Solo In Chicago…Grow Your Practice!

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Happy 2013 from Solo in Chicago and here’s hoping the new year is full of “Accomplishments of Significance.”

But, what is the most important month? It’s the month after your client has worked through his initial retainer deposit. And it’s so critical because this can become a time when clients get behind on their payments and if you let that happen it’s hard to recover…it’s hard to get those clients paying again once they have gotten out of the payment habit.

And I don’t mean for this to be an extensive post about overall billing strategies or evergreen retainers but rather simply that you must be ON TOP of a client when he gets the first bill after the retainer is used up. Our contracts require that clients pay their balance-in-full each month for all work done the previous month…remind clients of that fact. Sometimes we’ll accept a payment plan where a client can pay less than the full balance as long as a significant, monthly payment is made. But you cannot let a client pay nothing! Because each month without payment makes it progressively more difficult to get the client paying again. You must get your clients into the monthly payment habit.

The client who pays that “next month” will likely be a profitable client for months to come; the client who pays nothing may never pay anything again.

I’ve known about Time59 legal billing software for sometime but have really experimented with it and gotten to know the software well over recent months. I like what I see and the price is right at $8.33 per month.It’s a great option for a start-up solo practitioner. I like it’s unQuickBooks-like simplicity…it gives you what you need as a solo or small firm lawyer without the crap that just confuses users and wastes time. The $99.95 annual fee provides the following:

• Clients Unlimited
• Projects / Matters Unlimited
• Invoices Unlimited
• Time Records Unlimited
• Expense Records Unlimited
• Timekeepers Unlimited
• Accounts Receivable
• Trust Accounting

Until my firm expanded and we started using a full law practice management suite I used WorkingPoint. It was an interesting cloud-based accounting option but to get the unlimited invoicing that most any lawyer needs your cost is twice as much as Time59. Plus it didn’t provide the lawyer specific features like trust accounting.

Here’s Time59 FREE 30-day trial sign-up.

**FTC Disclosure:  Time59 is an advertiser on this Website.

“Yes Mr. Smith, court today went well. The judge is putting a lot of pressure on the other side, and while we still have a bit of a road to hoe, I am guardedly optimistic about our chances here.”

“By the way, as I mentioned in my last letter to you, the retainer you paid me will soon be exhausted. I will need another payment from you within the next two weeks or I will be forced to withdraw as your attorney. I would prefer not to go this route, but this is a business.”

If you are a solo attorney perhaps you have been in this situation, and to me, it is one of the more awkward aspects of running a small office. How to provide great advocacy and service on the one hand, while on the other hand, appropriately nudging late-paying clients in the right direction, or when push comes to shove, dropping those clients altogether.

I recently had breakfast with a colleague who transitioned from running his own office to a larger firm in the same practice area. When I asked him about this very situation, he mentioned that a client rang him to complain about the unfriendly call that the client received from accounting. Fortunately could take the position of  “I don’t know anything about that, but hey, if they pull the plug, they pull the plug.”

Of course there are ways to minimize this situation, that include the following, but it is tough when the uncompromising businessman and the sympathetic advocate are the same person.

• Counsel clients so that their cost expectations are realistic, and do this at multiple times throughout the course of representation.
• Do a good job of assessing the case and get an appropriately sized retainer fee, with a little wiggle room for the unexpected.
• Give clients plenty of heads up before the money runs out. Have hard and fast rules about when they will be notified and make sure they know those rules up front.
• If you have to put the payment pressure on and you are the only one to do it, bifurcate the communication. Counsel the client as you would, but when you call or write about payment issues, communicate only about payment.

Sooner or later though, it is going to happen, particularly in this economic climate. And it might be a little awkward. You have a client you really like, and a case that is quite interesting. On the other hand, business is business. You think ‘I do it this time, and next thing you know I am going to be running a pro bono outfit.’

Even if it is a client you do not particularly care for and a case that you have seen before, you cannot walk away just like that. As attorneys, we have ethical considerations and obligations to our clients, regardless of the money in our trust account.

So what do you do when there is nobody else around to put the financial pressure on? Or even when there is, when the client knows who is making that decision? Is it as easy as distinguishing advice calls from money calls? How do you communicate to a client that you have the gas pedal all the way to the floor until the clock says 0.00 (but once the clock says 0.00…)?

A couple re-posts here that I found enlightening…

The article title is a piece from the NYTimes here looking at methods doctors are using to run better businesses.  The 4 business tips from the piece are:

• Limit staff costs;
• Spread-out expenses;
• Go electronic; and,
• Monitor and tweak as needed.

