Solo In Chicago…Grow Your Practice!

Well, there’s about 8 hours left in 2009 as I jot down a few thoughts here in the Central Standard time zone. Can I say that New Years Eve is a non-event for me…not sure why although it may have to do with the fact I’m more of an early morning person than a late night person so the concept of staying up past midnight to see fireworks or some lighted ball dropping isn’t quite the cat’s meow for me. But the one thing I do enjoy about the transition from year-to-year is the opportunity to reflect on the last year and plan ahead to the next year.

Here are 4 Final Thoughts for 2009 from one Solo (attorney) In Chicago…

Steady Income Sources are Nice and/or Cash Flow is King. I’d guess that like with me, this is a huge struggle for many solos. I think a lot of it stems from the fact that sole practitioners tend to be more dependent on individual clients than larger law firms. And if these individuals are anything like some of my clients they’re not always rolling-in-the-dough which equals paying their lawyers in dribs and drabs. It’s hard to lawyer like that and it’s hard to live with that. Can you find some steady sources of income to create an “income floor” that you can count on each month? Over the last 6 months or so the combination of my work as part of the Cook County Domestic Relations Division Referral Program (run through the domestic relations division of the Circuit Court of Cook County per rule 13.8b) and as an arbitrator through Cook County’s mandatory arbitration program have allowed me to create more a floor under my income. Not huge dollars but at least I have knowledge at the start of each month I can count on say $1,500 of income that isn’t dependent on a client’s payment that month. Might there be some court-appointed options that you can plug into? Or is there a way you can gain some business or entity clientele with more repeat business to supplement your individual clients?

Marketing/Selling is Key. Here’s a fact they don’t teach ya in law school:  The lawyers who make the most money aren’t the best legal practitioners rather the lawyers who make the most money are the best salespeople and marketers. This fact is of the utmost importance if you’re starting/building a law firm. I’m just about at a point where I’ve located the marketing sweet spot in terms of really getting the phone ringing regularly with new client inquiries. The big 3 marketing channels that work for me are:  1) Current/former clients (reached via personal meetings/contacts, annual mailing, and monthly Constant Contact e-mail newsletter); 2) Other professionals (reached in many ways like category #1 plus memberships in local Rotary and LeTip chapters); 3) Bar Association referral services. For me categories #1 & #2 are where the action is BIG TIME. Other areas I’m pondering are better Internet-based ads and targeting the evangelical Christian community which I’m active in better. I’d hope to maybe do an interview with some small firm attorneys and their Google AdWords experience. I see them up on this blog and they just seem so generic that I can’t imagine why/how they’d be effective plus I’ve heard of some bad experiences…I suppose it’s all about the correct keywords, no?

Under-Billing:  A Problem with Solutions. This is becoming less of a problem for me as my self-confidence grows, I see the quality of work I do vis-a-vis other attorneys (and vis-a-vis their billing rates), and I do better with regards to items 1 & 2 above…in other words these things are all interrelated. Lawyers under-bill because they might not think they’re very good lawyers but I’m starting to see I am a pretty good lawyer. And as I build some steady income sources and effectively open several effective marketing channels I’m not as worried about losing that 1 client if I quote too high of a fee because there will be others who will happily compensate me for the quality of work that I do.

Use Friendly But Aggressive Billing Communication. I like where I am right now with regards to our billing communication and follow-up. And I don’t say that theoretically, I say it meaning we’re getting paid well and our receivables are reasonably low. What’s working for us? It’s one non-lawyer’s job to mail our bills our each month and to follow-up with clients at specific time increments if there has not been payment. And this isn’t some a-hole collection agency (I’ve sworn off of them) rather it’s a friendly member of our staff making a reminder call. Full and accurate communication in your billing is key too…the description on your bills is as important as any of your in-court legal writing and probably more. I bet most clients are reading your bills more closely than a lot of judges are reading your pleadings. Eventually you must withdraw and bring your fee petition if there’s non-compliance. I haven’t crossed the sue-my-ex-clients bridge yet, BUT, if you’re in area like under the Illinois Marriage and Dissolution of Marriage Act where you can bring a simple fee petition as a pleading like anything else in the case you’ve got to do it. Clients seem to act if you’ve got a judgment against them and a wage deduction’s comin’.

SEE YOU BACK HERE NEXT YEAR!

Some occasional, insightful nuggets from around the BLAWGSPHERE…

Representing Family Members and Other Horrible Life Decisions (Nutmeg Lawyer). Nutmeg includes a nice listing of factors to consider when looking at friends & family representation. He includes a jarring story where a lawyer represented a very close friend in a divorce and the lawyer’s emotions ended up getting the best of her. Personally I’ve had some excellent family/friend representation within boundaries. I’ve for the most part represented friends/family in real estate transactions and estate planning plus a couple of sort of easily settled lawsuits. Bottomline, who do ya know better than friends and family and those I respect and know will be professional and pay my fees and are great clients. In my experience most of my friends/relatives expect to pay market value fees and are adamant about doing that.

