The Fate of the Corner Store Is Coming to Small Firms – Soon

So what did happen to the corner store? The short answer is it became the 7-11, the Circle K – or it went out of business. Most did the latter.

The legal blogosphere is filled with speculation and news about the happenings of biglaw in the legal revolution – but about 63% of lawyers in private practice are in firms of 3 or less. So what’s the future for the little guy?

What if you could suddenly benefit from national advertising – a powerful website – group health and malpractice insurance, and a continuing feed of business that would alleviate your need for marketing?

Sound like joining a big firm? Well, yes – but no.

The legal revolution that has brought about “Alternative Business Structures” offering a range of services beyond legal, and “Non-Lawyer Ownership” of law firms in Australia and Britain are blossoming with creative examples of exactly this revolution. One is a British legal franchise called Quality Solicitors. There are currently over 200 British law firms – some top ones in smaller communities – under the brand.

In Britain, financing for such endeavors is coming from outside the profession. And while that’s not yet permitted in the U.S., it doesn’t have to be for the franchise model. A few wealthy attorneys could fund it. And my bet is that it’s already in the works.

But, you say, “no way – the franchise model has been tried, and hasn’t worked very well.” You’re right – but that’s the past. The world – and technology – has completely changed the game.

LegalZoom has created a no-lawyers model with thousands of fill-in-the-blanks-online forms. They didn’t even need lawyers – although they have since expanded, to capture the market at the next level, of those who really do want to talk to a lawyer. And of course, the web has become the first place a majority of consumers look when choosing a lawyer. So when they Google “lawyer” and see a website that talks candidly about cost, it has their attention. The Quality Solicitors website headline is “When it comes to bills, we don’t like surprises either.”

Then it uses “artificial intelligence” to help the client determine what type of services they need, then puts them in touch with the appropriate attorney in their area. And right there, for the world to see, are prices. Reasonable – and note at the right, with a “clear price” guarantee.

Politics isn’t the only place we’re seeing a consumer revolt. LegalZoom has proven that.

So what can you do to solidify your market position? What can you learn from Quality Solicitors?

First – like it or not, price rules for consumers and small business.
The savvy consumer knows the difference between a straightforward problem or issue and one with a host of “if’s, and’s and buts.” Larger corporations, not yet so much. But even that is changing. Savvy in-house legal counsel increasingly know how to take advantage of a highly competitive marketplace.

The fact is that hourly billing is a relatively new concept that began in earnest in the 1960’s. Before then, most everything was flat-rate priced. (if you want the full story of how that change came about, give me a call.)

So, you’re thinking I’m going to say “flat rate pricing,” but you’re wrong. The answer is actually a sophisticated version of that, called “unit pricing.” Your agreement – and heck, maybe even your advertising (a la Quality Solicitors) has specific “flat rate” prices for stages, or levels, of work, with an open end hourly rate if needed. For instance, in estate planning:

Simple will with components A, B, and C:              $750
Additional if D is needed:                                         $300
Additional if E, F & G are needed                            $900
If H is requested                                                      $1200

Likewise, in litigation, pricing might look like this:

Review of matter, development of strategy,
Filing of initial suit (includes up to five client meetings)                     $3,000 – $5,000
Additional meetings                                                                           $400
Deposition fee (travel billed separately), per deposition, per day     $1000
Trial preparation                                                                                $5,000 – $9,000
Trial, per attorney per day                                                                 $3,000 – $5,000

This is an admittedly simple model with numbers that may not fit for you. But the concept is important. Specific prices for specific, well defined (in writing) types or stages of work. The client should be able to see what they can expect to pay for each stage of the work, and so they can make better decisions based partly on the dollar consequences.

Yes, even when your work is carefully unit-priced, sometimes your time will be more than the fee involved. But you’ll prosper on the law of large numbers rather than on each matter. And after all, what better way to drive innovation and efficiency (which the legal profession has never, until recently, had to deal with) than having to analyze past work to identify better methods or better pricing?

The traditionalist objection to this “cost-based” decision tree for the client is “The client might stop me from doing something important because of cost! They’ll be telling me how to practice law!” Yep, and yep. My answer to that is to yell “IT’S ALWAYS THE CLIENT’S CASE, NOT YOURS!” and to remind the attorney of their first and foremost duty in the client relationship: advice and counsel. If the client decides not to take the advice (which should, needless to say, be documented in a letter or email), then it’s ultimately the client’s decision. How’s that really different than today’s real life?

Second: Make sure your website does its job for you.
What does that mean? First, it means acknowledging that it’s a web world. Even if most of your business is referrals, know that most of those prospects, after they were given your name, went to your website to check you out. So, no website? Really? Then you’re missing out on lots of clients who searched for you, couldn’t find you, and didn’t call. Crappy, creaky 1999 website? Ditto.

So. Give in to the reality that you should pay a design expert to create an impactful, compelling website that attracts viewers to become clients. Because it’s no longer your business card. It’s your front door. Need a referral? Call me.

And if all of your business is referrals, and most people find you on the web by typing in your name (your website statistics can tell you this), maybe that’s all you need.

If most of your business comes from strangers – walk-ins, in traditional terms (remember where your front door is), then make sure your website has all the bells and whistles that make Google light up and want to rank you highly in the listings. This is the first part of what the geeks call “website optimization,” and it’s a job for experts – which doesn’t mean your brother-in law the computer programmer, unless he has at least three recommendations from law firms. There’s a science to picking a web designer who can do both great design and great “organic” optimization. Happy to provide the details. Call me.

