Fee or Free
A client of mine asked me whether he should charge a prospective client a fee for their initial consultation, the meeting before being engaged.
There are three approaches to this issue, long debated amongst lawyers:
1. Free initial consultation
2. Paid initial consultation
3. Paid initial consultation with the payment applied to the total bill if they engage you.
There is no one right answer or magic bullet in response to this question. Obviously, everyone wants to get something for nothing. But, we then also run into the bromide that "you get what you paid for." In this case, nothing.
Whether you can charge for the initial consultation is normally a question of the client’s trust in you, their confidence in you … and how long it takes to generate those feelings in the client toward you …
I don’t think “free” connotes expertise … and that’s what prospective clients are looking for. In deference to the current economy, and the need attract clients, you might consider alternative #3 ... charge them an initial consultation fee, and apply that amount toward the total fee in the event they should retain you.
This is never an easy choice. But, we must remember that people do believe they get what they pay for ... and anything free is usually viewed with suspicion either as to motive or expertise. A discount in an on-going relationship, however, is viewed differently and not to be confused with the issue at hand.
Do you know when you've succeeded?
The other day, I was cycling up Red Rock Canyon in Las Vegas, NV.
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I went from about 2500 feet to 4713 feet. En route, the road was rolling hills. So, sometimes I went down, but then there was an ascent next ... all the way to the top, about 7.75 miles from the start.
Before I reached the top, however, I was complaining to myself about how hard this ride was ... and whether I could complete the ride as I had intended. When I reached the final plateau, not having ever ridden there before, I was not sure that was the top. I thought there were more rolling hills ahead of me. I asked a couple of cyclists who were descending. When they told me this was the top, I was elated I had made it to the top, relieved that the pain of the trek was over and quite surprised at how hard I had fought with myself.
How many of our clients don’t realize or appreciate the success we bring to the table for them? What have you done to educate them about the process of your representation? I was fighting myself because I had never been in Red Rock Canyon before. Most of your clients have never been involved in the judicial process before. And even sophisticated clients with previous involvement don't truly appreciate what lies ahead. What have you done to show them a preview of what’s to come? What have you done to make their journey easier? What have you done to shine a flashlight on the road in front of them?
When you shine the flashlight, and they still agree to move forward, the likelihood is that they will pay you your full fee without question and promptly in accordance with your engagement agreement.
Use the flashlight!
Outside counsel: Listen Up!
For those lawyers interested in knowing what Corporate Counsel are concerned about, see Rees Morrison's article.
Can you afford to retire?
While the economic crisis is being felt by nearly every segment of the working population, one group of workers is faced with particularly tough decisions regarding their futures. Law firms need to be prepared to assist them in making a transition during challenging times. Six-in-ten workers (60 percent) over the age of 60 say they are putting off their retirement due to the impact of the U.S. financial crisis on their long-term savings, according to a survey by CareerBuilder.
I agree with Ron Friedmann that lawyers, even partners in larger firms, are feeling the economic strains of today's world and therefore delaying anticipated retirement. But one group of lawyers may not: Sole and Small Firm lawyers. These folks have something of value that they can sell .. converting their equity into cash. Most lawyers never thought their law practice was a saleable asset. So, while their investments may have tanked, they can look to their law practice for ready cash.
Why sell your law practice?
Lawyers, ready to retire, must consider the value of their law practice as an asset that can be sold ... With 401 Ks becoming 101 Ks (or less), the revenue from the sale of one's law practice may provide the revenue stream needed for retirement.
Are lawyers agents?
Seth Godin suggests an interesting question:
"Travel agents... gone.
Stock brokers... gone.
Real estate brokers... in trouble. Photographer's agents, too.
Literary agents?
The problem with being a helpful, efficient but largely anonymous middleman is pretty obvious. Someone can come along who is cheaper, faster and more efficient. And that someone might be the customer aided by a computer."
We've seen this happen in the legal community. Many more people are representing themselves, pro se, because they can't afford lawyers or ... heaven help us ... they can serve their own interests just as well as the lawyer.
