Ed talks about the cash flow needs of your practice.
I’ve talked about a lawyer having an estate plan. I’ve talked about creating an estate plan for your law practice; this is an idea first generated by Ellen Peck, retired judge of the California State Bar Trial Court. Now, there is another estate plan to prepare: Digital.
What are you going to do with all your passwords, all your email accounts, all your accounts in social media and all your other accounts that reside in the internet?
Your virtual life doesn’t end just because you die. And in some arenas, the material you have on the internet cannot be removed or taken down. You may even have money residing in some of the internet residences such as PayPal, on-line gambling accounts, etc. Be sure to appoint or designate someone to be responsible for dealing with these issues. Be sure to write down all the accounts and passwords. And be sure to contact such companies as LinkedIn, Facebook, Google, etc. to comply with their policies.
There is little or no case law to date about planning for digital assets after death, and certainly no precedent of which I’m aware on this. But, for just that reason, it’s time to think about these issues.
Not bad enough that legal services are already expensive, but court closures resulting from budget cutbacks will make legal services of all kinds even more expensive. Alternative methods of dispute resolution will need to be engaged. This is like a bad heart, needing new arteries created from exercise. But, we don't know yet what the "exercise" will be to enable the cost of legal services to go down. Will it be technology? Will it be alternative dispute resolution? Will it be "why can't we all just get along?" attitude changes?
Marlo Van Oorschot talks about the cost of a divorce rising, as just one example. But, she puts it in terms that everyone can understand.
More budget cuts are going to cause court closures in the family law department this year. This means the time and cost to bring a family law case to conclusion is going to increase. Unless an alternative means of resolving a case is implemented, parties should plan on spending two years and their children's college education funds waiting to have their day in court.
Fee suit exclusions seem to be the latest insurance ploy to cheat unsuspecting lawyers.
An engagement agreement is designed to be a "two way street." The lawyer promises to do certain things... address the needs (and wants?) of the client; represent the client to address the challenge being faced by the client, whether it be a lawsuit or a transactional issue. And, of course, the lawyer is representing that he/she is competent to do so.
The client, on the other hand, promises to tell the truth to the lawyer, provide information and documents relative to the matter when requested by the lawyer to do so ... and to pay the fee as billed in accordance with their arrangement.
What are the consequences of failure to honor the respective promises? For the lawyer, it is a malpractice suit and/or a disciplinary proceeding. For the client, it's withdrawal by the lawyer (unless on the eve of trial or otherwise would prejudice the client) or a lawsuit for payment of the fee.
BUT, some insurance carriers are lining up with clients, saying that if the lawyer sues for fees, and the client cross complains or counter sues for negligence or files a disciplinary complaint with the state bar, the carrier will not provide defense costs or pay any judgment against the lawyer. The effect of this is to deny the lawyer the ability to collect the fee when the client fails to pay. Why pay insurance premiums for something you will not receive? The $64 question.
Fee suit exclusions are a veiled attempt by insurance companies to raise premiums without notice to the lawyer. And, the lawyer generally isn't even aware of this exclusion.
Both law schools and insurance companies conspire to keep lawyers ignorant of the business nature of their practice. In no other industry do creditors ignore their rights and fail to sue debtors for refusal to pay legitimate debts resulting from their purchases. Why should lawyers be placed in a different position? Why should clients be encouraged not to pay their lawyers' fees?
The reality is, according to people I've spoken with in the industry, that there are few lawsuits filed by lawyers. (Perhaps it's because lawyers have been scared away.) Further, the reality is that there are few counter suits for negligence. The further reality is that lawyers win most of these lawsuits; the figure I've been given is winning 9 out 10.
Seems that the lawyers face a big challenge: Failure of the law schools to teach business practices so lawyers can more effectively represent clients and efficiently deliver legal services; insurance carriers looking out for themselves, not their customers (lawyers); and bar associations believing their sole function is to protect the public, rather than a dual function of protecting the public AND helping their members (lawyers) to become better practitioners (including business skills).
Lawyers who survive in this environment should be commended.
I was wondering how long it would take?
Sarah Martinez, a recent law school grad, broke the ice. She has sued Howard, Rice, Nemerovski, Canady, Falk & Rabkin in San Francisco Superior Court for extending her an offer of employment, deferring it and now reneging, saying it didn't have the resources to hire anyone in the near future. Among the counts alleged are racial discrimination, sex discrimination, and breach of contract.
While every case stands on its own facts and merits, it's clear that Big Law will have to alter its offering policies in the future. The impact on law schools and those coming up through the grades is yet to be determined, but I suspect it will dramatically alter the economics of the future 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.
The California Guide to Opening and Managing a Law Office has just arrived! It's a 600 page power packed treatise that evey sole practitioner should review. It, along with the ABA's Flying Solo, is uniquely designed to raise issues that need answers for success.
