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Everyone wants to see their firm grow in value.  This is the reason that anyone owns or starts a law practice.  I understand that people have other reasons for running a law firm, but we would all be lying if making money and growing in value wasn’t right near the top of the list.

One of the best ways to add value is to invest in something that you can trust and influence.  That something is you.  As an attorney the product or service that you are selling is yourself.  People are buying your knowledge, experience, ability, and trust.  By investing in yourself you provide value to your clients, your practice and yourself.  Many people associate value with something outside of themselves, when in fact they are the rate limiting factor and by investing in anything other than themselves is counterproductive.

Consider how you are using your time, determine which pieces are indeed value generating and cut out or off load the rest to someone else.

Ways you can add value by investing in yourself is to step outside your area of expertise, learning something new, develop a new skill, be intentional about being intuitive….start with small investments so you can experience success.  Keep challenging yourself to take it up a notch and every time you do your value will increase along with your value to your firm and your value to your clients.

What scenario provides the greatest potential – a unit based business or a business based on hourly compensation?  When it comes to potential the answer is a unit based business. The more units you can efficiently and effectively process the more revenue you can potentially generate.   The problem with an hourly based business is that there are only so many hours in the day.  This means your income potential is limited to your hourly wage.  So as an attorney you have to be very diligent on how you spend your time.  When working for a client you can of course charge for your time, but for those hours of the day when you are not working for a client, what are you doing?  Are you investing your down time in activities that will result in billable time?  Or are you watching time (revenue) slip away on things like administrative work, interruptions, technology issues, staffing issues, etc. 

An idea would be to create a list of things you can do during your down time that will help you increase your productivity/revenue in the long run.  Things on your list might include,  sending out Linkedin invitations, asking attorneys within your firm if they need assistance on a matter, writing personal notes or letters to your loyal clients,  visiting clients, participate in community organizations, write for the firms newsletter, etc.   Use your down time as time to invest in your practice and soon you’ll be as busy as you want to be.

Through regularly working with and interacting with lawyers, I have begun to see two fairly distinct groups emerge in terms of how they manage their practices.  A common theme seems to be that they either love to focus on one side of the ledger or the other.  The two sides I’m talking about here are revenues and expenses.

Those that fall into the first group have fairly good revenues for the size of the firm; however they have no handle on the firm expenses.

We recently worked with a firm that was a lot like this.  It was a solo practice and the annual revenues hovered right around $240,000.  This isn’t anything exceptional, however that should be enough to keep the firm running and provide a reasonable standard of living for the attorney.  The issue was that the attorney refused to anything on his own.  He had staff for everything, regardless of whether they actually saved time or made the firm run efficiently.  This ended up putting the attorney in a position where all the revenue was used as soon as it came in, if not before.

The scale gets tilted too much in this direction and the owner loses all the freedom and work/life balance that should come with a solo or small practice.  Most people like the idea of staff working for them and doing all the things that they don’t want.  The caution here is that you can quickly become handcuffed by rising expenses and end up working for your staff rather than yourself.

The other side of the coin then is those that are focused solely on running a lean / low cost operation.  If I were forced to choose one extreme or the other, I would lean this way, however this side also has it’s disadvantages.

This attorney is the one that insists on doing everything herself because she doesn’t trust that anyone else can do it as efficiently or as well as her.  She is proud of the fact that her only expenses to run the firm are her time.  However, there also lies the problem.  This type of attorney ends up spending significant amounts of time on administrative rather than billable matters.  Even if she is efficient in those areas she is still missing out on the opportunity to increase revenues.

This group regularly loses sight of the fact that in some cases an increase in expenses is actually the best thing for the firm because it can allow for a greater increase in revenues.

So it’s obviously not a surprise or anything too complex, however the key lies in finding the right balance between handing off tasks and keeping expenses low.

So much is said about communication, both within the firm and with current or potential clients.  But what does effective communication really mean?  I believe that to truly evaluate effective communication you need to look at the desired end result – Trust.  Trust is the firm belief in the reliability, truth or strength of someone or something.

Isn’t trust what all attorneys strive for?  To be trustworthy means you are a person of character and integrity; you do what you say and say what you do.  So how does one build trust with their clients, partners, staff, community, and etc.?  I simply recommend starting with a list.

Create a list of all the ways you communicate with various stakeholders, here’s an example:

–          Meetings

–          Telephone conversations

–          One on one conversations

–          Letters

–          Invoices

–          Voicemail

–          Email

–          Social media; facebook, websites, twitter….

–          Etc.

After you’ve created your list determine how you can be more effective communicating with each stakeholder, for example:

–          At the conclusion of each meeting take the time to paraphrase back to participants accountabilities and timelines;  make sure you do your best to deliver exceptional work and exceed your timelines.

–          Spend more time listening and asking questions while engaged in conversations.  Find opportunities to follow up.