Next step – decide where you want to appear on the list when the consumer does a search for “family lawyer” or such. Several options here. You can pay Google to list you at the top of the page, in as many jurisdictions as you can afford.  You can pay a web magician to get you listed at the top of the next group of “unpaid” listings (an arcane and less than perfect art – again, do your due diligence). You can buy a “pay-per-click” ad in the far right column that you only pay for when someone clicks on it to go to your website.

All of this means that, finally, you have to have a marketing budget of reasonable size – 10-15% of your budgeted gross revenues at least. Some for your web works, and some for your other marketing. Many personal injury firms spend far more than this.

Third – do your own marketing.
That means advertising where necessary, and most importantly, personal marketing – building and maintaining relationships with your referral sources – in other words, paying attention to the Parieto Principle – the old 80-20 rule that says 80% of your business will come from 20% or your (you name it – efforts, contacts, expenditures).

The still-true fact is that the best business comes from referrals – other professionals (especially your fellow attorneys), former clients, and personal, social and business contacts. And that’s at all levels, right up to the top of the profession. CEO’s don’t Google “corporate lawyer.” They ask their fellow CEO’s or their CFO or accounting firm for a referral.

And referrals are, by far, the cheapest source of business. So, like it or not, you have to be extremely active with relationship-building. And particularly if you are in a smaller community, you have to be ubiquitous – a “leading citizen,” known and respected by all. Be seen, involved and active in as many places as possible. That in itself won’t make you rich, but turning all of that into a systematic, efficient and results-oriented personal marketing program will. If you need some pointers here, give me a call.

The final truth. . .
Consumer law is going away from the traditional practitioner to the LegalZooms, the RocketLawyers, the franchises, the do-it-yourself forms on the web. The lawyer’s hold on the lower levels of the legal system is slipping fast, as the web offers more and more choices and opportunities. Yes, those choices may not always be the best, but sometimes, the consumer only needs a Kia, not the Bentley we want to sell them. And remember that it’s always the consumer’s choice, not ours.

. . . And the larger solution
Move up the ladder, away from the simple to the more complex work, whether that be corporate or high net worth individuals or successful entrepreneurs, where needs are more complex and nuanced, where matters and their solutions are unique, and where long-term relationships – those “trusted advisor” relationships exist between client and attorney.

Or get ready to buy a franchise.

Here Comes the Revolution – How to Hold On to Your Team Stars

Seven people have passed the exam to be the nation’s first “legal technicians” in Washington state. A quote from the ABA Journal article by Debra Cassens Weiss:

“Washington is the first state with a program to allow limited license legal technicians (LLLT’s)  to help litigants prepare legal documents and provide advice on legal procedures without a lawyer’s supervision.”

And a second story, this time from the ABA itself: Legal technicians may partly own law firms in this state; is ban to nonlawyer ownership crumbling?

The short answer is a resounding YES. The dreaded “ABS” (alternative business structures) which allow non-attorney ownership of law firms, which is already in place in Australia, Great Britain and is coming soon in Canada, has now been breached in Washington State, sans blessing from the ABA.

And if your reaction is “it’ll never catch on,” you’re dead wrong. Oregon is close to following suit. California and New York are considering. Florida is taking a look.

A recent article in the New Jersey Law Journal titled The New World of Outside Investment in Law Firms” has an enlightening comment about the traditional resistance to change – the “law is a profession, not a business” argument:

“There is a hoary battle cry we always hear when having these discussions: “practicing law is a profession, not a business.” That started in the late 19th century when lawyers began to establish a professional identity and adopted the Victorian scheme of professionalism from England. At its core was the tension between the ascendant commercial classes and those who considered themselves better than merchants and above the fray. Many of them practiced law as a gentlemanly profession, but relied on their family money to pay the bills. Few of us today have trust funds. If we don’t bill, we don’t eat. That sounds pretty commercial to me.”

The article also discusses a seminal event – the first law firm in Britain to do an IPO. Well worth reading.

The licensed legal technician trend, like the “nurse practitioner” and “physician assistant” waves that are sweeping the medical profession, is coming to a state near you. And it will affect you in the following ways:

First – unless you’re willing to lose that outstanding paralegal, be prepared to re-think and re-structure how your practice works to keep them – and their revenues – inside the firm. Don’t worry about losing your under-performers. They’ll stay as long as you let them collect a paycheck.

Second – get ready to completely re-imagine and re-design your operations, marketing, client relationships and fees – before your competitors do – to take full advantage of this new category of legal service professionals. Because the toughest of those competitors will. You can implement a good part of this re-design right now on a practical level, before the revolution comes to your town. Frankly, much of the legal profession has been doing this for decades – we’ve just disguised it well.

Third – Get used to not supervising the person who used to be your paralegal. It will be a separate profession with its own standards and procedures. Although in Washington State it is still entwined with the Bar, the state Supreme Court actually created a separate LLLT Board to oversee it. Soon that board will operate in parallel with, and not beneath, the State Bar. Watch for the emergence of a parallel “bar.”

Fourth – expect to find yourself directly competing with one or more LLLT’s. They no longer have to work under the supervision of an attorney. They can – and will – open their own firms. But they will not be admitted to represent clients in court (yet).

Fifth – if you have one or more outstanding paralegals, be prepared to enter into new relationships with them. Many of the best will want to be partners with you – or if not with you, then with another attorney – likely your direct competitor.

Sixth – like it or not, your world is about to change. Read CNN’s commentary The Fall and Rise of Lawyers.

And finally, if you’re worried about your future direction and could use some help drawing a roadmap to your future, call or text me – 407-830-9810 – or shoot me an email – dustin@attorneysmasterclass.com.

 

What if Your Employees Owned Part of Your Firm?

What if your employees sat next to you in shareholder meetings, voting on business decisions about the firm?

big-wave

It’s coming. 

