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!
Panic attack
The economic crises has finally hit home. People I know are talking about October and November as being months when the world stopped! ... and they couldn't get off. No one seems to know what is going to happen next.
I met yesterday with managing partners of several major law firms in my Managing Partners Roundtable.
They all agreed, they have never seen changes as we're currently experiencing. The top most law firms are freezing compensation increases for next year; they are moving away from lock-step bonus systems and even reducing bonuses for this year; and they are hiring smaller "classes."
The previous wisdom was that the economic impact for law firms would not be felt until the second half of 2009. But, these leading law firms are saying the impact is being felt now. This year's revenue will be down by 15% to 25%. There is no standard except this one: Everyone is experiencing change; most are seeing economic results that are less than last year; and everyone is unsure about next year's patterns.
And smaller law firms, and sole practitioners, though more nimble and better able to reduce expenses, are equally unsure about what to do to protect themselves without "cutting the meat" from their law firm and jeopardizing their future recovery.
In this crazy environment, panic attacks are easy to come by. Richard M. Weber has some cogent counsel for these hard times:
“While I don’t give investment advice, I’ll share with you my own reaction to the current crisis. After my “Sell, I tell you, Sell” panic subsides, I look at all my resources for retirement and begin to settle down. My house is nowhere near “paid off,” but the monthly mortgage payment is within my budget and its intrinsic value is still more than the mortgage principal. I have sufficient life, health, and disability insurance to protect our family from the economic damage those kinds of disasters can create. I have a year’s living expenses in cash (and yes, I’ve checked to make sure that FDIC insurance covers those accounts). More important than all of these resources, however, I realize that I have marketable skills, a number of clients who value those skills and actually pay me, and no particular desire to retire next week to “go fishing.” So my investment account statements remain unopened in a desk drawer, I only glance at the bad news at the top of the Business Section of my daily newspaper, and I get back to the task at hand: taking pride in my work and applying myself to it as diligently as I know how.”
Panic attacks come from the "fear of fear." To counteract this fear, look at observable behavior. Look at the facts. Check your reality. What is happening now; review your financial resources. Project financial requirements for the next twelve months. Look at your health. As they say in the airline business, put your oxygen mask on first, before seeking to help your neighbor. You can work through anything so long as you retain good health. Talk to members of your support system, family and others who have the expertise to provide advice to help you.
And, take a deep breath. Things could be worse, we could be living in a war zone. History tells us that life consists of cycles ... though we are in a nasty one now, things will get better.
Are lawyers guaranteed a profit?
I like the thinking of Patrick J. Lamb who, in August 2008, said that a lawyer can negotiate a fixed fee even in litigation. In other words, he contests the old rubric that since one doesn’t know what the “other side” will do in litigation, fixing a fee is not possible. He also suggests that creating a budget for litigation doesn’t guarantee a profit, just that the lawyer will not bill more than the budget.
But, the point that Mr. Lamb raises is that no business is guaranteed a profit. Yet, ...
... lawyers tend to view themselves differently. They seem to feel that an hourly fee will guarantee their profit. Of course, they would have to know their cost structure; few do. They would have to collect the fee; more are having difficulty. And few produce a realization rate of 95% or better.
Recently, I received a phone call from a person who wanted to buy a law practice. He visited my web site and saw several law practices I represent or have represented that are for sale. His thinking was that he could buy the practices at a low price, have the seller finance the sale and thereby earn the kind of money to which he would be entitled once he passed the bar exam. I cringed when I heard the word, “entitled!” That is the underpinning economic value of far too many people in our country today ... If the current economic crisis does nothing, it may knock that value out from under us ... and that would be good.
I believe that is what Patrick Lamb was getting at ... that lawyers feel entitled to earn a profit. Yet, he fails to acknowledge the frightening statistic that more than 50% of the lawyers in a California study (and in NY and by extension most other places as well) earn less than $100,000...and more than 25% earn less than $50,000 per year. Many people, even many lawyers, would give a great deal to earn these sums, no doubt. But, after so many years of schooling and foregone opportunity revenue, it doesn’t sound like much. And certainly doesn’t allow one to live lavishly.
Running a practice using the principles of The Business of Law® will guarantee that the lawyer will have the best chance of making a profit ... but the principles must first be implemented to attain and maintain profitability!
