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Articles
Throughout my career - as a lawyer, coach and consultant - I have been a vocal advocate for the idea that running a law firm in a businesslike way improves the professionalism of the practice of law. The purpose is not simply to get more money for the lawyer; it also benefits the client. A profitable law practice is much more likely to avoid such ethical problems as dipping into client trust accounts, either as direct fraud or as a stopgap "loan." Moreover, a law firm run as a business will also approach client service more efficiently - returning phone calls promptly, creating and adhering to a budget, providing sufficient details on clients' invoices, etc. You can't truly be a professional service business until you understand "The Business of Law"®.
There is a three-part cycle that drives the business of any lawyer:
These three functions are distinct and separate. All three are important. All lawyers who remain in practice must be capable in the production function. Fewer lawyers are comfortable with the marketing and sales functions. And fewer still understand and are effective at the collections function. Successful lawyers must understand their practice as a business as well as a profession, and must take a businesslike perspective to providing their clients with value. Doing so keeps them profitable, so that they can open their doors the following day. The firms whose attorneys understand these truths will ensure their long-term future and success.
How well do YOU understand them? Ask yourself these questions:
If you can't answer each of these questions clearly, you should be feeling nervous right about now. And if you are, I can help.
Speaking of nervousness I very often get emails from attorneys who read my newsletters. But I very rarely get emails as nervous-sounding as this one:
"Dear Ed, I have been running my own law practice for 5 years. Every year we manage to add 7-10 new clients to the firm, but despite this, we always seem to break even, or end the year just slightly in the black. It's frustrating because I spend so much time in the office away from my kids with little to show for it, and it's getting to point that I dread coming to work everyday. I know we could do a better job managing some of our costs - our overhead expenses increased by 200% last year and I really don't know why or where to look. Your newsletters are helpful, but I really need a more serious solution PLEASE HELP!"
- Bob, Dallas TX
Bob, if you're reading this, here's the advice I give every attorney in your situation (and believe me, there are many just like you!)
Bringing in more clients won't make your firm more profitable, in many ways it will only add to your costs and increase your workload Consider following my 1-2 approach for making more money instead:
Ok, you're wondering, "How?"
Being able to charge more for your time is easier than you think.
There are many ways to do this, too many to mention right now. But here are two clear-cut ways: Make yourself invaluable to your client by providing a service they absolutely feel they need to have (instead of reacting, look ahead for solutions to client problems). Increase your hourly rate a small amount at a time until you are at least at the market rate (careful, there's a trick to doing this without the angry phone calls!).
As far as cutting costs
When it comes to watching your overhead, I don't mean firing your staff or buying legal pads at the Dollar Store instead of Staples. There are plenty of painless ways to watch your budget, such as implementing innovating billing techniques (moving away from hourly billing), using innovative staffing approaches (hiring right the first time and outsourcing grunt work you shouldn't have to do), and buying technology that will help control your spending (make sure you get the right system though!)
In case you didn't know, Bob, all of this is covered in detail in my book Attorney and Law Firm Guide to the Business of Law®: Planning and Operating for Survival and Growth, 2nd ed. , plus you learn so much more
For example, Bob, if you're nervous about how you answered the questions in the first article, pick up the Attorney and Law Firm Guide to the Business of Law®, 2nd ed.:
Chapter 18 gives you a sample billing statement and cover letter that will get every client paying on time!
Thankfully, you don't need to spend time drafting anything from scratch These and many other charts and forms are available on disks enclosed with the book. As for the quality content, I'm pleased to quote an earlier review of the book that appeared in the ABA's Law Practice Management: "Jargon-free remedies for everyday law firm problems are at your fingertips. It's clear and concise coverage of fundamentals in one text."
Bob, I realize things seem hopeless now, and I bet many attorneys reading this can probably relate. By implementing the Legal Profit System I give you in this book, I guarantee you will get paid so much more for your services that all of your hard work will be worth it. If you find otherwise, Bob, I'll refund your money no questions asked!
Click here to purchase the Attorney and Law Firm Guide to the Business of Law®: Planning and Operating for Survival and Growth, 2nd ed.
As a subscriber to this newsletter, I know you believe as I do in the importance of "The Business of Law"®. Attorney and Law Firm Guide to the Business of Law® will show you how to make that belief a profitable reality for your firm.
Good luck!
As the new year begins, compensation and tax matters - and the funds needed to take care of them - come to the forefront at most firms. In many instances the most effective way to secure the cash needed to meet key financial needs is through a standing line of bank credit. Lawyers have a tendency to view bankers almost as adversaries, willing to lend money only if you don't need it. The reality is that lawyers and law firms are generally attractive customers for banks desiring to grow. Banks value lawyers as having good financial prospects, relatively low risk, and good potential for new business referrals. However, the key for your firm to use banks successfully is to establish an ongoing relationship so that the bank understands your law firm's business dynamics and is comfortable with your ability to share risk in any loan or other transaction.
There are two ways that bankers assess that ability. The simplest is a quantitative measure called the FICO score. FICO (created by the Fair, Isaac credit analysis firm) is the number bankers use to determine whether they want to lend you money. It estimates the risk that you will default on a payment, generally within the first three years of a loan, and your score is based on your history of borrowing and repaying money. If you use credit, and credit cards, prudently and pay your bills on time, your FICO score should be a good one.
More important than the score number are the qualitative factors that a banker uses to gauge your creditworthiness, collectively called the Four Cs:
Needless to say, FICO and the Four Cs are critically important elements of "The Business of Law"®. If you take care of the business side of your practice, and establish a good working relationship with your banker, you have all the answers you need to pass the lending test.
© 2024 Edward Poll & Associates, Inc. All rights reserved.
