1. Four Lessons That Bear Repeating
2. Don't Undercut Yourself When Selling Your Practice
3. Should You Give Staff a Bonus?
4. New Tools to Help You With "The Business of Law"®

• We are proud to announce that Mitchell Gibson Poll, a hefty (at least according to my daughter-in-law) 8#, was born on Monday, June 18th. This is my 11th grandchild and I couldn't be more proud or happier. And I'm thrilled to report that mother and child (and father and little sister) are all doing fine. I'm off on the 28th to Sleepy Hollow Manor, New York to visit my newest! If you're near there and want to say "hello," call me at (310) 721-1515.
  
  
• This is your last chance to get the pre-publication price for Disaster Preparedness and Recovery Planning for Lawyers: A LawBiz Special Report.
  Click here for more information.



• Check out another West LegalEdcenter teleseminar that was aired on June 13th; the subject I covered this month related to selling your law practice - In this session, we talk about valuation as well as some negotiating suggestions.
  
  Visit LegalEdcenter teleseminar and search by "speaker" for "Ed Poll".

1. Four Lessons That Bear Repeating
   
   Sometimes the most obvious questions are the best. During a recent phone interview a writer asked me what are some of the most important lessons any law firm can apply to improve its management processes. It took a moment's thought, given the broad sweep of the question, but these four clearly stand out in my mind as vital truths for every firm. They will likely be familiar to regular readers, but are definitely worth re-emphasizing.
   
   Lesson #1: Learn to delegate. Lawyers (like doctors and other professionals) tend to be control freaks who find it hard to let go of the details. Yet we also want to focus primarily on what we enjoy - practicing law - and tend to let business and operational issues slide. The solution is delegating to others the work other than what you do best, namely serving your clients and marketing to new ones. Hiring does involve expense but, realistically, you are leveraging skills of others at a cost of $X and charging that work out at your $Y billable rate. The profit to you is substantial ($Y-$X), and your stress level will be much lower.
   
   Lesson #2: Have confidence in your ability. Lawyers often charge too little for our services because we don't believe strongly enough in the value that we provide. Don't forget that there will always be someone willing to charge less than you do. Once on this slippery slope, it is hard to get off ... and there is no winner. The solution is to show clients that you offer value, not just represent cost. Providing solutions gets attention - and gets rewarded. Merely charging an hourly rate, with nothing unique about it, tells your client that any other lawyer is just as good as you are. Premium service at premium rates should be every lawyer's goal.
   
   Lesson #3: Collect the money you're owed. The key to any law firm's performance is integrating how many hours you bill with how much money you collect. Keep your accounts receivable listing always at your elbow to make sure that your clients are paying you in accordance with their agreement. It is vitally important that you move quickly to collect any overdue accounts. One study shows that a bill over 60 days past due can still be collected about 89% of the time. However, that drops to a 67% likelihood of collection after six months, and to a 45% likelihood after one year. You truly have a good relationship with your client only when the client's account receivable is up to date. Don't be among those lawyers who realize they are in trouble only after cash stops coming in the door.
   
   Lesson #4: Don't be afraid of "selling." The real definition of marketing is simple: Identify the people most likely to hire you for the work you want to do, communicate with them to let them know who you are, and then develop close relationships with these people to help them achieve their goals. To be effective, irrespective of the size of the law firm or the firm's marketing activities as a whole, each lawyer should work at creating a personal relationship with a prospect before he or she becomes a client. While some lawyers believe they are not marketing oriented or skilled, I believe everyone can market, and should market, more than they do. There is no one personality type necessary for being a rainmaker. Everyone is capable of bringing business into the firm - and should do so.
   
   
2. Don't Undercut Yourself When Selling Your Practice
   
   Longtime readers know how strongly I believe in the ethical legitimacy and business sense that support selling a law practice. However, there's a right and a wrong way to approach the sale, and the wrong way is to undercut yourself. Too many lawyers do that by actively seeking out buyers and giving them a price at which they want to sell. I believe you should let buyers come to you, and that you should never set an initial price. That price inevitably becomes the ceiling of the transaction - the potential buyer will come in with a lower offer, and things go downhill from there.
   
   Another reason not to set an initial firm price is that time is an important consideration. The value of the practice may be different at different points in time and in the context of buying a business, even a law practice, one must look at the future. That means, when valuing a law practice, one should also look to the expected future earnings of the practice. Many people believe that the price to be paid must be based only on this figure generated by the existing practice, but you can also include future earnings that may be based on the buyer's talents brought to bear on the purchased practice in some cases.
   
   I believe it's best to sell (and buy) on a fixed, set sum. There can be bonuses and payment terms that take into account the buyer's legitimate concerns. I prefer to take advantage of my own efforts to increase the revenue and reap the rewards, usually with an appropriate involvement of the selling attorney during a transition period. While many lawyers believe there should be a percentage of revenues paid and not a fixed fee, this approach locks both sides into an agreement that allows no upside for a buying lawyer. Both parties' concerns can be addressed with a fixed sum. And this also moves away from Bar Counsel's concerns about selling files, which is illegal.
   
