September 2006

This issue contains the following articles:
  1. A Strategic Alliance That Benefits You
  2. Embezzlement - It Can Happen To You
  3. Accepting Credit Cards Is a Hot Topic for Small Firms and Solos
  4. To Be More Profitable, Have a Unique Selling Proposition
  5. Convergence or Collaboration? A Unique Selling Proposition in Action


  1. A Strategic Alliance That Benefits You

    Since 1995, I have had the privilege of representing LawBiz® Management Company in hosting our Managing Partner Roundtables. Once a month, the managing partners of law firms, many of which are in the highest tier of the national 100, attend these small, confidential and informal meetings to compare notes, speak frankly with each other, and compare ideas and strategies that have - and haven't - worked for their firms. I facilitate the discussions, and suggest ideas that reflect my understanding of The Business of Law®.

    Now, thanks to a new strategic business alliance with one of the country's leading legal consulting firms that we announced on September 1, I will be able to conduct Managing Partner Roundtable meetings throughout the United States. LawBiz® Management will work in partnership with Juris, Inc., a leader in providing specialized business systems and consulting services to law firms nationwide. Since its founding in 1974, Juris has forged relationships with more than 2,000 law firms around the country. I have long known and respected Chairman and Founder Tom Collins, and President and CEO Stephen Collins. “Juris Managing Partner Forum," a group of law firm managing partners meet annually in a two-day forum to discuss critical business issues facing their firms. Together our organizations will be able to leverage our strengths to reach an even wider audience.

    To learn more about upcoming Roundtable events around the country, please check out our respective web sites: and Contact me if you have ideas or requests for Roundtable presentations at 1-800-837-5880, or email

  2. Embezzlement - It Can Happen to You

    My advocacy for The Business of Law® reflects my firm conviction that running a law firm in a businesslike way improves the professionalism of legal practice. 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 business operations with the kind of checks and balances that eliminate financial irregularities.

    Tom Collins, a former C.P.A. and founder of Juris, Inc., confirms this. As noted on, Tom says he has never encountered a single case of embezzlement outside of the legal community and has found it relatively commonplace among law firms.

    There are several factors making law firms more susceptible to misappropriation of funds, such as part-time executive management, lack of business competency in the organization, and decentralized authority to approve and sign disbursements. Tom cites a KPMG survey in 2002 reporting that the average embezzlement incident goes on for 18 months before detection. More than half the time, the loss is exposed only through a tip or by accident - little more than 10% of embezzlers are caught as a result of external audits. Fraudulent checks, credit cards, payroll, petty cash and outside vendor accomplices are all favorite tools of the law firm embezzler, who often is a trusted staff person who seldom takes a vacation.

    The best way to reduce your risk of embezzlement is to follow common sense best practices of cash flow management. These include:

    • Deposit all client checks immediately and in person at your bank, even if the amount paid does not match what you billed; negotiate or correct the variance later.
    • Don't allow the person who opens the mail to also create the bank deposits; don't allow the person who deposits the money to also do the bank reconciliations.
    • Reconcile your bank statements immediately upon receipt. This facilitates immediate recognition of irregularities that may be more than just transactional errors.
    • Maintain separate payroll and general accounts, placing in the payroll account the full amount of gross payroll (including employee portion of taxes) on the day that payroll is due. Never allow access to payroll money for firm operations. Embezzlers have been known to "borrow" payroll and payroll tax funds in the hope that enough accounts receivable will be collected in a day or two to cover the shortfall.
    • Review all vendors bills, approve them and only then authorize checks for payment. Sign the checks yourself, don't delegate this function.

  3. Accepting Credit Cards Is a Hot Topic for Small Firms and Solos

    Few topics on which I write seem to resonate more with small firms and solos than accepting credit cards for client payment. The simple fact is that if you accept Master Card, Visa and Amex, you've enabled 99% of your clients to pay easier and faster. Clients today live on plastic, so paying legal bills with credit cards is easier for them and creates a tremendous marketing advantage for the law firm.

    Credit cards are a convenience for both parties. If you have the credit card information of the client and permission to charge his or her account, you get paid more readily and certainly more quickly. That gives you greater convenience and improved cash flow. The ease and assurance of payment and the speed of collection offset the few dollars that you must pay in credit card processing fees to get paid (2% to 4%, depending on your volume, the card and your ability to negotiate with your bank and processing agent).

    There are, however, certain ethical and practical caveats that any lawyer should observe in accepting credit card payment. These are some of the key ones.