Disclaimer: I'm responsible for two of the volume's chapters. There are many contributors and editors who have made this an outstanding reference work.
One of my law firm clients has a lawyer who is what I would call a "reluctant marketer." This lawyer is a great lawyer, a "worker-bee," but not a great rainmaker. The managing partner considered engaging a coach to help the lawyer improve his skills within his comfort zone. Why is this important? Because the amount of work for this lawyer that is being internally generated is lessening. In other words, this lawyer has to begin helping himself a bit.
Parenthetically, I saw a recent survey that shows the amount of hours being worked by lawyers, generally, is coming down. But more on that later.
But, the management committee has come back and said that "costs" are frozen. No more spending. Is this a backward way to look at the situation? What about looking at expenditures from the ROI perspective? If you buy a new piece of equipment and it pays for itself in a couple of months, wouldn't you move forward? I think you should. If a coach or marketing director can help the lawyer increase his/her revenue because of improved rainmaking efforts, shouldn't you invest in the process?
And what would this mean to the other lawyers? A reduction in their take home pay? When you're already earning hundreds of thousands of dollars, a collective reduction by only a few dollars in sdthe short run for an ROI building expenditure may be worthwhile.
The American Lawyer brought us the "AmLaw 100," and more. Some blame Steven Brill, creator, for lawyers focusing on the business side of the practice. That would be an interesting discussion.
But, whatever one thinks about Brill, The American Lawyer has done it again. This time, on the negative side of the practice of law, layoffs.
Listing of firms and articles concerning layoffs is the first time I've seen this all in one place. Scary to think that there is so much of this going on that it merits concentrated press coverage.
The Business of Law® is not a generic term. In 1995, lawyers did not think they were in a business, let alone a service business. And I was successful in my application to register this as my mark. It has been my mark for more than 10 years.
Today, lawyers in the large law firms understand that law is an honorable profession, but is also a business.
Peter Zeughauser in the ALM Law Firm Leaders conference said that the AmLaw 100 revenues are $64.5 B. That’s BILLION dollars. And 3 firms account for 10% of that number; that “profits” (why are we talking about profits if we’re not in business?) increased 8.7% in 2008, ranging from a low of $410,000 to $4.95 million.
Allison Shields asks a fascinating question, "What do the Flying Wallendas have to do with strategic planning?" This was in response to my blog post reflecting an earlier conversion among Allison, Aviva Cuyler and me.
And I agree wholeheartedly with Allison's conclusion: "If your firm hasn't started the strategic planning process, now is as good a time as any to begin. Your strategic plan can begin by focusing on where your firm is now, what challenges it faces and what resources are available to meet those challenges and anticipate what might happen in the future and begin scripting a response so that you can act instead of panicking."
Wall Street isn’t the only institution falling down around us. A law firm, not the first, that was first opened 118 years ago in 1890, collapsed in a heap of depressed lawyers, staff and clients, not to mention vendors. Many people were significantly impacted by the dissolution of this 600+ lawyer firm.
How could a banking institution, built over decades, collapse in hours? How could a law firm of such magnitude collapse in a matter of weeks? For the law firm, there are a number of reasons provided in the public airwaves, each of which carries a significant lesson about The Business of Law®.
Here are a few of the lessons that popped out for me:
Lessons to be learned:
• Expansion is always expensive and must be planned. If planned properly, one normally will still find a period of time in the beginning where expenditures are greater than revenues. Most law firms are not “cash and carry,” necessitating the extension of some credit in the form of increased accounts receivable. Though profitable, accounts receivable don’t get collected fast enough to pay expenses without borrowing. While the public accounts did not say whether the expansion offices were profitable, they did say that these offices were expensive and challenging. Their borrowing apparently reached the cap. Good planning would have suggested a slower pace for growth or larger line of credit.
• Partner defections in today’s world are far more common. There is less loyalty to the firm. Strong firm cultures bonding lawyers together are harder to find. “Free agency” is the rule of the day. One’ personal compensation is the top priority ... and the RPP (revenue per partner) and PPP (profits per partner) are the most important metrics being considered when thinking about the location of one’s practice. As in baseball, free agency will strip many stars away from a law firm. In Heller’s case, once the rumors of economic challenges and partner dissatisfaction were ripe, law firms and head hunters came knocking. Once a few left, more left; then the landslide began ... just as on Wall Street recently.
• When any one client represents more than 10% of one’s business, the firm is at risk of heavy loss if/when the client leaves. Leaving can occur when the client is acquired by another company, when the client has financial difficulties and either can’t afford your legal services further or actually disappears, or other business reason. The client can also leave because of dissatisfaction with the lawyer. Whatever the reason, innocent or not, the result for the firm is the same – economic hardship. When expansion or capital decisions are made based on sustaining the revenue from these large clients, the law firm is at serious risk. In Heller’s case, more than 60% of its business was in the litigation practice group. And, more than 25% of its litigation went away suddenly. Of course, Heller would feel a significant impact economically, especially since they were unable to replace the revenue flow quickly ... and in this case, the firm collapsed.