The latest iteration of “alternative business structures” – ABS’s – now permitted in the United Kingdom and Australia, and soon in Canada – is one that will frighten many attorneys: employee ownership of law firms (or the ABS that contains them).

According to the newsletter from LegalFutures.co.uk:

A groundbreaking alternative business structure that last year embraced employee ownership has seen the valuation of its shares rise 15% over the past 12 months. Staff at Triton Global each received a free initial tranche of 145 shares in the company, worth about £500, and nearly two-thirds have since invested further to the collective tune of £58,000. Triton is a multi-disciplinary insurance business combining legal advice, claims administration and loss adjusting. It has 140 staff across five offices in the UK, and a further 35 in seven offices overseas. 

And by the way, guess who’s forging ahead fastest with ABS’s there? The Chartered Accountants, who have thus far authorized 48 – in the last six months alone.

Until the mid-80’s, accountants in the U.S. were among the most conservative of all professions. By ethical rule, it was unethical to give someone a business card unless they specifically asked. Then in the late 80’s the profession went through a re-invention which re-imagined the profession as financial and management advisors to businesses, and spurred the foundation of dozens of consulting firms which collectively took billions out of the pockets of the legal profession.

Will they do it again? Will the leaders of the legal profession – the rule-makers at the national and state level – wait until the accountants skim the cream before surrendering to the inevitable? The profession’s leadership should be fighting hard to evolve the profession in the U.S. like it is evolving in Canada and the rest of the British Empire.

The Big  wave of change is coming. As they say, we can be on it – or under it.

How Do They Get Away With It? U.S. Firm Evades U.S. Non-Lawyer Ownership Rules

Non-lawyer ownership of law firms are still illegal in the U.S. even though they are now permitted in Australia, the United Kingdom and, soon, Canada. So how is a U.S. firm becoming a fully-licensed ABS (alternative business structure)? It seems they do it by putting “UK” after their London firm name.

LegalFutures, the UK-based legal blog, today reported that New York-based Cahill Gordon & Reindel just became the first U.S. firm to do so. (Last week they reported that Jenner & Block was the first but today retracted that.)

Cahill Gordon & Reindel’s ABS will have non-lawyer ownership, making it a true ABS. Their stated purpose is to expand their litigation offerings to clients in the UK and internationally. Why this requires non-lawyer participation in the firm’s ownership is still unexplained.

I have sent a query to the firm for more information. Watch this space.

Jenner & Block Jumps Ahead of the Line in the Legal Revolution

Think the Australian, British and (soon to be) Canadian legal revolution hasn’t hit the U.S. yet? Think again.

Quick recap of what’s happening, straight from the Canadian Bar Futures Report, which generally mirrors the Australian and British models.

The key elements of the revolution all flow from the first recommendation of “multidisciplinary practices” (MDP’s) – firms with business structures “that permit fee-sharing, multidisciplinary practice, and ownership, management, and investment by persons other than lawyers or other regulated legal professionals.” That means, for instance, a firm with lawyers, CPA’s, auto body repair shops and doctors, all under one roof.

From that flows the second element, “alternative business structures” (ABS’s) meaning non-lawyer ownership, or participation in ownership, of law firms. Those CPA’s and doctors and auto mechanics can be part or full owners of a firm.

And the third, “fee-sharing with and referral fees to non-lawyers.” That means the doctor or real estate agent or CPA or whatever can either get a referral fee or even a piece of the overall fee – legally.

So – the British Solicitors Regulation Authority just licensed an ABS consisting of Jenner & Block, a major national ABS based in Scotland, and a mediation service. How did they evade the (rapidly aging) U.S. legal structure strictures?  J&B asserted thar “the office will be operated by “a local independent affiliate, Jenner & Block London LLP” – even though its head of legal practice is dual-qualified Chicago-based partner Timothy J Chorvat.

And a lovely dodge of the issues. According to the article in the British blog Legal Futures, “…the firm would not explain the rationale for becoming an ABS. They would prefer at this time not to reply to your questions. The structure they have chosen for their London operations and their relationship with the SRA are not issues about [which] they wish to engage [with] the media currently.”

Smooth, J&B. And by the way, congratulations. You’re breaking ground for the rest of the profession. My spoof article “Berkshire Hathaway Purchases Omaha’s Largest Law Firm” may not be a spoof for long.

Are You An Excitement Addict? What Is It Costing You?

The wonderful Susan Carter Liebel just posted a great article on the Solo Practice University site about entrepreneurial addiction – people who are serial entrepreneurs and love the creation process better than the implementation process, and get bored with established routine. Such entrepreneurs, inside or outside of the legal profession, are the life blood of a vibrant country.

I want to shine the spotlight on another, more troubling addiction that seems to be rampant in the legal profession. Excitement. It’s an addiction that typically takes a toll on the attorney’s practice, clients, family, and eventually themselves.

And make no mistake, it’s a true, medically-defined addiction. The more accurate term is “adrenaline addiction” because of the fight or flight hormone produced that is designed to speed us up when danger approaches.

A caveat here. A good, committed attorney will usually experience a consistent amount of stress in their daily practice. Being able to function well in stressful situations is a valuable trait. But for some, the stress either accelerates because of lack of understanding of how to manage and grow a practice, or sometimes because, in a real sense, they crave more of it.

The adrenaline-addicted attorney lives constantly on the edge. Always late for meetings and appointments, drives fast everywhere, never has enough time to do any forward planning to avoid the next crisis or to stay out of chaos, so chaos continues to reign. They are often at odds with judges and opposing counsel. They almost invariably have high staff turnover. They drink copious amounts of coffee or caffeine drinks. They cannot be separated from their mobile devices or their e-mail – 24 hours a day.