Lawyers must bring creativity, judgment and experience to the table to maintain their position in the affiars of business. Being a commodity, or being "run of the mill," just isn't enough anymore. And a major differentiating factor for most clients is the "care and feeding" offered by lawyers. Impersonal and expensive (a relative term) is no longer accepted. We've got to move past the point where the single largest complaint against lawyers is their failure to return phone calls, the failure to respond quickly to the concerns, wants and needs of the client. Until that happens, the legal profession is in jeopardy of losing its franchise.
Change creates opportunity
One could view the current situation with the attitude that whenever there is challenge (a much over-used word today), there is also opportunity. Certainly better to consider opportunities than feeling like a victim in constant pain.
Our new newsletter is now on the stands.
Increasing purchasing power for lawyers and staff?
There is so much happening in our profession that it’s hard to keep track …
I read an interesting article in a recent issue of the New Yorker Magazine that employed workers are actually seeing an increase in purchasing power because of declining prices all around. Yet wages are not going down because, historically, companies have chosen not to change wages for reasons relating to employee morale. I’m not sure whether that historical fact holds true in this environment. I just read that a couple of the large law firms are telling their new hires that the starting compensation will be $145,000, NOT $160,000. Obviously, change is in the air.
The purchasing power for employees is an interesting thought. The key, of course, is to keep your job and even lawyers are facing challenges here.
50 Financial Tips to Thrive in a Down Economy
Join me for an ABA teleseminar. Outstanding panelists in a fast paced presentation that will provide tips to thrive in the new economy! Geared for sole and small firm lawyers. Sign up today!
Lawyers survival - cont'd
I like the comment of Stephen Mabey, who said:
"History should be a guide post not a hitching post and when marketplace adjustments increase in both strength and frequency I think falling back on historical prose that we are different than all other industries / marketplaces is a great way to ensure a repeat of history."
Despite the pain, I'm not sure how many of us can alter our course of conduct. But, clearly, the successful ones will have to make some mid-career alterations.
Will the legal profession survive as it is?
Larry Bodine suggests that law firms that survive today's economic crisis will:
- Have “customers” not “clients.”
- Offer flat fees per project or per procedure.
- Have rates that are markedly lower than in 2008.
- Will routinely produce budgets for all legal work.
- Be run like real businesses, which know their costs, can calculate a profit margin, and offer customers “just in time” services at the best price possible.
- Realize that customers are fickle and expect personalized service.
- Have lawyers that fly coach and stay at cheap hotels near the client’s offices, instead of the Four Seasons 5 miles away.
- Have lawyers that know their clients business, their goals, strategies and objectives, and work to help the client make more money or cut their costs.
Airstream and Today's New Wealthy Class
I knew there was a reason for us to get into an Airstream. For those who have followed our adventures, here's how we now feel.
Pay attention to your clients
I was coaching a client today. She pulled at my heart strings by telling me the problems she is having with several of her clients who owe her money, big sums of money.
One of the clients paid her $37,000 two weeks ago and already owes her another $27,000. After complaining about some of the services and getting a $5,000 reduction in billing, he has not yet committed to a date certain for payment of this amount. Oh, yes, you guessed part of it. "The check went out last week."
Should she continue working for this client? My advice was to review your file to make sure it's clean and not susceptible of negligence claims, make one last effort to collect by telling the client he has to pay what is owed within 7 days or you will file a motion to withdraw because the client has not honored his agreement commitments, and then be sure you are far enough away from trial to have sucha motion granted.
Bottom line, however, while you are taking care of your client, you must take care of yourself! If, while focusing attention on the client's issues, you ignore your own billings and accounts receivable, you will lose the respect of the client, you will not get paid the full amount owed to you, and you will not get more referrals from this client. Lawyer Beware!
Leverage and morale
Susan Ward quotes Adam Smith in her blog posting today.
I respectfully disagree with his assertions. This is what I said in response to Susan's comments:
It's hard for me not to disagree more. Leverage always has been, and will continue to be, a motor for profit. Whether that leverage comes from associates or from non-equity partners (another form of associate) is not clear, nor important, for this discussion. Time will tell. And Susskind's conversation merely discusses another form of leverage, technology, just not the human form.