• There was a “Tipping Point” along the way. Where it came, only insiders know. But, when the Tipping Point was reached, it was too late to arrange a merger. Previous attempts failed, and a marriage while one patient is sick is very unlikely. Whether because of the rumors or intuition, every merger candidate passed. Sometimes, even bargain sales are not attractive. Just look at Wall Street today, as I’m writing this. Later, we might be remorseful that we didn’t act, but, for now, acting is just fraught with too many uncertainties and doubts.
Many people were hurt. Coming on the heels of a collapsing national/world-wide economy, the collapse of Heller Ehrman was even sadder. Other firms should learn the lessons of The Business of Law® from this experience.
During an economic crisis, yes, some call it a depression, Heather Milligan has some cogent ideas to market your practice:
- What are your clients’ key industry pubs reporting on today? Understand how the financial markets impact their companies.
- If your clients/referral sources are at risk, call and see how you can be of service to THEM. Not just their companies, but THEM. If their company is on the brink of collapse or bankruptcy, their first concerns will be about putting food on their table, not who is handling the filings.
- Face time. Face time. Face time. You need to be, and stay, top-of-mind with your key contacts.
- For we marketers, time to start thinking about clearing our budgets of “unnecessary” items. Now might not be the best time to kick-off a rebranding campaign or overhaul the website. I’m not going to ask for a high-capacity color laser printer right now. End-of-year charitable contributions/tables-of-ten will soon be reaching your desks. How are you going to evaluate them?
A new, ABA Formal Opinion 8-451 (August 5th), states the obvious: A lawyer may, but is responsible for, outsource work to lawyers and non-lawyers support appropriate to represent the interests of his/her client.
Parameters of this approval include i) the fee for the outsourced work must be reasonable; ii) the client should be informed of such relationship and may need to consent; iii) the lawyer not assist in the unauthorized practice of law; and iv) the lawyer must supervise the outsourced work to assure that competency and quality assurance standards are met.
Delegation is a main principle to profitability and success. By delegating, you can get the best person to do the work, and you can thereby liberate some of your time to seek new, high interest, profitable work.
But, be careful! As my wife says, "... there's no free lunch." When you get more clients, more business, you need more people to work on the matters ... And now, one day, you wake up and find that you have the increased revenue you want, and too little time to do it without more delegation, more people ... and you become more of a manager of legal services and less of a hands-on lawyer. Some can handle this role change, some can't ... Of course, that's the only way to become a larger law firm and earn more money ... and have more responsibility.
Many sole practitioners utter the refrain that they want to be "lone rangers." They want to be on their own, without the political "games" of an organization. Yet, interestingly, almost to a person, I hear them say they want more revenue. How can you have more revenue without growth? How can you have growth without having an organization? How can you have an organization without a role change, i.e., becoming a manager of legal services? It would be nice to be able to move toward a specific goal, a certain "line in the sand," and stay right there all the time. But, ours is not a static world. Oh, what a wonderful web we weave when we start having "wants." <g>
Is the Virtual World real? It apparently has more “life” than I knew. Even the IRS is involved, recently ruling that independent, virtual contractors were, in reality, part-time employees for whom taxes needed to be withheld. What impact will this have on other “virtual businesses?” What impact will this ruling have on “virtual assistants?” Are they independent contractors, our assumption in the past, or employees, though at a distance?
Assuming your competence, what can you do? Here are some suggestions I’ve made over the years that you might consider:
1. Increase your fee for this matter/client. If the client accepts, you’re well rewarded
a. You receive an added benefit by learning that the market will accept a fee increase from you.
2. Engage a contract lawyer to help you in this and other open matters in your office.
a. This is a great way to begin growing your practice.
b. By doing this, you can have both a “volume” practice as well as a sophisticated practice
3. Delegate less sophisticated work that is now on your desk to others in your office.
a. Build your team so that you can take on challenging, sophisticated, higher value (revenue) matters
b. ... And build your team so that you can accept “lesser” matters that will teach your team to be better ...
c. Delegation and leverage also enable you to be more profitable.
4. Use technology to make you more efficient.
a. Increase your technological utilization to enable you to be ever more efficient.
5. Review your calendar to determine whether you have court priorities that are ahead of this matter ... or whether creative scheduling will enable you to meet your commitments and take on the new matter as well.
a. Most clients will accept a schedule that might include a “delay” from your perspective but still be timely from your client’s perspective.
b. There is no need to promise delivery of work product sooner than the client needs it or that you can produce it.
6. Have the client be part of the “team” approach to addressing his/her matter and have the client do the next task in the matter; in other words, have the client do some of the work which will also delay your direct involvement for a bit more time.