The Most Expensive Mistakes a Lawyer Can Make (Chuck Newton). A very useful list indeed. At a recent ISBA Webinar that I moderated along with a couple of colleagues the unanimous answer to the question, “What was your worst decision you’ve made since starting your law practice” was under-billing or as Chuck lists inadequate pricing. That along with wasting $$ on office space i.e. borrowing/spending too much on Chuck’s list were my answers.

The Chicken or the Egg? Changing Practice Areas in Challenging Times (GAL).  A great & relevant point for us all no? I’ve probably been keeping my power a bit too dry in this area. GAL’s experience:

I would make several observations from my own experience.  First, the internet makes expertise available.  With a little hard work in your spare time, there’s almost no area of law you can’t gain base experience in.  Further, your chance of getting a case within a practice you’re interested in is no more than random luck, unless you go out and develop an expertise and start talking up that expertise on the web and on the street.

Wanna be a lawyer? Well, get thee to a courtroom (Ernie the Attorney). That’s a great tip all the time. If you can stumble on a few interesting cases in a courtroom while waiting for your matter to be called you’re very lucky. This is very worthwhile and easily done both for the substantive law you may learn & for more “perception issues.” I experienced some perception issues first hand recently when I served for the first time as a Cook County Arbitrator. The arbitration rooms are small so I’d closely observe the plaintiff’s and defendant’s lawyers. And the way the lawyers act from the moment they step into the room surely impacts likability and likely in some subtle way a court’s ruling.

Well I suppose the only real way to do the above is to retire from the legal profession so please take the above headline with a grain of salt.

But I am constantly trying to alleviate some of MY clients’ “payment problems.” Part of my attempt to deal with “the problems” was to pick-up my copy of Ed Poll’s, The Business of Law, which I’ve owned for several years but hadn’t ever read. I don’t know Ed personally but I’ve been following him on Twitter (@LawBiz) for the last several months and I’m a regular participant in his LawBiz Forum. Ed’s background in helping lawyers become more profitable speaks for itself. I’m not through the entire tome as yet but I have been focusing on the several chapters in the section entitled Financial Management.

Some general things to check out are some of his financial forecasting tools and his two suggested methods for pricing legal services (his so-called Cost-Plus & Market pricings). An interesting factual nugget, “The average national accounts receivable cycle for lawyers’ services is 4.3 months.” Ugh.

But we want some action points to put dollars in your pockets, no? That’s what I need.

Here are 3 easy-to-implement billing/financial planning nuggets I’m thinking about and I’ll report back on the final implementation:

• Billing cycle change. My firm sends out client bills on a monthly basis. I’d guess most lawyers who are primarily involved with hourly billing sorts of matters send out monthly statements. For the 4+ year history of my firm we’ve closed our billing cycle on the last day of the month and then mailed bills to clients the first few days of the next month. The problem? The majority of our clients’ payments don’t come in until roughly the 15th-25th of the month. And this is often a problem because both within my business and personally I have bills that sometimes are dependent on client payments due at the start or middle of the month…and that’s a problem! My solution:  Change the end date of our billing cycle to somewhere in the early 20s day of the month and then mail bills essentially 7-10 days earlier than we’ve been doing. The goal being to move the client-payment-received window forward to the 5th-15th.

• Incorporate “Evergreen” Retainer deposits. With the exception of real estate transactions, we generally require a retainer deposit from clients up front which then gets billed against as we do a clients work. I suppose we can always take larger retainers upfront which is probably half of the solution. However I do often think clients might struggle to make too large of an upfront deposit. Yet on the back end of things my problem has been once the retainer deposit has been used then we’ve been in the habit of simply billing clients for the work done that month. And then we start to have payment problems because we’re totally at the client’s whim. My solution:  Ed mentioned the “evergreen” retainer idea to me being simply a client must always keep some minimum amount in my trust account until the representation is completed. Then if there’s a payment problem I will always have some funds to collect against. I haven’t finalized the amount of the “evergreen” retainers as yet and I think it will vary by the nature of the case…seems like a range might be $250-$750.

• Consider a discount for clients who pay promptly. Here I’m aiming at the same problem as the billing cycle change…simply, getting client payments more quickly. So I’m deciding about what date deadline I’ll use that will qualify a client for a discount & what should the discount be. I’m leaning towards post-marked by the 15th of the month for the date. As for the amount, kind of wavering between a fixed-fee vs. a %. 10% sort of sounds good and would be easy to calculate but that seems too large.