And tellingly, they also often have high receivables, because they often have poor judgment on client intake, are short on client responsiveness, and never find enough time to follow up on receivables. As a result, difficult, no-pay clients occupy significant time in their practice and their finances, creating yet more chaos. And in another sense, clients who are uncooperative are another chance for exciting conflict.

For the adrenaline addict, order, predictability, and procedural days are not exciting, but chaos and crisis are. Being late for appointments, arriving at the last minute in court, verbal jousting with frustrated clients and opposing counsel are. Even having high receivables is exciting in a negative way. After all, stress is the first cousin to excitement.

Many attorneys who profess frustration and stress about their practice are, unknowingly, excitement addicts.

Some are naturals. A common cause is growing up in an alcoholic family, where constant volatility and unpredictability created an atmosphere of fear and excitement, and a need to be hypervigilant.

And some were simply trained by the legal profession to be so. How does that occur? They may have begun their careers in firms where the workload was so overwhelming that they were always behind, and the management so overbearing that they were always under fire. In this atmosphere, young attorneys come to believe that high stress and constant crisis are normal components of a successful practice. And when they open their own firms or move to a less demanding and stressful position, they unconsciously go about creating the familiar – even though unpleasant – atmosphere.

How does the adrenaline addict feed their addiction? By –
Taking in difficult clients that, at some level they know will be a collections challenge.
Taking too many clients, so that they will always be overworked and under organized.
Not investing sufficient time with cases to strategize, schedule, get the work done, and build strong client relationships.
Not having sufficient support team, or even worse, not effectively utilizing their support team.
Viewing every encounter, from client to opposing counsel to judge, as opponents to be outsmarted and vanquished, rather than collaborators in the legal process.
Drinking 3 or more caffeinated drinks daily
Frequent offensive driving behavior, such as tailgating, speeding or road rage
Constant scheduling of appointments, meetings and events with little down time in-between, and always on-the-go
Frequently causing drama between him or herself and others, or knowingly putting him or herself into stressful situations

And the result?
For the practice –
• An attorney and staff who work long hours inefficiently and at a high level of stress
High staff turnover
High client dissatisfaction and resulting high receivables
Periodic grievances and even occasional malpractice suits
Damaged professional reputation
Financial struggles

For the attorney’s personal life –
Relationship turmoil, alienated children and family
Broken promises
Potential or actual health problems
• Lots of high-risk sports and activities
Other addictions, such as alcohol, gambling
Overspending, credit card debt, impulse buying, financial problems
Lots of toys quickly discarded

If you see a bit of yourself in any of this and want to make it different (and there’s the rub – it’s a hugely difficult addiction to give up), I’ve provided some useful reading below. And I’d be happy to chat about how I might help you change that behavior into others that promote a healthy practice and a healthier life. Give me a call at 407-830-9810.

Some useful reading:
Can You Be Addicted To Entrepreneurship? – Solo Practice University
The ACOA Laundry List of Traits, Trait 8 – Excitement
The Painful Reality of Adrenaline Addiction
How to Overcome Adrenaline Addiction: Tips From A Former Addict
Adrenaline Self Test
Are You Addicted to Your Own Stress?
ADDICTED TO ADRENALINE?

2015 Report on the State of the Legal Market – It Ain’t Pretty.

The Managing Partner Forum has just released its 2015 Report on the State of the Legal Market. And it’s not pretty. The most salient quotes:

“In the six and a half years since the onset  of the Great Recession, the market for legal services has changed in fundamental – and probably irreversible – ways …the legal market is now awash with new, non-traditional competitors that over time are likely to change the dynamics of the legal services sector in significant ways.”

“The regulatory barriers that for decades have shielded law firms from such competition are collapsing around the world and, even in countries like the United States where formal regulatory constraints remain largely in place, creative “workarounds” are proliferating. Clearly, a much more vibrant and competitive marketplace is emerging.”

“…There is now strong evidence that the U.S. legal market has segmented into discernible categories of highly successful and less successful firms, and that the performance gaps between those categories has been steadily widening.”

The shifting dynamics of the legal services market underscore the critical importance of law firms taking a strategic and long-range view of how their clients, their practices, their markets, and their competitors are changing. . . The resistance to change may also be rooted, ironically, in the very success that the legal industry enjoyed prior to 2008 and, by at least some measures, continues to enjoy today. We may, in other words, be victims of our own success.”

And more…

“Since the collapse in demand in 2009 (when growth hit a negative 5.1% level), demand growth in the market has remained essentially flat to slightly negative.”

“Demand growth in litigation. . . remained negative, as it has been more or less since the recession in 2008.”

“It is increasingly clear that the buying habits of business clients have shifted in a couple of significant ways that have adversely impacted the demand for law firm services.”

“…the major accounting firms again appear to be aggressively pursuing opportunities in the legal sector as well.”

Read the full report HERE

Need some advice on navigating your ship safely to the future? Some directions at http://www.attorneysmasterclass.com/ or http://www.legalceonow.com/ or  http://www.advancedattorneys.com/

A Cautionary Tale for the Small-Firm Lawyer In the Fall of Dewey

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 dustin@attorneysmasterclass.com  Always happy to offer my thoughts. 

Read the complete article “Judgment Day” in the February ABA Journal HERE.

Sams Club Makes Legalzoom a Member Benefit

I predicted the further commoditization of legal services in a recent post, “The “Walmart Lawyer” Has Arrived.” Now Walmart has gone beyond its Canadian experiment with Avvo and rolled out Legalzoom nationwide. Just as I predicted.

This from today’s edition of The Florida Bar News:

“Legal Zoom did more than 1 million wills last year. It’s now a benefit for members of Sam’s Club, whose stores may eventually have lawyers on site. Avvo, which started as a lawyer rating service, now links a potential client to a lawyer every eight seconds and is setting up a service where anyone can speak to a lawyer for 15 minutes, for $39.” Read the full Florida Bar article HERE.