There is no simple conclusion. But one element may very well be that clients (General Counsel) feel pressure down from their CEOs and Boards of Directors. They need to be more price and cost sensitive. Partners in larger law firms, on the other hand, want larger compensation packages for themselves in order to be seen as peers of the CEOs who are earning far more than in the past; lawyers do not want to be seen as vendors, but as peers ... and frequently compensation is a factor in this perspective. Of course, it's hard to be a peer with a CEO whose average compensation went from 4:1 to 17 and even 34:1 between him/her and the average employee working for him. And it's a bit disingenuous for that executive to say that lawyers' fees are too high. Even in companies whose stock is falling, or whose profits are falling, it is rare to see the CEO offering to reduce his/her compensation.
Here are some of the key findings of the research report and my thoughts related thereto:
1. Clients are concerned about continuously increasing fees.
The report suggests that in-house counsel believe that law firms cannot continue to increase their prices. This may be true in the opinion of General Counsel; however, it is not how General Counsel act. In fact, despite protestations to the contrary, General Counsel continue to engage large law firms with large billing rates, even though very competent, but smaller law firms are available. In the meantime, for legal needs of the average American, there really is very little alternative. Either their legal needs go unmet, or they must pay the higher fee. As in every other aspect of American economic life, costs are increasing. It is not clear to me that legal fees are rising any higher than the cost of living. Merely take a look at the price you recently paid for gas.
This conclusion should not be a surprise. In focus groups done over 10 years ago, lawyers believed that clients were very concerned about their fees and the reasonableness thereof. However, clients in similar focus groups, conducted at the same time, ranked reasonable fees down the list of their priorities, sometimes even lower than half way down. Thus, it is not surprising to this writer that General Counsel and their outside counsel should differ on the importance of controlling costs.
Again, this conclusion does not seem to be a surprise. Was it Mark Twain who said everyone is talking about the weather, but no one is doing anything about it? So too, here, everyone talks about the billable hour being an anathema to the legal community. In a recent example, one prominent lawyer suggested that the billable hour would be the death knell of the legal profession. Yet, neither he nor his firm were prepared to adopt a different billing method, though there certainly are alternative billing methods available. This method may not be the best or fairest, but it certainly is the easiest to understand. There is something to be said for that.
It seems that this conclusion is, at best, tenuous. It is also clear that the clientele of Eversheds is of such a sophisticated nature that much of their work is "one-off." Under such circumstances, using technology to be more efficient and effective is important, but it does not rise to the status of commoditizing legal work being performed. In the more mundane world of legal services, where the vast majority of lawyers conduct their work, technology and commoditization will become significant. Or, at least the threat is that it will become significant with significant adverse consequences (especially under the hourly billing modality) to lawyers and benefits to clients.
I suppose that this conclusion requires a definition of "happy." It certainly appears that one would be happier than one's assistant with a vast difference in compensation levels. Despite this difference, however, I know too many large firm partners who are close to "burn-out" or at the very least are "unhappy" in their day-to-day occupation. In fact, there are just too many reported cases of alcohol and drug abuse; how many such cases are not reported can only be left to one's imagination.
At least one half of the clients and partners in large law firms did not think that flexible working time schedules would be a viable solution to work-life balance issues, especially in transactional areas. Yet, it is an issue that remains on top of the table and must be dealt with in order to satisfy the needs of the now sometimes four generations of lawyers working in the same office environment. What is the answer is clearly not universally yet known. I suspect that the real answer must be left to one-on-one negotiation between the law firm and the individual lawyer who needs the flexibility. The law firm that fails to address any such request in a manner satisfactory to the requestor will lose that talented individual, and perhaps more.
To some degree, this conclusion is a continuation of the previous discussion. It seems that the parties are split equally. One half of clients and one half of partners believe that flexibility will solve the work-life balance, while the other half of each disagrees. As noted above, it is a problem and one that must be addressed in order to keep the younger generation involved with the legal profession. The older, in-power generation scratches its collective head for a solution. Despite the best of intentions and goodwill, this older generation seems to be unable to understand why their followers (the generations behind them) don't have the same values as they do. Nor do they seem to be able to develop generic solutions acceptable to the younger generation as a group.
The Eversheds report clearly is a great starting point for discussion. Unfortunately, there are no solutions provided. And other than suggesting a willingness to be flexible, open to discussion and new ideas … and occasionally trying out a new idea here and there --- I have not heard any “expert” in generation differences develop a “one answer fits all” solution. Legal powerhouses must listen and adapt to the needs of both their lawyers, their staff and their clients in order to assure their business continuity. This is a “disaster” of a kind we’re not accustomed to thinking about, and certainly was not contemplated by the law firms involved in reacting to the disaster of 9/11 in my book, Disaster Preparedness & Recovery Planning for Law Firms. However, the basic principles there apply here as well. Planning (for the future) is essential to business continuity, the underlying principle of business.