–          Letters or notes are great ways to show empathy

–          Take the time to explain your invoice, lack of detail can be misinterpreted as if you are hiding something.  A phone call explaining the invoice can go a long way in building trust.

–          How quickly do you respond to your voicemails and emails, what if you created a minimum standard where everyone that contacted you via voicemail or email could expect a response from you within specific timeframe?  This way you’ve established an expectation, and hopefully it’s an expectation you can consistently exceed.

–          If someone were to google your name what would they find?  Is it a true representation of who you are?

Effective communication builds trust and trust is developed over time by listening, following up, establishing expectations (and then trying to exceed those expectations), empathy, timeliness, honesty and humility.  Take some time today and make a list of individuals you trust….are they effective communicators, my bet is they are.

I’ve heard the phrase “It’s just part of the job” quite a bit lately when describing some piece of work that an attorney particularly hates to do.  My question in return then becomes, “But does it really have to be?”

I think it’s valuable to take a look at your practice and identify the tasks and items that are particularly draining for you and look at it’s really something that you have to do yourself.  These types of tasks, whether it be billing clients or summarizing records or dealing with insurance and vendors, can effectively drain your energy and often times end up getting pushed to the back burner in perpetuity.  As an owner/manager of a law firm you have the understanding that management tasks need to be completed, but is it really in your best interest to them yourself?

One of the biggest hurdles I see in overcoming the mindset of “my firm, my responsibility” is that the attorney feels like taking management tasks off his or her plate and letting someone else handle them is essentially a loss of control of the law firm.  What you really need to look at is what is it that really brings value into your practice?

The answer to that question of course is you as the attorney and the legal services you provide.  As a result, when you are spending your time and energy on management aspects you are losing opportunity to create more value for yourself.  This continues to get more complex and draining when you try to grow and manage additional employees.  The time and missed opportunities for revenue and value can easily continue to pile to up.

Might it be worthwhile to stop trying to wear all the hats at once and focus on the only aspect that puts money in your pocket?

It seems like it’s become a foregone conclusion that any mid-size law firm needs to have a Managing Partner.  You need someone to manage the financial performance, create the budget, oversee the billing and bookkeeping process, manage the vendor relations including malpractice insurance.  Not to mention the oversight of staff effectiveness, professional development, and run practice meetings.

There’s no disputing the fact that each firm needs these things and more in place to be effective.  The question then becomes, “Is a Managing Partner really the best person for all this?”

As I’ve dug into this question, the result seems to be quite consistent across the spectrum.  When an attorney accepts the role as Managing Partner, he or she can be reasonably certain that her book of business will decline by at least 25%.  So what ends up happening is that the firm takes one of its top attorneys and periodically slashes his book so that he can oversee the administrative functions within the firm.  The transition period is even worse because at that time you are taking a new attorney to become Managing Partner, thereby reducing her book of business, and meanwhile the outgoing Managing Partner still has his book at least 25% below his potential.  During this time period, the law firm ends up with two of its best attorneys working well below their peak efficiency.  This can easily add up to nearly $1 Million Dollars in revenue lost for the firm over a fairly typical 5 year span of a Managing Partner.

Many Managing Partners receive a stipend during their span at the top, however it’s certainly not uncommon for that person to be the lowest compensated Partner in the firm during that term.  There seems to be this idea that each Partner just needs to bite the bullet and take her turn at some point.  Again, my question becomes, “Why does this need to be the way things are done?”

My solution looks like this.  Elect one person to be the “Legal Leader” of the firm.  This person still needs to provide the leadership in legal matters and practice meetings; however he only deals with issues directly relating to how that firm will practice law.  Leave all the other administrative tasks off his plate.  Let someone else handle the finances, the vendors, the staff, the recruiting, etc.  It is possible and it works.  And it doesn’t require the significant overhead brought on by a COO.  In order to be most effective and stay nimble, I think many firms might want to take another look at how things are done and question whether the status quo really is the best way.

I know that even seemingly easy decisions become more complex when other people and relationship are involved, however I still find myself amazed at the number of law firms I’ve visited lately where the attorneys are wedded to their support staff regardless of the quality of work or how much it’s costing them in money, time, and energy.

Support staff is supposed to be there to make the life of the attorney easier and allow him or her to focus time on more valuable matters.  It often starts out that way and then you start to realize all the headaches that can start to creep in with managing time, turnover, training, quality, etc.  A relationship that is supposed to free up you time can just as easily start to eat at it.

Going even a step further, I’ve seen a handful of examples where firms have so much support staff that the focus shifts to making sure there is enough work to keep them busy.  It may be time to reevaluate how you fulfill your staffing needs.

Outsourced or virtual staffing can provide all the benefit of in-house staff and alleviate nearly all the managerial headaches that come along with them.  You don’t need to worry about keeping them busy, you only need to worry about keeping yourself busy because you can use virtually support staff how and when you need them.  In addition, they have the ability to grow with you without any addition hiring, training or managing on your part.