What is the bigger picture here? Bar associations, starting with the ABA, have so badly failed their profession that thousands of lawyers are inevitably – and in many cases, not even gradually – losing their ability to make a living at the law. Bar associations are tragically far behind the curve in serving the needs and interests of their members. The very organizations which used to protect entry to the hallowed portals of the law and keep legal services expensive, are now at the back of the pack, trying to react to the fast-moving world of business.

Futurists such as Richard Susskind in “The End of Lawyers?” and Jordan Furlong, in scores of far-seeing posts on his blog law21.ca (and occasionally myself) have been laying it all out in chapter and verse for years.  And Bar associations have done essentially nothing – at least nothing substantive – to respond. They have been re-arranging deck chairs on the Titanic.

The next big challenge for Bar associations – to which they will fail to rise – is the rising tide of transformation in the profession in Australia, Britain, and soon, Canada – multi-disciplinary practices, non-lawyer ownership of law firms, and more – as outlined the the Canadian Bar Futures Report (an absolute must-read). Bar associations will dither and quibble until the questions become irrelevant, as outside forces take over.

As I and scores of others have predicted, the bottom half of the market for legal services – the “commodity” half (where a great percentage of most attorneys live) is going away, or becoming commoditized to the $39 level now offered by AVVO.

The top half – where legal services are more complex and problems and solutions more unique – can survive, but only by taking dramatic steps to re-invent how they accomplish and deliver their services. For they too are coming under immense pressure from corporate clients who are no longer tolerating the “black hole” approach to billing. Pfizer fired one of the first shots here as early as the mid-2000’s. They announced that they were spending nearly half a billion dollars a year on legal services, and were firing half of their law firms and requiring the rest to provide services on a flat-fee basis. Thousands of companies are following suit.

The solutions? The “legal project management” approach, in whole or in part. As currently taught, it is aimed at mega-matters, and is far too complex for many practitioners (just like much case management software). But focus on internal capacity and efficiency – building strong, efficient and fast-moving teams – is essential to safe navigation of the future, even at the “bespoke” level of the law.

To survive attorneys and law firms must take heed of the principles I put forth in my “Heirarchy of Value of the Attorney In the Practice.”

First and most important – marketing – making sure we have clients to serve. Without clients, the attorney’s skills are irrelevant.
Second – client relationships – making sure the client is being well served (by the team), is happy with the work, speaks well to others about the attorney, and comes back with more work.
Third – Creating the strategy and direction – the roadmap – for the matter. I call this the “wisdom” piece.
Fourth – leading the team to get the result. Leading, not doing it all.
Fifth – the high-level legal work which no team member can do. This hearkens back to the strategy, but also means key client meetings, depositions, hearings, mediations, and trial. This is the neurosurgeon approach. He or she has a team that provides all the initial work, preps the patient for surgery, and often even does the initial opening. The neurosurgeon does only that part of the surgery that no one else can do. And when they’re done they leave the team to close and complete the surgery.

If you’re looking into the face of a rapidly changing marketplace and could use some input, call me. Always happy to offer whatever advice I can. 407-830-9810.

More rants – and more solutions – in coming posts.

Maybe Marketing Isn’t Your Problem!

In many areas of the country, the market is heating up, and when that happens, the biggest danger isn’t necessarily lack of marketing – it’s the fact that attorneys have only so much time and capacity to get the work done – and when they’re on overwhelm, they’re not marketing to capture all the additional work that’s available.  And even worse, they’re not able to deliver the best service to their current clients.

So, marketing isn’t necessarily your biggest obstacle. It might be your CAPACITY AND EFFICIENCY. And how do you increase it?

“Systems, Sorta Systems,”  part four of my video series  “Seven Ways Good Law Firms Lose Money,” discusses how poor systems – or poor use of systems – can seriously hamper a firm’s growth. It’s just 10 minutes long, and it’s worth circulating to every attorney.

The larger issue here is that the profession is moving in the wrong direction – shrinking support rather than increasing it. Steve Jobs didn’t stay in the garage building computers – he assembled a team to do almost everything he was doing, except the most important parts – the ideas and the leadership – what I refer to in the legal profession as the “wisdom” piece. When the attorney is using their time doing work that could be done by an associate, a paralegal or an assistant, they are not operating at their highest value. They have a practical ceiling on how many files and how many hours they can work – and how much time they have to make sure more business comes in.

There is a mistaken belief that technology can substitute for team. Only partly true. The lawyer without a team but with great technology has simply raised their ceiling, not removed it. And in the process they have trapped themselves inside the machine.

As Michael Gerber put it so succinctly in his book “The E-Myth,”  “if no work gets done when you are not present, you don’t have a business – you have a job.”

The path to an unlimited practice is paved not with Ipads and software, but people, systems, procedures – but most of all, great leadership and great management – of which the legal profession is in short supply. Almost every day, I help lawyers expand the

Don’t miss “Systems, Sorta Systems,” or any of the first four parts:

“A Checkbook Mentality”
“Technicians In Charge”
“The Almost Lone Ranger Syndrome”

And of course, call me if I can help Always happy to talk, no charge. 407-830-9810.

The Rising Schizophrenia In Our Profession

Much has been written recently about the increasing gap between the haves and the have-nots in this country. There’s clear evidence that, while the rich are getting richer, the middle-class is increasingly being squeezed, and a large percentage of them are heading for lower middle or even lower class financial status.