Just a thought to consider, before we lump them into the "nickel and dime" category. Just because it's different doesn't make it wrong.
(Never thought I'd defend an airline practice!)
He says, "
Because our “new” vintage Airstream is still being built and our “old” vintage Airstream was totaled from our December accident, we could not stay at the rally, but had sleeping quarters about 10 miles away, a short car ride. To get there, we had a short stint on Highway 550, a heavily trafficked thoroughfare in the area, so I’m told. As we got close to our destination, I noticed the highway was streaming with police. It looked like a major car accident; as I got closer, it looked like a disaster. I could tell the roadway had been narrowed by cones and police cars into one lane. And as I approached the head of the line, a policeman approached me. Suddenly, I realized that I was in the middle of a road block!
The officer spoke. He asked if I had had any alcohol that evening. Those of you who know me, know that I am always the “designated driver.” I have nothing against alcohol or those who enjoy it. I’ve never developed a taste for good wine or other spirits. Thus, drinking good wine is “lost” on me.
This evening, however, a friend at the rally had bought a bottle of red wine, a favorite of theirs and my wife. To be part of the group, I accepted a “short” glass and had a few sips — well, o.k., I had one glass of wine. Several hours later, our evening ended and we drove ... until we were stopped at the road block. I told the officer the truth. He pulled me out of line, told me to shut off the engine and turn off the lights. Not having driven this car before, I fumbled with the lights. As a former prosecutor of DUI/DWI defendants, I knew this was not looking good. A drunk will usually fumble with the lights. I laughed it off, attempting to be casual with the officer.
He gave me the eye test. I got a bit nervous, contemplating the balance of the field sobriety test..Have you ever taken that test ... while sober? It’s not the easiest thing to do, especially when filled with anxiety “in the field.” Though nervous, he could tell I was sober ... or at least not under the “influence.” And we drove on ...
As I was thinking about this, on the scene, I had visions of needing to call an attorney in the area to come bail me out ... or at least defend my good reputation to keep me “clean” with the Bar, that is to make sure I didn’t have a spot on my record that would impact my license to practice law and my license to drive a car. Could I afford to hire a lawyer in today’s economy. Of course, we might say that is the wrong question. Could I afford NOT to hire a lawyer is the better question.
For those in need of a lawyer, it is clear they have a need. And, from my perspective, it’s clear that lawyers provide substantial value to their clients. From the client’s perspective ... and this is the only perspective that is important ... they too often are confronted with a large bill they did not expect ... and an inability to reconcile the value of what was done for them and the fee they now have to pay. That is the fault of the lawyer. It’s up to the lawyer, the professional, to educate the client about both the value of the service to be performed and the anticipated cost of delivering that value. When that is done, the client will be satisfied no matter what the dollar amount may be.
Are there any lessons to be learned from this excitement for lawyers and law firms?
For UCLA, this was another great year, though the team did not win the ultimate prize, the national championship ... and did not become the 101st title in the school’s storied history. Coach Ben Howland, one of the premier coaches in the country today and his team made the Final Four with 3 different teams in 3 straight years! A remarkable feat! This team won more games in a season than any other team in UCLA’s basketball history, even under Coach Wooden. They forget that Coach Wooden won his first national championship more than 15 years after he started. Coach Howland is only in his 5th year ... and has already knocked on the door 3 times, and the final game once. His players are good students, good athletes and good citizens of the campus. One cannot utter higher praise.
Are there parallels for lawyers from this “game” of basketball that millions of folks watched the other night.
After watching Memphis outperform UCLA (my alma mater), I am reminded of legendary Coach Wooden’s observations in an era where videotapes of one’s opponents were seldom reviewed. He said: “Play your own game and you will win your fair share." Obviously, he won more than his “fair share” of games. But, then, he had the likes of Lou Alcindor, Bill Walton, Gail Goodrich, Walt Hazzard and a host of other outstanding athletes. As good as today's players are, they are not Alcindor, Walton, et al.
In Saturday’s game, Memphis played about as well as they could ... and UCLA didn’t. Basketball, as is a law firm, is a team effort. If a cylinder of a car is not firing well, the entire engine falters. And when competing against another fine vehicle, all cylinders are needed to win.
UCLA had a great inside game. But, its perimeter folks were missing shots. This put too much pressure on the inside ... If the guards and forwards had made a few more of their open shots, if their players had made the inside shots that were uncontested, the inside players would have had a bit more breathing room ... and everyone would have seen a different game. Memphis, on the other hand, was firing on all cylinders; everyone was doing what they were supposed to be doing. Memphis played “their game.”
In a law firm, you cannot profit and you cannot grow unless you have skilled visionaries and lawyers who are rainmakers. You cannot grow and continue to increase profits unless you work as a team, share client information, legal expertise, and legal knowledge with all the other lawyers in the firm.