Thoughts??

Well, it’s not quite a death in the family but…

Pulled that quote from this piece at law.com about law firms suing former clients for back fees. ABA Journal had an erely similar article on the same day…and now I’m posting about it. Interesting that one of the law firm’s suing former client allegedly was owed $400,000 in fees.

Who stays in a case where there’s that large of an unpaid bill?

I’m still for the most part following this “collection policy” with my firm. Personally I have never sued a client for fees (with a caveat to come) nor seen it done at the two smallish firms I worked at prior to my current set-up. However, as someone who practices a good amount in cases covered by the Illinois Marriage and Dissolution of Marriage Act, there is a specific section of that Act (508) which allows a former attorney to bring a fee petition against a former client (typically you bring a fee petition immediately after you withdraw). I have used this mechanism and will continue to do so…you get a judgment without the hassle of filing a separate suit.

This was a chunk from an article recently published in the ISBA’s General Practice, Solo, and Small Firm newsletter (sorry password protected). They actually have a very good newsletter well worth the $20 per year…and I’m not just saying that because I’m a member. Note the below. I added variations of the below to our agreements:

Unavailability of Attorney/Client’s Consent to Temporary Substitute Attorney/Limited Confidentiality Waiver. In the event attorney is unavailable or becomes ill, disabled or dies unexpectedly, client consents to another lawyer, chosen by attorney or attorney’s legal representative, appearing for the attorney and to the extent necessary reviewing the file and handling the file until attorney becomes available or a successor attorney is chosen by client. For this limited purpose, client waives confidentiality and consents to the other lawyer’s appearance and access to clients’ file for the purpose of taking appropriate action to protect clients’ interests. To the extent possible, attorney will discuss with client the need for the other attorney and identify the other attorney, prior to having the substitute attorney temporarily act for or appear for the primary attorney and the client.

No Guarantee of Result. Client understands that the Attorney does not guarantee any specific results and that the nature of a domestic relations or other matter is such that evaluations of the case and advice as to dealing with particular items or transactions is subject to change from time to time as the case progresses and circumstances and/or the Client’s goals change.

No Cost Estimate Due to Factors Beyond Control. Client further states that he/she understands that a significant part of what is done in a domestic relations case or other matter is based on what the opposing party does or does not do and upon other factors over which neither the Attorney nor the Client have any control. Such factors, particularly the action or the inaction of the opposing party, may substantially increase the fees and costs involved, and therefore there is no realistic way that the fees and costs can be estimated or controlled.

I’ve posted before on the problem of under-billing here and here and for different reasons including several seminars I’ve been involved in of late have been thinking a lot about the problem of under-billing and what a practice killer it can be. I think a decent analogy would be the issue of pricing a house to sell. So my wife and I have a semi-regular ritual of watching TLC’s Property Ladder on Saturday mornings. It’s a program about renovating homes and then flipping them for a profit. And after watching many episodes one realizes the importance of pricing the home for sale after all the renovation is complete. Frequently the first-time flippers will make all sorts of mistakes and go over-budget and miss their timelines, ect., BUT, regardless of how well the flippers did on everything up until the open house (good or bad) if the home is priced improperly the flipper will often be in big trouble and not sell the house.

It’s similar to pricing your legal services. You can do everything else right such as actual lawyering, business management, even marketing and yet really not retain clients and build the kind of business you want if the price ISN’T right.

Trey Ryder’s weekly e-mail marketing newsletter did a great job of explaining this under-billing/under-charging problem (as an aside, the e-mail newsletter is a free sign-up and often quite informative).

Here’s a blurb that underscores the big problem…

ADVICE:  I encourage my clients to charge on the high end.  It’s much better to be the most expensive lawyer in town and have people appreciate your knowledge and experience — than to be the cheapest lawyer in town and have prospects question your skill.

No matter how narrow the audience you’re trying to reach, you can probably find hundreds of prospects in that target audience.  The key is having a competent marketing program that can effectively identify, reach and harvest those prospects so they become your clients.

Here’s a teaser for ya to entice you to watch our June 30th Webcast.

SIGN-UP NOW…only 47 seats remaining.

The question:  What’s the worst decision you’ve made in your early years in solo practice? The unanimous answer:  UNDER-BILLING…in other words, under-valuing the worth of your legal services. And it kills you for at least 3 reasons:

• If client pays, you’ve cost yourself that difference between what you’re worth versus what you actually billed.
• You’ve lowered the perceived value of your brand…right or wrong the cost of a product or service often equates to it’s perceived value or luxury.

• You often lower your performance expectations (and actual performance) to match your billing rate. Ideally you give the same effort for your best clients and say that pro bono case but I’ve felt the leak of lowered performance that’s hard to totally avoid