It’s the same in our profession. Some attorneys and firms are enjoying boom times, while an increasing percentage are struggling financially. (Read Susan Carter Liebel’s recent post 80% of Americans Can’t Afford Your Legal Fees”). For some the issue is how to cope with overwhelm – that is, how to increase capacity and efficiency, and take maximum advantage of boom times. For others, the issue is, literally, professional survival: how to attract sufficient business to stay afloat.

The solutions for both situations are radically different. But the root issue is the same: attorneys must break out of more traditional thinking and take dramatic and, yes, often risky, steps to change direction.

The “haves” of the profession must literally rethink who and what they are. Most are still stuck in the traditional “technician” role, simply working ever harder as more work comes in. The road out for them is reinventing their role – from “doing it, doing it” to creating, leading, and managing teams. Without this change they are actually limiting their ability to grow even more because they are working at – and usually even beyond – their capacity. These fortunate attorneys have even more work available to them – if they only had time to market and the capacity to handle more work. Where I have helped attorneys evolve from do-er to team leader, dramatic revenue increases have followed.

For much of the rest of the profession – the comfortable middle class and those who are struggling – the issue is more visceral: how to survive and thrive in a dramatically more competitive environment, and one in which the price and value of basic legal services is collapsing.

For them rethinking is about marketing. They must move from “marketing by wandering around” and living in hope to tight and aggressive focus on target markets, and evolving their services from general to more niched and specialized. In effect, they must identify and own specific “small towns” – that is, special interest communities – where they can become highly visible and preeminent. And this tight focus must also incorporate Web, social media and even advertising. But the result is dramatic: stabilized and increased income, and a strong, long-term position as the “go to” attorney in their specific “small towns.”

For both groups, there is a road up and out of their present positions. And for both, it starts with a new answer to the question “who am I as a professional?”

Call me if I can help.

The “Walmart Lawyer” Has Arrived

Back in January 2013 I wrote a post predicting “The Rise of the Walmart Lawyer.”

The rise has begun.

My prediction was that Walmart would contract with young lawyers who would then utilize an online legal document generation program like LegalZoom – and offer advice on which pre-packaged legal documents the consumer needed.

It’s begun in Canada, and not quite the way I predicted. The reality is actually more radical. Axess Law, a new-wave Toronto firm, is now offering “bespoke” legal services from a tiny rented space in the front of several Walmart stores in the Toronto area, with an eye to expansion. And they’re actually using their own proprietary documents and software akin to LegalZoom, more Canada-specific, and not quite so “canned” as LegalZoom

What makes them different?

Price, of course. Simple wills $99, notary services $25. And a carefully limited range of services. More complex work is referred out.

Business model: volume. The traditional law firm model was based on scarcity, which no longer exists – one of the reasons the profession is in trouble.

Accessibility: drop-by and drop-in service, no appointment necessary. Hours – 7 days a week, 8 a.m. to 8 p.m. They say that the hours of 5-8 are their busiest – just when other legal offices are closed.

How are you changing to deal with the future? If you provide a “commodity” level of services, you are in danger. If Walmart does it, are Target, Kohls, Kroger, Walgreens and CVS – in partnership with hundreds of other new-form law firms –  far behind? You need to read the full article. It’s one of the waves of the future – but not the only one.

If you’re worried about your future – contact me. Let’s talk.

 

Partner Compensation: Start Making Sense – A Riposte

Jordan Furlong just posted another thoughtful and perceptive Law21 blog post on law firm compensation that is worth your attention: Partner Compensation: Start Making Sense. Jordan is one of the profession’s deepest thinkers and most accurate futurists, and writes what is consistently one of the top 100 legal blogs and my personal favorite. I suggest you read it first, then come back here for my counterpoint. He and I most often agree on the principles, but not always on the details.

Jordan’s observation is dead on that compensation is the “third rail” and one of the fundamental reason why law firms are failing, splintering, and going through hugely disruptive times. They are failing because of inordinate and warped compensation structures, splintering because younger partners are increasingly unwilling to finance massive payouts to retiring partners, and experiencing huge disruptions as the more progressive of them attempt to right the boat and survive.

Here are my comments on Jordan’s three points –along with a general agreement on both his approach and philosophy.

1. Stop overvaluing sales.

Yes – this “most highly valued” area of business generation is overvalued, for the reasons Jordan suggests.

His solutions, while in the right direction, contain somewhat of a fatal flaw, which is calculating “profit” on which to measure sales compensation. This introduces a wildcard factor that can destroy the original intent, because profit is a number easily manipulated and subverted.

Rather, I suggest a simpler version. First, I completely agree with his declining compensation concept. But second, a simpler structure – one which is more easily calculable – is in order here: 15% of first-year revenues, 10% of second-year, 5% of third year, and at the fourth-year the client becomes a “house” account with no origination paid. The firm should also delineate the qualified practice areas of all attorneys, and require that work outside the originating attorneys practice areas be moved to a supervising attorney with the appropriate skills, and out of the hands of the originating attorney. This serves the firm’s purposes in diversifying the firm’s contact with the client, and frankly, keeps the unqualified originating attorney from billing inappropriate hours for “supervision” of work outside their expertise.

Jordan cites frequent cases of inordinate sales focus resulting from declining client service after the sale. This, however, is not really a sales issue, but a management one. Frankly, the biggest obstacle to an attorney developing a larger book is their ability – let me restate that – their skills and willingness – to manage work effectively. Most lawyers are either good technicians or good salespeople, but rarely good managers. This problem is exacerbated by the general trend of law firms to decrease leverage, which drives work that should be done at lower levels up to the attorney, and thus decreases their capacity to handle more matters. And an attorney who is already overwhelmed is not keen to increase their marketing.

There is a larger issue here as well: how the overall firm is operated. The medieval “guild” foundations of the profession create a curious and dangerous dichotomy: my clients are my clients to manage as I wish, but I deserve a big share of the overall profits of the firm.