Firms that grow, even to a 100 or 200 lawyers, where rainmaking is limited to a few stars generally are law firms facing collapse when those few rainmakers retire or “die in their boots.” Without a succession plan that includes the willingness of the “stars” to share their knowledge and transition their client relationships to others in the firm (the next generation), the entire firm disintegrates when they (the stars) leave the firm.
As in basketball, successful law firms are team efforts ... with all cylinders working well, together!
Ohio deals with issues that the ABA rule subsumes or believes is not important.
For example, Ohio is concerned that a lawyer may buy a practice in order to resell it. The rule prohibits this. I'm not sure what Ohio was concerned about; I've never seen one lawyer buy a practice with the intent to "flip" it. A law practice is not a piece of real estate that one can hold for a short time and have economic appreciation increase the value sufficient to justify the added expense of another transaction. In order to increase the value of a law practice, a lawyer must add to the revenue and the profitability of the law practice. There is no time factor set in the Ohio rule, so I'm not sure what the factors are that they will consider in evaluating whether a future sale violates this provision.
The ABA rule allows certain disclosures in the sale negotiation without violating confidentiality. The Ohio rule appears to be more stringent until and unless a confidentiality agreement is signed by the purchasing attorney.
The ABA rule does not make reference to covenants not to compete; this is left to State laws. The Ohio rule states that a purchase agreement may include a reasonable covenant not to compete.
Whatever the differences are between the Ohio rule and the ABA rule, at least Ohio now has a rule. I believe "simple is better" in this circumstance. But, a rule permitting the sale is better than either no rule or a rule prohibiting the sale!
For me, this is reminiscent of the discussion I had recently with a client who asked me to do a profitability analysis of her firm She and her partner believed that the expenses of their small firm were too high My review of the data indicated that there were areas where reductions or revised characterization would be relevant. For example, several capital expenditures could be removed from the expense side of the profit and loss statement and recast as assets; a management fee could be removed or recast as a draw by one of the partners because such a fee is inappropriate for a small firm. However, the real focus for this firm should be on increasing its revenue. That would have the most dramatic impact on the performance of the firm. Recasting the expenses would not change the cash flow of the firm, but would help generate the mental toughness confidence that they are not in terrible shape, that they could succeed, and provide the mental toughness to continue seeking the appropriate client base to generate increased revenue.
Looking at the relevant data helps remove the fear of failure, engender confidence that small changes in one's own behavior can have large impact on one's success, and bring the realization that success is just around the corner.
If you’re representing larger businesses, my experience suggests that they don’t buy legal services based solely or even primarily on hourly rates. They, like most others, buy based on perceived value, expectations that you can provide solutions to their challenges and personal rapport.
Sending the letter as you’ve framed it brings the focus of your service to price. If you focus on price, you are a commodity ..and any other lawyer can compete with you on price if they choose to do so … However, once you create rapport, show that you can provide solutions and therefore are value oriented for them, you will attain their loyalty. That is the best marketing approach, I think, you can take in the circumstance you describe.
Have you thought of calling your clients … and merely thanking them for their loyalty and continued business …. (with, if you feel so inclined, an “oh by the way, my rates will remain the same in 2008)? When the time arrives to raise rates, I would offer that you read my article on the subject of when and how to raise your rates.
Stay tuned for the official press release.
Once every four years, we receive the opportunity to make a gift to our employers. Do you think they appreciate it? <g>
Karen Mathis, immediate past chair of the American Bar Association, focused her year on developing a new awareness for the legal profession. She said recently that 400,000 lawyers will retire in the next 10 years. That’s the entire current membership of the
What will these lawyers do? Will they close their doors and start new careers? Will they sell their practices? Will they become sole or small firm practitioners because their current firm has a mandatory retirement age, some as young as 62 years of age? Will they be “warehoused,” and merely wait to die?
Karen was perceptive to suggest that the “Second Season” is an important issue that needs to be addressed both by our profession as well as our society in general. We’re currently experiencing a multi-generational workforce, something not seen before.
As with many concepts, it’s important that the individual take responsibility for his/her own future welfare. Looking out at least 5 years to prepare for what you will be doing when it is time for you to slow down or even leave the practice of law is essential for your very well-being. These 5 years may be the “Red Zone” of your career. What will you be doing to prepare yourself so that you can score a touchdown, so you can spend the final years of your life enjoying the fruits of your labor as you choose?
- Income fluctuations
- Managing the practice
- Lack of help in the practice
- Isolation from other attorneys
- Inability to discuss ideas with colleagues
This list is not unexpected.