    • There is a distinction between earned (general account) and unearned or "evergreen" fees (trust account). As we've written before, the two cannot be commingled. Unless you have clear instructions to and arrangements with the bank that card charges, including charge-backs, should be paid from your general account, do not use credit cards for your for unearned fees.
    • It is essential to have clients sign either a separate document or a paragraph in a fee agreement that says they will not charge back a disputed charge when paid for by credit card. In other words, the client agrees that the charge is non-refundable and cannot be reversed by the credit card company. Any dispute over fees paid by credit card should be settled between the lawyer and the client, by arbitration or otherwise, governed by the rules of professional conduct. Then, obtain a letter from the credit card company that states their policy that they will not charge back items where the client agrees in advance that this method is not acceptable.
    • It is not a good idea to charge a fee to the client for using credit cards. This is a "nickel & dime" cost that will either dissuade them from using the system or will just be a significant irritant when they pay you thousands of dollars for your service. It may also be prohibited by your credit card agreement or by the laws of some states.

  4. To Be More Profitable, Have a Unique Selling Proposition

    There's an adage that goes something like, "He who quotes the first number in a negotiation loses." The same is true for legal fees: when you quote an hourly fee, there will always be someone who is cheaper. A key piece of advice in a recent business book, Blue Ocean Strategies, is not to think out of the box, or even break the box, but rather never put yourself in the box. Eliminate your competition entirely. Be different. Offer something that your competitors don't or can't. Create something new that your clients need or want. If you can't think of what makes you unique, you're really nothing more than a commodity to your clients.

    As we noted in this LawBiz Tips several months ago in connection with family law practice, "commodity" work will not result in high and profitable growth. Highly focused and "high end" work will result in higher revenue and profits. When the work you do is perceived by the client as having high value, because you've presented it in the context of what makes your services unique, you will be able to charge more - even a percentage of the value of the work. The value of a unique selling proposition is simple Business 101 - but too many law firms ignore the lesson.

    A unique selling proposition is a key strategy in establishing higher rates. It can be approached in a variety of ways. If you handle estate planning, for example, you could add financial planning as a service, either as part of the fee package or for a designated added fee. Sometimes, showing that you provide better-than-excellent service is all you need to establish a unique position - for example, calls consistently returned within two hours, or final client documents nicely packaged in an attractive folder. You can also show that you are cutting edge. An effective Knowledge Management program is a good example. Electronic Knowledge Management through a shared database makes information available faster and more completely to clients and others in the firm. The result is greater efficiency, better communication and faster turnaround that can justify a higher effective hourly rate.

    The unifying idea of a unique selling proposition is to show that you offer value, not just represent cost. Merely charging an hourly rate like a day laborer, with nothing unique about it, is a recipe for mediocrity at best - and insolvency at worst.

  5. Convergence or Collaboration? A Unique Selling Proposition in Action

    Jeff Carr, General Counsel of FMC Technologies, talked in a recent LawBiz® Audio Podcast about the "DuPont Model" and compares this model to his own expectations when interacting with outside counsel for FMC. DuPont is famous (or infamous) for its pioneering application of convergence: reducing its number of outside law firms by 70% or more, and urging the remaining firms to offer discounted or incentivized rates. The DuPont Model could be considered adversarial. By contrast, Jeff talks about how the law firm needs to partner with the Corporate Law Department, collaborating together, as opposed to the traditional vendor-buyer relationship. Collaboration produces more effective representation at a lower cost to the company without discounting either the value or the per hour fee of the lawyer.

    Collaboration is an ideal context in which to apply the unique selling proposition idea. In a recent LawBiz® Blog post, Peter Jenkins, a noted consultant to corporate general counsel, suggested that outside firms which recognize the cost and time constraints on GCs, and come up with unique ways to address them, can assure their place as valued legal service providers. Peter suggests that the outside firm come up with solutions to these typical GC concerns:

    • How can I manage my IP portfolio more cost-effectively? I simply don't have any money in my budget for new systems.
    • Electronic discovery costs are going through the roof. How can I gain effective control on this runaway, unpredictable expense?
    • I would love to explore creative billing arrangements, but the law firms I use have little or no experience in decision tree analysis and budgeting. How do I get where I want to go?
    • I know I could save a lot of money if the law firms I use would pay more attention to how they staff my matters. I just don't have time to oversee this; nor would I really know how to make effective staffing changes.

    There are many more questions that could be asked that reflect the General Counsel's reality. Using Peter's list is a great starting point. The "bottom line," though, is that if we can provide solutions to the dilemma faced by General Counsel, then we'll get their attention, and business. That defines the power of a unique selling position.
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