In China, years ago (I can't speak for today because it's been many years since I was there), the leverage the economy used was people. They couldn't use machinery because they had so many people who needed work.
Yes, experience is important. But, it is also teachable. Perhaps the more progressive law firms will wake up to how important continuing education is for their lawyers (partners and others) as well as their staff.
Morale is low. Agreed. But, that in part is because of failed expectations. Expectations in BigLaw must be brought in line with economic reality; the business model needs to be adjusted a bit ... then morale (with good leadership) will rise.
The End of Lawyers?
Richard Susskind has written a book suggesting that lawyers may become obsolete unless we make some dramatic changes.
I see nothing unusual about his conclusion … that legal work will be unbundled and that the work that is more mundane and routine will be systematized and perhaps even automated. Technology advances provide us with opportunities that didn’t exist before. We can, today, create better product for less money. Technology is only one aspect. Globalization is another. And this isn’t just for the large law firms. A client of mine, in Texas, opened an office in India for the specific purpose of document review and document production – it’s done for less money more quickly … And he can get a faster turnaround because of the time difference.
Law is slow coming to this process. My background is in manufacturing. I’ve owned and operated several companies. In order to retain prices, not to increase prices, we would do everything we could to automate. When automation, reducing the amount of labor costs, would go no further, we reduced the size of the container. For example, we would go from 32 oz to a 22 oz jar or a 10 gal. container to a 5 gal. container.
When we have time of challenge as we do now or changes in our economy and culture, we have the opportunity to innovate for improvements in products and services. We have the opportunity to create new demand. I see this beginning to happen in our parts of our economy. It will have to happen in the legal profession, nay the legal business (The Business of Law®), if we are to continue to serve our public as we know.
Lawyers sell all the time
In response to Tom Kane, I wrote the following:
Yes, we "sell" all the time. My definition of "marketing" is the process by which we persuade another of the merits of our idea. This comes in the context of persuading a judge or jury of our client's position; of persuading our supervising partner that we're the right person to work on a matter (in a large firm); of convincing a prospective client that we can get the result they seek. This is all marketing/selling. And we do it all the time. I even do it in my sleep when I seek to persuade my wife that I'm entitled to a portion of the bed when we move around. Marketing/selling is both conscious and unconscious. When we make it conscious, we have a better chance of succeeding.
Put your best billing foot forward first
Put a “positive spin” on the description of your services. I have been saying this for many years in the context of preparing your billing statements for work done for clients.
Continue Reading...Entitlement thinking may be on the way out
Ownership mentality, or the lack thereof, is a primary cause for the failure of many organizations, including law firms. When entitlement is the primary psychological attitude, the organization and the people it serves suffer! There is a vast difference between ownership thinking and entitlement. One of the unanticipated benefits of our financial difficulties may be to whack "entitlement" thinking on the head.
IOLTA funds update
See the latest edition (March 3rd) of our newsletter featuring a discussion about the safety of IOLTA funds and the responsibility of lawyers for the failure of banks holding their accounts.
Yes, Joe, the plumber, needs more education than lawyers
Bruce Crist, mentioned in my previous blog post, sent me another note. Seems I'm wrong again. 
I mentioned that California attorneys are required to take 12.5 hours per year. The actual requirement is that lawyers receive 25 hours (down from 36 by recent amendment) of MCLE approved education. That works out to be, according to C.P.A. Bruce, 8.33 hours per year.
And Bruce admits that this is less than plumbers are required to take in MA. Bruce says now that plumbers are required to have 44% more education than most lawyers. Taking a line from Bruce, "... and the point is?" I made my point earlier.
Bruce, thanks for the "joust" and for reading my article.
Have a great day!
Plumbers must take as many hours of education as lawyers
In an article I wrote for February 2009 issue of The Bottom Line, the publication for the Law Practice Management & Technology Section of the State Bar of California, I discussed the continuing education requirements for lawyers as contrasted with others such as plumbers, et al. The article was a follow-up to piece to comments I have made here on June 12, 2006 (MCLE whining) and November 22, 2005 (Plumbers get more education than lawyers), all of which focus on the complaints lawyers have made about their education requirements to retain their licenses.
Continue Reading...
