West LegalEdcenter will host a LawBiz program entitled, The Budget as the Foundation of an Engagement. Why should you think about creating a budget, a budget for the practice, a budget for the client matter? Create a budget only if you want to get paid!
It’s clear that the taxing authorities are hurting for money. New York adopted a provision that requires that sellers to New York residents collect and pay to New York their sales tax even if the seller has no physical presence there. Thus, at least one internet seller has now withdrawn. How will this provision interfere with electronic commerce? What makes this seller unique? Why should physical presence make a difference concerning collection of tax on sales to in-state residents?
And California is seriously considering imposing a tax on professional services, even on lawyers! Would this violate the rules of confidentiality by requiring the disclosure of the client’s name when creating a report to the State? What other rules of professional conduct might be violated by such a provision? Stay tuned as the legislature continues its deliberations — and then almost certainly litigation to prevent its implementation.
"Law is subject to the same laws of economics as every other business." Thus spoke Tower Snow, former chair of Brobeck, the then large San Francisco law firm. (more…)
Seth Godin has the right answer: The closer you are to the pain, the higher will be the cost. Or, as a former Senator from Illinois inferred years ago, clients do not seek a lawyer until and unless they need something fixed — they are in pain!
In the May 12th edition of WSJ, Money & Investing Section, the headline says it all: "Cash Flow Reigns Once Again." The article suggests that investment decisions are now being made based on the cash flow of the company whose stock will be purchased.
What a novel concept! In the posting of another blogger, the suggestion was made that only accrual accounting tells an accurate picture of a law firm’s financial position. Yet, one can find many businesses that have good accrual financial statements but fail because they lack cash flow to sustain their business. The reverse is true. Businesses can show losses in the accrual system but have great cash flow — they collect their sales and receivables very quickly — and survive for quite a long time.
Possibly the first national law firm grew to its prominent position many years ago because of the almost fanatical focus on collecting accounts receivable. Their realization rate was very high. It is essential for lawyers today to focus on this metric to be successful.
Profits are essential, but cash is and has always been the key ingredientt for successful businesses and law practices. It is still true today … and, as the article suggests, cash reserves will enable the business to continue even through a down economy.
Price and value are clearly not the same when it comes to legal fees. While both are time sensitive (as of any given moment in time), the former generally is set by the seller/lawyer and the latter is generally perceived by the buyer/client. Price can be value, in my opinion, when the client is involved in the setting of the legal fee and price is determined by the value perceived by the client. Some folks call this "value billing."
Don’t bill for time spent by first year associates, increase dramatically the time spent on educating young associates and bill only by fixed or flat fees … these are three different approaches to providing more value to clients and greater certainty to the cost of legal services for clients that are highlighted in a current article in the ABA Journal.
Does any or all of these new approaches increase the cost of doing business? Possibly. Do they increase satisfaction of your clients. Definitely. Do they increase your revenue? Quite probably.
These approaches are worth considering and perhaps adopting for your practice.
Mike McKee, a reporter for the San Francisco Recorder once again underscores the hostility that California lawyers have against the current malpractice insurance disclosure proposal.
Still, the question I asked earlier in this series has yet to be answered by the Board of Governors! Why is it that shareholders of law professional corporations do not have to disclose that they do not have malpractice insurance? Or, at least meaningful malpractice insurance? All they need to do is sign a piece of paper saying that they will be responsible for the first $50,000 of a malpractice judgment. There is no financial statement required, no verification of financial ability and no insurance policy required under the current rules; nor is there any such requirement under the new proposed rule!
And why is this fair in the minds of the Governors supporting this proposal?
In Law Firm Fees & Compensation: A LawBiz® Special Report, I discuss several formats for billing legal services. Jeff Bleich, President of the State Bar of California, discusses one of these formats, the billable hour in his April column of the California Bar Journal. He raises the specter of the “billable hour trap.” He maintains that the profession must change its fee structure and move away from the current policy of billing by time. He reflects the thinking of many lawyers who are feeling the pressure of working long hours.
Because of his comments, I began to think about this subject in a way different than I have ever done in the past. I want to share some of my revelations as, perhaps, a catalyst for your further consideration on what clearly is a very important issue.
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Sole and small firm practitioners have more at stake than insurance in the current debate at the California Board of Governors over mandatory disclosure of malpractice insurance coverage, much more! Their very existence is threatened. Perhaps that is an overstatement. What is clear, though, is that the economic well-being of this group, and the very survival of many individuals in this group, is being threatened. (more…)