I know only the basics about a medical education but I do find that dentists and doctors generally are better business people than lawyers, not sure why. Two things really stick-out to me whenever I make a visit to the dentist/doctor. First, there’s usually excellent delegation and specialization. Thinking about my dentist just because I’ve seen her more recently, there’s a receptionist, a dental assistant, a person who deals with billing, and the dentist. I’m most impressed by the fact that the dentist doesn’t do anything other than the real dentistry work where she’s needed for a fairly brief time so her value is absolutely maximized….all greeting/prep/billing is done by others. Second, and I’m being a tad repetitive but I think the point is critical, someone other than the doctor/dentist is wholly responsible for financial matters.  With one exception I cannot recall ever discussing money issues with my doctor/dentist. Lawyers can learn a lot through a trip to the dentist to get their teeth cleaned.

And finally, Keeping the Cash Flowing:  A Dozen Tips for Getting Clients to Pay More Promptly. My favorite were:

• Make it easy for the client to pay;
• Consider delivering invoices in person for significant clients;
• Create prompt payment incentives or slow payment disincentives;
• Be the squeaky wheel.

Many points of review for me but one item I’m absolutely using which is new for our billing procedure is “Provide in your engagement agreement that you will charge their credit card or process the withdrawal for the full amount of the invoice 10 days after sending it out.” Get a credit card on the file and get a hold on some money if there’s a payment delay/problem.

I was sitting around a small claims courtroom recently and observed a trial between 2 pro se litigants involving a cement patio paving job gone bad. The end result was a $1,200 judgment for the Plaintiff…the homeowner who brought the suit against a couple of laborers who had breached a contract and did a lousy job paving a patio.

I listened to some 30 minutes of testimony in the case and the Defendant in defending his shoddy work got me thinking back to this post:  Another Problem with Under Billing. It came out that the Plaintiff had gotten some good positive feedback about the Defendant’s previous work. Then the Plaintiff mentioned that a couple other cement installers had quoted her prices in the $1,500+ range. The Defendant put on his defense and admitted that he used an inferior quality of cement and in his words he had to use the cheaper/inferior cement since he was only charging the Plaintiff $1,200. In essence the Defendant’s explanation was I didn’t charge the Plaintiff enough to do a quality job. He spoke of the laborers he had to pay and he had to pay a commission to someone, etc., etc.

Here’s an excerpt from the post above about how this exact “cheap cement” scenario plays out with lawyers too…different product/same problem:

You take on client X perhaps due to a healthy degree of human empathy due to client’s difficult circumstances, often both legal and financial. And perhaps you take a smaller retainer than you should and you charge a lower hourly rate than you should. I don’t think the lower hourly has to kill ya but the lower retainer is poor judgment. But it’s what I’ve seen happen next that’s the real killer. Because you want to “keep the bill down” for the poor client you sort of “under work” the case. And speaking about a time or two in my own practice I’m surely not saying I was at the level of ignoring the case or being at a level were the ARDC might come calling. But instead of say regular “A+” work I was doing “B” level work to keep the bill down. But, when the case doesn’t go just like the poor, sympathetic client wants it to go, he/she is just as unhappy as the well-heeled client whom you gave the A+ service too.

And the inevitable result is a client who you’ve under-billed and who is now unhappy and who likely will be under-paying and you’re unsatisfied because you didn’t do your best work and you’re now both underpaid and under-appreciated.

Very damaging stuff from pleadings to patios…small civil judgments to real reputation damage.

Here’s an informative video from LawBiz’s Ed Poll on this important topic. As usual some useful takeaway points from Ed. So he says NEVER do not charge for the initial consultation. But his advice on what and how to charge for the initial consultation is a new-to-me concept (at least the “how” part of it). Here’s a previous post I wrote on the subject, Initial Client Prospect Meetings:  A Third Way, with some questions I consider when deciding whether to charge or not charge.

That was the compliment paid to me today by a client of ours which was immediately followed by his handing me 5 new cases and several thousands of dollars in new legal work.

Granted, this was someone who already knew us pretty well but he worked with several attorneys on different aspects of his businesses. And the comment above didn’t come after some huge court victory. Nope, it was the client’s response while discussing the billing practices of another firm he was firing.

Why?

Legal bills that lacked requisite detail. It may not be sexy but you’ve got to have the most detailed, descriptive legal bills possible. This was ingrained in me at my first lawyer position and I’m glad it was. If you’re on the consumer side of legal services, would a bill that said pay $500 (assuming this isn’t a flat fee matter) for legal services rendered how would you feel? I get bills from service providers all the time and although there are times I’m unhappy with the service or think the price is too high, it’s seems like it’s only with lawyers where I hear of instances of consumers not even knowing what they’re paying for.

Let this not be you.

Clients who pay their bills quickly & fully:  PRICELESS.