On top of all this, the full cost of in-house staff including payroll taxes, etc, is generally more than twice the cost of looking elsewhere to fulfill your support needs.

I understand employee relationships and employee loyalty, but at what point does that become an anchor that prevents your firm from reaching its full potential in terms of efficiency, productivity, and profitability?  When you find yourself thinking of hiring someone new, take a look at the needs your have because chances are there is an alternative solution that will provide you exactly what you’re looking for and make your bottom line look a whole lot better along the way.

You always hope that when you work it is doing something that you love and enjoy doing.  That being said, I don’t know many people that voluntarily refuse a pay check each month or aren’t looking forward to pay day.  However that’s exactly what I see many attorneys doing every day.  Now I think that pro-bono work is a great way to give back and serve your community, but outside of a non-profit, you cannot operate a firm with pro-bono work.

So the question then is, why are so many attorneys making it so easy for their clients to not pay for the services they’ve been provided?  I have asked many times for attorneys to tell me the last time they billed their clients.  Almost half the time I ask that question the response is some variation of this, “I don’t want to answer that, it’s a little embarrassing how long it’s been.”

Taking it a little further, to the other 50% that have billed relatively recently, I ask the follow up question of how many of those bills are still outstanding?  Far fewer have any real grasp on what percentage of their billed time they are actually getting paid, also known as the realization rate.

Simply put, very few attorneys are successfully completing the revenue cycle on a regular basis and as a result are leaving significant money that they have already worked for and earned sitting right on the table and eventually just blowing away with the wind.  The truth is that by the time the work is done being performed, you’re only 30-40 percent of the way through the cycle.

I’ve seen what happens when client invoices are sent out in a timely manner and when there is monitoring and follow-up on the outstanding invoices.  The result is a law firm that starts to make a profit and grow.  Why work so hard just to leave the money sitting there?  Completely the revenue cycle doesn’t need to be hard or painful; it just needs to get done.

Michigan’s legal community was shocked by the low pass rate on the July 2012 bar examination results which were released on October 26, 2012.  Overall, only 55% of the test takers passed.  First time takers did marginally better; but not as well as they had in previous years.  What happened this term that is different from previous years?

I do not believe the applicants are any less prepared than they were in previous years.  The only problem that I could cite the BLE for is not communicating their expectations more clearly to the applicants.  I do not believe there was unfair testing involved or a concerted effort to limit the number of lawyers practicing in this state.  Rather it was a combination of a change in grading systems coupled with expectations that simply were not met.

My recommendation to applicants who did not pass would be as follows:

A.        Review your results.  Look at your results carefully and be honest about your performance.  Have someone else look over your scores and ask them for an opinion.

B.        Rethink your study strategy.  If the study strategy you used last time was not successful or you were not comfortable with it, reconsider your approach.  Make sure to take into account any distractions, (personal or professional) and any other activities that may take you away from focusing on the test.

C.        Review Michigan’s old essay exams and their model answers.   The model answers and questions are published and available.  I believe that any serious studying for the bar examination includes review and practice of old questions.

D.        Make your own outlines.  Making your own outlines is a way to encapsulate your knowledge of the law you are outlining.  The outlines need not be long and they may need to be condensed more than once.  Ideally, they will be down to no more than 2 to 4 pages per subject matter tested.  The most important things your outlines should cover would be major rules, terms of art, specific areas where you have seen tested either on the essays or Mobs or anything else you have seen tested and you believe may be relevant.  The outlines are not to make anyone else happy but the applicant.  They should be detailed compendiums of the law, but rather a distillation of the applicant’s knowledge of that area of law.

E.         Plan your studies.  This means detailed time plans for your work.  You should know what subjects you are going to study, what number of hours you are going to put into it, and set goals for studying daily, weekly, monthly along with overall study goals.

Tim Dinan runs a solo practice focusing on Criminal and Civil Litigation. The firm also specializes in matters applications to the Michigan State Bar and character and fitness hearings. Mr. Dinan has successfully represented over 100 clients now licensed to practice law in Michigan.

How do you measure the quality of your IT provider?  Is it based on how quickly they get to your office or in how timely a manner they fix your problems?  Would it not make more sense to measure the quality based on how many problems you have popping up in the first place?  I have met recently with several law firms that said they were extremely happy with their IT support because of the response time of the team, saying “they’re over here all the time.”  The first question that came to my mind was “why do they need to be there all the time?”  Don’t be lured into thinking that having an IT guy present all the time means you’re getting the best value for your dollar.  Make sure you check out what all those extra service appearances are costing you.   In my opinion a lot of firms are getting “churned” by their IT support provider in the guise of providing great service.  This is similar logic to thinking a financial advisor is doing a great job because she is constantly buying and selling stocks.  What you may not be thinking about is that each time that IT support makes a visit, or the financial advisor sells a stock, there is a fee associated with it.  IT support that is done well should be proactive and avoid the need for frequent trips to fix minor problems.  Often times, the IT support that you don’t see is doing a much better job than those that you do.