then to focus on the creative, problem-solving aspects of the law practice.
5. Will the trend toward internationalization of law firms increase over the next twenty years? Will it engulf even the small firms?
I suspect that communications will continue to improve and that everyone will be impacted by this movement. Despite, the outward look, legal matters will continue to have a local flavor.
The old concept of knowledge management was to look in your file cabinet and pull out the paperwork of your last deal or pleading. In the future, KM will mean that AND looking at the file cabinet (and internet) of other lawyers and their work product in order to create the solution to the challenge being faced by your client today in the fastest way and least expensive way possible.
Altheimer & Gray’s, an 88 year-old law firm in Chicago with 300 lawyers and offices around the world, filed for bankruptcy in 2003 with liabilities of more than $30 million ($25 million owed to its bank). The proposed plan will require the firm’s 59 former equity partners to pay a total of $15 million to the bankruptcy estate; of that amount an average of $753,500 will be paid by each of the nine executive committee members.
The remaining portion will be paid by the 50 other equity partners. And Altheimer’s 65 non-equity partners will contribute slightly less than $10,000 each. No one expects that very much of the more than $30 million in accounts receivable will be collected. See more.
Over-extension of the firm’s real estate obligations, failure to aggressively collect its billings and lack of a team effort to address management challenges are factors that took this firm down. No wonder that today’s young lawyers are questioning whether they want to become partners in firms in which the management of the firm is questionable at best and secretive at worst.
That sounds very much like Steve Kumble’s story as he relates it in his book about Finley Kumble in the 1990s.
While it is not practical for lawyers in large firms to have a direct voice in every decision, is it reasonable for all lawyers in the firm to be personally liable for liabilities over which they have no control? That is a key question being asked by today’s aspiring partners-to-be.
The question was asked of me today: I can’t get a job and am forced to start my own practice sooner than I expected. I’m working out of my own home. How do I start?
The least expensive way to grow a law firm from “ground zero” is to do what you are doing, working out of the house and seeking sub-contract work from government entities and other attorneys. When you do this, negotiate the best arrangement you can for adminstrative tasks to be performed by the contractor, items such as their office staff taking your dictated material or rough drafts of computer-entered typing to complete the document preparation for your final review and submission to your contractor; if an office is needed, if an office is needed, your contractor providing one to you; same with telephone, and other requirements. This keeps your overhead to an absolution minimum.
Also, be sure to create a marketing plan for yourself which will describe how you plan to market yourself to other lawyers to get sub-contract work; then how you will extend your efforts to get “private” clients to know of you; and then how to expand beyond that into a full-blown office environment, traditional practice of your own.
Once the revenue starts flowing, be sure to set aside as much as you can, using only a minimum amount for living expenses. The savings then can be used to do what is needed when you are ready to start out on your own in an office environment, such as purchasing needed technology, paying rent and investing in the growth of your accounts receivable during your first few months.
This is just the beginning. You will have many adventures in your future. You may want to visit our web site again, to see practical resources available to help you grow your practice from the home-based practice to a traditional practice, as well as how to create a business plan for your future.
And, when you’re ready, our coaching has helped many lawyers increase their revenue by five and six figures! Consider this when you are ready to invest in yourself and your future.
One of the reasons I coach and consult with lawyers is that it allows me to combine my love of the law with my love of business, especially entrepreneurship. I recently came across a great site devoted to entrepreneurship. This, hopefully humorous bit, strikes at the core of why there are so many “consultants” today, many of whom are merely waiting for their next job:
Considering that more than half of the people in the U.S. are either self-employed or working in a company with under 100 employees, it’s amazing how few jokes there are about entrepreneurship and small business. Here’s one I heard recently:
“So, what made you decide to go into business for yourself?”
“It was something my last boss said.”
“Really, what was that?”