The fact is that, in most firms other than mega firms, the originating attorney “owns” the client, and has complete control over their management, from indifferent client service to allowing receivables to languish.

As Jordan recommends, the firm should be “taking the temperature” of clients regularly, and the very issue of continued partnership should rest on the attorney’s commitment to high level of client service and satisfaction. In this respect, firms should be actively and aggressively training attorneys to be strong team leaders and managers as well as good salespeople and technicians. And as a corollary to this, firm should be building strong support teams around their strong salespeople, which dramatically increases their capacity to oversee (and thus originate) work. This is a concept which goes against the grain of the current trend in law firm structures and is, in my opinion one of the most short-sighted issues in law firms today. But it points directly to most law firms’ inability to create good managers or good management structures.

And finally, the firm, not the attorney, should own the receivables and manage them appropriately, and the firm should be primarily responsible for making sure a high level of client service is delivered.

2. Start properly valuing everything else.

The issues Jordan enumerates for valuing other elements of the practice are certainly valid. But most of these issues are difficult to quantify other than subjectively, which often assures that no one feels treated fairly. And those that are quantifiable create a considerable overhead burden, as well as much room for argument and discussion.

Yes, firms should value client relations, as measured by client surveys, and project management, as measured by timelines and budgets. Again, these fall into my belief in us of more objective measurements.

Legal marketing, however, is compensated through results – that is, originations – and need not be additionally valued. However, firms should provide marketing budgets and better, more practical staff support. Too often, firms hire marketing people who focus on big issues of branding and image, while failing to support the practical, “boots on the ground” efforts of the individual attorneys which actually generates most of the business.

Leadership activity is already measured and compensated by stipends for service at various levels of management. In fact, firms that fail to do so are insuring that those roles will be marginally exercised, resented, and badly managed. Smart firms not only provide stipends for management responsibilities, but consequent offsets of billable hour requirements.

Recruitment efforts should generally be outside the normal purview of the working attorney, and vested in, for instance a recruitment partner, who is compensated for this management role. There could well be some space to provide some type of “finder fee” for an attorney who refers in a successful candidate. The issue of longevity of that hire as a factor for that compensation isn’t valid, since it is largely outside the control of the finder, and too dependent on political and financial decisions of firm leadership.

Community support and participation, while almost an ethical requirement of attorneys, is really of two types. The first is the contribution of services – pro bono work or work donated to charitable and community organizations – and the second is community participation and leadership. While the first is somewhat quantifiable, the second is a hybrid of personal commitments and marketing.

Permit me a tangent here. One of the biggest failings of most law firms is inadequate recognition that each attorney has certain strengths and weaknesses, and brings specific values to the firm. Most firms expect all attorneys to fall into a single pattern – good sales skills and good technical skills. And in fact, offers of partnership are most often tied directly to originations.

Often, good “sales” people are bad managers (and sometimes even not such great lawyers), and should be required to utilize a strong “client care” team to deliver services and legal work.

Conversely, every firm needs, and should appropriately value, those who are good technicians, and therefore support the good salespeople in delivering service, but who are not good salespeople themselves. The best firms have the appropriate mix of both and the right structures to make it work. Great teams behind great salespeople create a very large funnel of work, revenue, and profit.

3. Stop paying partners to bill hours.

Jordan’s observation on the baffling partnership structure is dead center. Back in the 1990s large firms were experiencing a disturbing trend: associates were leaving large firms at an alarming rate. While the theory was that partnership was a reward, associates saw partners under more pressure and stress, rather than less. A Wall Street Journal article quoted one associate as saying that the competition for partnership was “a pie eating contest, the reward for which is more pie.”

Why this still exists is a complex problem, but one that stems from the fact that most attorneys still see themselves as technicians, not managers, and insist on staying on as players, long past the point that they should have been moved to coaching.

There are virtually no successful companies where the owners and founders are still on the assembly line making widgets. In the business world, the successful entrepreneur moves from inventor to technician to manager to leader, and eventually to passive owner or shareholder.

The foundation of this problem is laid in law school, which typically teaches two principles. First, just do great work and the clients will come: and second, you’re a professional and not a business person. Consequently, lawyers have no desire to become managers, and indeed, see it as abandoning their profession, and thus their identities. In other words, their identity is tied up with the work itself, rather than the business that does that work. In many firms, the person elected managing partner is the person who was not present at the partner meeting to refuse.

Too many firms perpetuate this approach and this model by undercompensating their leaders and burdening them with onerous “technician” requirements for billable hours. Just four years ago, I encountered a managing partner of a 55-attorney office of one of the top 20 largest law firms who was paid $50,000 for the role, while still required to bill at least $600,000 – and given the support of half an assistant to support him in fulfilling both roles.

Final observation. The revolution that has already come to Britain and Australia and will shortly come to Canada (www.CBA futures.org – a must-read) will, sooner than anyone expects, come to the United States. And when venture capitalists, investors, and strong business leaders begin to transform the profession, much, if not all of this, will change. Big firms will fall and splinter and merge like never before. Smaller firms with onerous partnership and buyout terms will disintegrate, leaving those senior partners expecting big payoffs looking at empty firm checkbooks. And many attorneys will find their expected career paths vaporizing. My last tongue-in-cheek blog post, “Berkshire Hathaway Purchases Nebraska’s Largest Law Firm” isn’t fantasy, but simply a news article ahead of its time.

Trust Accounting & Credit Cards – A Potentially Combustible Pair

Colleague Peggy Grueneke, in her blog lawbizcoo, explains how the new IRS regulations concerning credit card acceptance create a very nasty web of ethical, financial and legal  traps for law firms. Accepting credit cards is increasingly important for all attorneys, but these new regulations create a level of complexity that could stop some from doing so. Clearly the new regulations come from the retailer point of view (users are all labelled “merchants”) and never considered the issues of trust accounting and retainers. An absolute must-read. if you’re out of compliance you could also be out of luck.