   Such issues are why I recommend sellers should retain a professional business consultant or broker for representation when selling a law practice. A professional consultant, involved in selling law practices, knows how to sort through the many non-qualified potential buyers to get to the few who actually do have the means and motivation to buy the law practice. Once the unqualified potential buyers have been culled out, still only somewhere around 50% of these folks eventually buy a law practice.
   
   
3. Should You Give Staff a Bonus?
   
   Suppose you want to give your administrative staff a reward for good performance, but have no idea what to do. This is definitely an area where you need to proceed cautiously. Staff persons rarely have any direct influence on the outcome of firm revenue and expenses, yet if they receive a bonus because the organization overall is doing well, it typically creates one of three responses:
   
   
   • The bonus doesn't register, because the staff person cannot relate personal effort to it.
   • The bonus creates a feeling of entitlement, because the staff person has nothing at risk.
   • The lack of a bonus, if firm performance slips, creates disappointment and cynicism, because the staff person could not control the outcome.
   
   My suggestion for the best approach to law firm staff bonuses is the creation of a pool that reflects the firm's year-end financial statement. One approach is to identify the net profit after all expenses and all attorneys are paid, and then assign staff persons a fixed or variable percentage of that pool. Another approach is based on revenue, by assigning revenue increase to the pool and then paying bonus percentages from that - which has the advantage that most people understand the concept of revenue and believe it cannot be "manipulated" as can profit. Of course, the firm could prefer not to be tied down to a specific formula, instead saying that because performance this year exceeded a three-year average, individual staff efforts are being rewarded by cash payments of varying amounts.
   
   Measurements for success must be clearly defined so that the staff person understands the criteria by which the firm will make its evaluation. These are typical elements:
   
   
   • If there are certain organizational criteria for success - profits per partner, revenue growth, number of clients - it must be clear what contributions to the outcome are considered to be within staff control, and which ones are not.
   • The staff person must be told specifically what he or she must do, and how performance of those responsibilities will be evaluated to qualify for a bonus.
   • There should be precise definition of the distinction between the staff person's base level of compensation, and any bonuses or other additional compensation.
   
   Clients increasingly reward lawyers for having "skin in the game." Lawyers who take the same approach to staff should be clear on the standards for and nature of the reward.
   
   
4. New Tools to Help You With "The Business of Law"®
   
   I'm proud to share the news that I was one of only 14 consultants in the world to have completed the inaugural Million Dollar Consulting^™ Graduate School held in Naples, Florida, and was one of five consultants inducted into the Million Dollar Consultant™ Hall of Fame. Noted consultant Alan Weiss, Ph.D. (a long-time mentor) conducts the Colleges several times a year and oversees the Hall of Fame selection process.
   
   Such recognitions are important to my clients because they attest to objective measurement of the methodology, integrity, client satisfaction, and innovation of the services that Lawbiz Management Company provides. That includes the following tools specifically crafted to help you with "The Business of Law"®.
   
   
   1. Our new 135-page book, Disaster Preparedness and Recovery Planning for Lawyers, is set for initial distribution July 2007. Special pre-publication price is $47.00. The book's goal is to help law firms develop a strategy for business continuity after disaster strikes.
   
   
   Michael Hirsch, Former FEMA Deputy General Counsel, says the book "provides excellent guidance on how to develop plans to prepare for and respond to all types of catastrophes, whether acts of God or of man. I know of no other such book that focuses specifically on law firms, and believe it would be a valuable addition to any firm's strategic planning resources."
   
   
   2. Our strategic alliance with Thomson-West's "West LegalEdcenter" to produce monthly teleseminars on law practice management continues to expand. Sessions are accepted for one hour of CLE credit in most states, and are recorded for listening at your convenience. Upcoming topics include, "Productizing Your Professional Practice," "Opening Your Own Office," "Cash Flow Management," "Disaster Recovery and Business Continuity," and "Marketing Within Ethical Bounds."
   
   
   Visit LegalEdcenter teleseminar and search by "speaker" for "Ed Poll" for a list of available programs.
   
   Information on these and other tools to improve the profitability and professionalism of your practice is available on our web site, www.lawbiz.com.

Share these ideas with others at work and in your personal life. Being a mentor and helping others is one of the most rewarding things you will ever do. They may get their own subscription by subscribing at www.lawbiztips.com.

Ed Poll, author of Attorney & Law Firm Guide to The Business of Law, 2nd ed., is available as a speaker for law firms, law departments and bar association meetings. Contact Steve at Markman Speaker Management, (781) 444 7500 or smarkman@markmanspeaker.com.

Time for a coffee break? Visit Ed's On-Line Book Store for other materials available to enable you to become more profitable or web log, and browse while you relax.

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