An astounding relevation in the article “Judgment Day” about the fall of Dewey LeBoeuf, in the February ABA Journal.
“…Many partners asked a lot of questions about the firm’s accounting in the years leading up to the firm’s demise. They did not always receive complete responses, and the pattern was that the partners would get busy on client matters and not follow through.”
As the X-ers say, OMG. Many of the smartest lawyers on the planet were too busy doing their work that they failed to get a clear picture of how the business was working.
The message for small-firm lawyers is simple. Never get too busy working that you aren’t making sure the business itself is healthy. What does that look like?
- Tending diligently to your marketing. Making sure you have a strong business network and that new clients show up regularly, and that no client represents more than 25% or your revenues.
- Managing the income stream: making sure all billable team members are billing at least 3 times their base salary or draw by recording hours diligently and pushing down non-billable work.
- Making sure billings go out promptly with client-friendly explanations, then maintaining a close eye on receivables
- Maintaining strong client relationships – not becoming so immersed in “the work” that you ignore the client who brought it.
- Managing overhead. Reviewing financials (or having a professional do so regularly) to ferret out unnecessary expenses.
- Being highly selective with client intake, and letting the bad clients and bad work that sneaked in go quickly.
I was recently called into a firm of 5 partners and eight associates to do an operations analysis to discover they had nearly $3.5 million in receivables on the books. Nothing short of catastrophic management from every side: managing new intake, managing billings, managing AR, and managing the attorneys who were (still) creating this mess.
Lawyers were taught the law, not the business, and that too often means they ignore the dull, dry business side they don’t feel comfortable with in favor of the legal side they know. And in doing so, they can kill their practices.
If you’re not willing to be the financial manager, pay a CPA to guide you. If you’re not willing to be the operations and team manager, hire a firm administrator to do so.
Most small firm attorneys will say “I can’t afford that.” but they can afford to spend sometimes as much as half their time doing the non-billable work of managing the store – and doing it badly – while losing the opportunity to do more billable work and more marketing.
The logic here is counter-intuitive. Spend more money to hire the right people – and end up making far more than the expense, creating a more stable business – and living a less stressed, crazed professional life.
If you need advice on how to turn your ship more directly into the winds of growth, call me at 407-830-9810 or email me at firstname.lastname@example.org Always happy to offer my thoughts.
Read the complete article “Judgment Day” in the February ABA Journal HERE.