It's very difficult to make plans when your income fluctuates; this becomes more challenging for a younger attorney who is also growing a new family. We oftentimes are not taught the need or skill set to save money and to live within our means. And it becomes too tempting to live according to the higher end of our income stream, hoping that that sum will not decrease. But, the vagaries of the marketplace, the highs and lows of cash flow, are there and need to be handled. It is a challenge.
Managing the practice like a business, again, was never taught to us in school, unless you include the School of Hard Knocks. And, most of us want to do that which we love, practicing law, not managing the practice of law. But, if you focus on the business side of the practice, then you just might be able to do both, practice and run the business. When you manage the practice, you will know when it is economically wise to engage help. This brings us into the realm of delegation and "outsourcing," both important principles of running a business.
The first 4 items on this list are economic and can, with the help of a coach, be addressed successfully. However, isolation and lack of camaraderie with other attorneys is more psychological than economic and can, perhaps, be the largest single challenge facing sole practitioners. Networking is an essential ingredient to preserve one's sanity. While there are many jokes about this subject, it should be taken seriously. Isolation can be debilitating. There are many advantages to being solo ... this clearly is not one of them. By nature, we are a gregarious species and need to be well-connected with others. Again, coaching is one approach to dealing with this issue because a coach can and should be your ally, your colleague. This is the one person that should be there whenever you are feeling challenged. The investment in the coaching process is a small price to pay for the connectivity you will achieve.
According to one source, crisis management statistics include causes that are outside of those traditionally thought about by law firms. But, in addition to Katrina, broken pipes, etc. think about the following:
About 53% of marketing executives responding to a recent survey by BtoB and Eric Mower and Associates, said they have experienced a business crisis that resulted in negative news coverage, declining sales or reduced profitability. About the same number (57%) reported that their company does not have a crisis response plan currently in place.
Of the 43% of companies that have developed a plan, 10% worry about their ability to carry it out, and only one-half have trained spokespersons ready.
Some 23% of respondents who went through a crisis said it took three months to a year for their brand to fully recover, while 13.3% said recovery took more than two years and 17.7% said they have not yet recovered after two years.
Causes for these companies' crises vary. A majority of survey respondents (55.7%) said layoffs, shutdowns or business foreclosures created the crisis. Some 45.2% blamed operational or services failures, 33% cited legal or ethical problems and 32.2% pointed to a competitive attack, such as negative word-of-mouth or messaging by others who have a vested interest in damaging the company.
In its December 6th edition, the Los Angeles and San Francisco Daily Journal highlighted California’s “Top Neutrals.” I read the supplement with great interest ... and was struck by the very high prices demanded/commanded by these triers of fact. From a low of $400 per hour to the upper reaches of $12,000 per day, I don’t hear the complaints against these rates!
Years ago, our system of independent neutrals developed because of changes in the judiciary’s retirement system causing economic pain to judges who remained on the bench, I lamented the separation of the rich and poor ... The poor folks had their matters heard by the judiciary, paid by taxpayers. The rich had their matters heard more quickly by independent neutrals, paid by the parties. Independent neutrals who work full-time earn far more than judges.
Our system of justice suffers when economics plays such a dominant role in the determination of disputes, when the poor receive different treatment than the rich. It’s bad enough when the rich can afford to gather a “dream team” for the assertion of their claims; but, it’s outrageous when economics can determine who will be the trier of the facts.
I find this remark of particular interest because it is usually said by one who wants to justify an act that is opposed by the vast majority of his very own organization. It is also offensive because it fails to address the very issue at hand. This statement is like Mom's or Dad's "...just because ..." response to a kid's inquiry as to why he should or shouldn't do something.
In this case, the statement is used to justify an action that will prejudice an isolated group of lawyers who practice in the small firm environment. They need assistance from the Bar ... and they don’t get it. Instead, they get slapped in the face. We might just as well place yellow arm bands around these folks and say they are "bad" people. There is no empirical evidence that this group of lawyers is subject to more malpractice claims than others. There is no empirical evidence yet set forth that suggests any reason to isolate this group of lawyers and identify or punish them in this fashion.
Yet, this very same organization has not, to date, honored its earlier (2005 Board of Governors Retreat) stated commitment to its members to provide them with help in their businesses (The Business of Law®) because it might antagonize a few legislators or other special interest groups or cost a few dollars or place additional demands on the staff. Where is the Board when they're needed?
This attitude explains why members of the legal community, generally, have lost confidence in its governing body. Why the Board of Governors would anticipate that lawyers in this State would support it in any future disagreement with the State Legislature or with the Governor is beyond understanding. One can “turn one’s cheek” only so many times before the resentment rises to the point of action.
The perception amongst small firm attorneys that the State Bar is the enemy and not the friend clearly gains traction with actions such as taken now by this Board. John Dutton of the Board of Governors perhaps said it best. “Dutton argued that some county bar associations, a few State Bar committees and most of the members of the Conference of Delegates of California Bar Associations have joined critics in opposing disclosure. ‘And here we are,’ he said, ‘saying, 'We're going to jam it down your throat. We don't care what you think.’”