Extraordinary Client Service – How It Translates to More, Better Business

Colleague and Legal Project Management Guru Pam Woldow of the Edge Group just posted a tale of client service as experienced at the Trump International Hotel. Her story, when considered seriously by attorneys and firms, can literally mean more, better business.

In working with my clients I emphasize the “Prospect to Client Continuum,” about how each touch, from first mention by a referral source to website impression, how the phone is answered, how they are greeted and treated when they come in, and especially how they are treated by the attorney – add up to a series of experiences that either increase or decrease their trust. And that translates to whether or not they hire you.

The truth is that most consumers, save the very sophisticated, don’t know how to evaluate whether or not you are a great lawyer. Instead, they will make decisions based on what others say about you (referrers) and how they “feel” about you. “Really liked them,” and “felt good about them” will be their reason for hiring. Conversely, “just wasn’t comfortable” or “we just didn’t seem to click” will be their reasons NOT to hire you (or sometimes even “too full of herself”). Those sentiments are the unconscious result of either great service, as alluded to in Pam’s post, or not-so-great service, as delivered in many offices.

Most lawyers think clients come in for the law, because of their “process” perspective. In truth, no client really wants an attorney or a “process.” They have a problem or opportunity, and the lawyer and the legal process are actually the obstacles they have to get through to get what they really want – a solution or a win. It is up to the attorney to deliver an overall positive “experience” and not just a “process.”

Then, great service continued throughout the representation adds up to bills that are paid faster, greater client cooperation (due to greater trust), and more client referrals. Yes, even if the outcome of your representation wasn’t the hoped-for one, so long as you have built their trust through great client care.

Every day, the profession is seeing more competition from every direction. It’s time we as a profession focus on service, not just process, because it’s the way the world outside the law works, and what consumers expect – and deserve.

What Makes Clients Really Want to Pay Your Bills?

Heated discussion on Lawyerist.com about sending effective bills. Couldn’t help but add my two cents worth here.  

Most attorney bills, with their point-somethings and cryptic billing program-generated phrases, are horror stories that stress clients out and invite challenges. ”3.2 – conference call with opposing counsel. 1.4 research and writing of response. .5 – client telephone discussion.” It’s enough to make them crazy – and often does.

When a client opens your bill, they want to know two basic things: what did you accomplish for me this month, and how much are you charging for it? The bare bill, even one with a nice cover letter, doesn’t really tell that.

The solution is a “progress report.” Grab the detail bill and translate it into client language. “In August we made significant progress toward an agreement. We had several positive discussions with opposing counsel and have resolved some key issues…”

Let them know what you actually did for them. Not the process and the time it all took – but how you’re moving their matter toward resolution. Then, instead of the laundry list of point-somethings, give them a simple summary bill. Attorney hours 12.3, paralegal hours 8.2, miscellaneous charges $147.50, with a “total charges for month” line below. And at the bottom, “detail billing on request.” Unless your client is a sophisticated user of legal services, few will ever ask for the detail, because you actually answered their real questions: “what did you do for me this month, and how much do I owe?”

If your client is sophisticated you still send the detail. But the “progress report” is always a powerful idea that will help you maintain more positive client relationships – and get you paid more quickly.

Costco Has Some Wisdom for Lawyers

Costco is one of the nation’s smartest companies. Even their Costco Connection magazine, which began as advertising flack, has evolved into a publication whose every issue provides value and insight to its members (along with a lot of advertising flack).

Last month’s edition has an article entitled “Top Five Mistakes Small-Business Owners Make” that hits attorneys dead center, and re-states some of the key points I have been teaching my clients and firms for twenty years:

1. Not knowing why customers buy
2. Offering a transaction rather than an experience
3. Being the answer (wo)man
4. Allegiance to how it’s done
5. One-dimensional thinking

I encourage everyone to read the Costco Connection article first, and over the next few days I’ll provide my own legal spin on each.

The Legal Balloon Goes Pop

Another story in the ABA Journal predicting the already  in-progress turmoil and diminishment of the legal profession.

One thought that always rattles around in my head: the profit margin of the average business is, in a good year, 20%. Grocery stores operate on a margin of 2-3%. Law firms operate on an average profit margin of 45-55%, yes, even the pretty good local and solos. Let’s not talk about the margins for some PI firms.

The legal profession has never had  a focus on efficiency and process because of its immense “slop” factor. Even poorly-run, inefficient firms could make barrels of money because they were keepers of the secrets, gods of the law. But technology and the web is stealing the bottom layer, at the same time as hordes of young lawyers are wandering homeless, willing to do whatever work they can find for whatever the client will pay.  And you’ve read, I’m sure, about how technology is now being used to do the kind of complex discovery that associates used to do – and better than they did, because computers don’t get tired or distracted – and also the massive analysis of contracts and agreements to identify key issues. Like all technology, such is now being brought down to the retail level and being made available to smaller firms.

Frankly, all of this is why today I am working with more attorneys and firms than ever – not simply on “marketing” or “operations,” but on transformations – rethinking firm directions, structures, target markets and niches.

The profession is in the process of deflating — until 80% or more are operating like businesses, with similar margins. Law firms in general have no idea how to do that, and senior lawyers will be horrified to see their share of that 45-55 percent profit disappearing.

Law is becoming an business, an industry – at least 80% of it is. And yes, one with high standards. But no longer a high priesthood. And only a few sharply focused superstar lawyers and firms will be left making those amazing profit margins, while thousands of others will be joining the middle income brackets, or less.