Of course, the very Governors voting on this issue also fail to disclose any personal financial interest they may have in this issue, and several do. They also fail to address more important issues for disclosure if we were truly interested in client protection. And, most importantly, they fail to create an affordable insurance program that would allow economically marginal (but very good) lawyers to buy the very product the Board is promoting! (Dare we remember that the State Bar obtains several million dollars each year from the insurance program it promotes?)
Q: Ed, can Outsourcing really make a firm more productive and profitable?A: Outsourcing is just another way to delegate work; appropriate delegation is another aspect of leverage; and leverage is what makes law firms more profitable. If you want to grow a practice, serve more people, or increase your personal wealth, you will need to understand and use the principles of delegation and leverage. In truth, almost every lawyer does this now—having a secretary to type, file, and do other office tasks is an elementary form of this concept.
However, managing the legal process and overseeing the quality of the work product of others is the reality of the legal profession. And this is outsourcing. In such circumstances, whether the “outsource” is someone in your office or someone in India or someone located in between, YOU, the lawyer, are still responsible for setting the strategy of the matter, the quality of the resulting work product, and the management of the entire process.
Outsourcing is a heavy burden, and one no outsourcing lawyer should take lightly. When it comes to ensuring that client work is done correctly, the buck stops with you, the lawyer -- no matter who has actually done the work.
Yet, the court just upheld the Vioxx settlement with Merck & Co., one provision of which states that a lawyer who has a client accept the settlement must withdraw from the case and cannot represent any other client in the case, even if he/she already represents other clients in the class action litigation. Effectively, this provision restricts the right of clients to select counsel of their own choosing. What makes this situation even worse is that the second client (and others also represented by the lawyer whose one client accepted the settlement) is unlikely to get another lawyer with the skill, time and money to invest in learning a new matter in the middle of the case. The choice for these plaintiffs is simple: Settle with Merck or lose your lawyer!
While it's nice to settle a large and complex class action, what happened to the famous and apparently not so inalienable right to counsel - competent (in Vioxx litigation) counsel?
- 83% of medium businesses (more than 100 people) have remote or mobile workers
- That means that only 17% of such businesses have no mobile workers at all
- Lifestyles today blend work and personal activities with fluid boundaries between the two
- 15% of our workforce are telecommuters
- 23% of our workforce travel long distance
- 27% of our workforce travel locally
- "Anywhere solutions" can boost productivity and enhance the probability of recovery in the event of disasters
- New technology for unified communications, not yet a driving force, is generally reviewed, if at all, at the time of replacement or updates rather than as an independent purchase now
- One of the greatest challenges facing today's business is that information is lost or stranded within the head of one individual
That means that technology becomes even more important in the management of a law firm. Technology affects current law firm profitability and becomes essential for survival and continuity in times of disaster. In current terminology, "knowledge management" will be the backbone of the success and survival of a law firm. And knowledge management needs enhanced technology to be effective and readily available. As I've said before, I believe law firms of the future will grow or die based on their effective implementation of knowledge management.
Q: As a lawyer who runs her own practice, it seems like everything I do revolves around trying to make more money. Is it professional to always be concerned about turning a profit? Or should I focus more on other things?
A: All lawyers today need to be fully sensitive to the financial needs and operation of their firm.
The issue is one of business competency. The lawyer who has it understands the operation of the firm as a business (budget, collections, profit, loss), the firm’s billing structure, how each attorney determines firm profitability, and the importance of clients and their own businesses. Years ago I registered the phrase, “The Business of Law®,” because it is such an important truth that summarizes my consulting work—and because so many lawyers seemed to lack an understanding of the concept.
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®.
In his column, Fire Wire, John Tredennick, writes the most extensive and articulate article on the subject of outsourcing I've read.
Outsourcing is just another way to delegate work, and appropriate delegation is another aspect of leverage. And leverage is what makes law firms more profitable.
If you want to be a lawyer who does nothing but legal work, then work for a law firm that will permit you to stay on the assembly line - in the library or the courthouse - but have little or nothing to do with other aspects of running a successful law practice. If, however, you want to grow a practice, serve more people, or increase your personal wealth, you will need to understand and use the principles of delegation and leverage. In truth, almost every lawyer does this now -- having a secretary to type and to file and to do other office tasks is an elementary form of this concept.
Managing the legal process and overseeing the quality of the work product of others is the reality of the legal profession. And this is outsourcing. What John is talking about in his article, in my opinion, is merely a matter of degree ... how much should be outsourced to others. In all such circumstances, whether the "outsource" is someone in your office or someone in India or someone located in between, YOU, the lawyer, are still responsible for setting the strategy of the matter, the quality of the resulting work product, and the management of the entire process, . As Harry Truman said, "The buck stops here."