This is probably review for long time readers but I was “tickled” again last night regarding the simple but oh-so-important matter of including a self-addressed-stamped envelope along with your monthly client billing statements. Here & here are past posts where I set forth a broader overview of my Firm’s collection policy. It’s the most important process of a law firm and something I will be taking a full examination of here at the end/start of the year again.

And it’s really a difference maker…speaking from first hand experience in my practice. I was reminded of it again last night related to my exciting new responsibility as Treasurer of my condominium association. I’ve been in the practice of condo law off and on for much of my career so I really shouldn’t have been too surprised but what I’ve been discovering is that the Treasurer position is the only board slot that actually has a lot of work to do. Among which is paying various monthly bills to service providers from phone, plumbing, landscaping, utilities, water, etc. So last night I had my stack of 8 invoices and was writing checks and noticed there’s quite a continuum between the providers in their “making it easy to pay.”

• A couple places did not include an envelope for my payment (and obviously not a stamp either).
• The majority actually included an envelope but no postage. This seems to be the norm for the super-huge providers, AT&T and the like where that amount of postage would likely be quite large.
• 1-2 providers included self-addressed & stamped envelopes.

And it just got me to thinking that some clients must be thinking the same things I’m thinking when I’m going through the stack of bills. I’m supposed to pay you/provider some decent $$ and yet I’m having to pullout a label, envelope, and my own postage. I have to “pay” just to pay (more time too). And that ignores the delays that would occur if I’m out of stamps or envelopes. If you’re anything like me with 25-50 client invoices being sent on a monthly basis, don’t be thrifty if it means delayed income.

MAKE IT EASY FOR YOUR CLIENTS TO PAY YOU!

That’s a nugget given to me by Rjon Robbins over at How to Manage a Small Law Firm on a helpful coaching telephone conference recently.

Simply it’s the old “ghost” of under-billing reappearing which I’m trying to exterminate from my life and law practice once and for all (see my post entitled, Another Problem with Under Billing). Next call, Ghostbusters!

Rjon gave me some great thoughts to really put my fees at the level they should be instead of shooting myself in the foot via under-billing. We spoke in the context of an uncontested divorce where I’m currently charging flat fees ranging from $750-$2,000 depending on things like the nature of the asset division and/or child-related issues. He asked me what would I like to charge? Reply, $2,000-$4,000.

So how to ramp up my fees?

1.  Charge the fee you want to charge. Not always easy for those of us not particularly comfortable asking for money. But, I’ll only make $4,000 if I charge $4,000.

2.  Now cram a great product and wonderful services into that “package” to fit the premium pricing. Since if you’ve been paid a solid, premium price then doing great work for client and meeting with client regularly and staffing client regularly is fine and rewarding. You’ve been paid handsomely and you’re doing excellent legal work. I think we’ve all “felt” the difference in the legal work we’ve done for great client who pays promptly versus not great client who at their best pays but not promptly…the pricing issue is essentially the same issue.

Because the opposite scenario is a lawyer killer that I’ve been through (survived physically, true, but the practice suffered). The opposite scenario is the post’s title…it’s under-billing or charging too low of a fee with the result being I whittle down the legal services and quality of legal work I provide to fit the too low price. The real life picture is client pays fees of lets just say $500 for an uncontested divorce. Now I know I can spend very little time on this case for it to retain even a semblance of profitability for me. Any more than maybe 3 hours of my time and this has become a total money loser, right? So now there’s a client who thought she was getting my “A game” who isn’t happy being ignored and there’s me as lawyer also unhappy that I wasn’t using my “A game” because I want to be an excellent attorney but can’t be one when I under-bill. With the conclusion being an unhappy client who won’t be recommending me to her friends (if not outright criticizing me to her friends) and a dissatisfied lawyer who hurt his practice and pocketbook only because of a stupid fee quote up front.

Under-quote one case and it’s a useful learning experience but do this repeatedly and it’s devastating to your law practice.

I hate to just be a re-poster but once in a while we’ll sacrifice originality for quality. The great Ed Poll tweeted this today from his LawBiz Forum, How to Get Paid:  It’s in your hands. Take a look at the full post, he’s got 9 golden nuggets that can each help put dollars in your pocket.

Some new-to-me billings ideas:

Have a high billable to collected ratio. In other words what % of the time you’ve billed to clients is actually getting paid. Interestingly, if you’re under 80% that’s a problem for sure, but also, if you’re over 95% that could be an indication of too low of billing rates.

Collection cycle management. See the full post…I actually implemented part of this that I had previously read in one of Ed’s book by shifting our billing cycle close date to the 24th day of the month from the last day of the month. Another idea he lists is breaking up the alphabet and billing different chunks of the alphabet say every week or 10 days, spread throughout the month. Perhaps when the number of bills I’m sending out each month gets larger this MAY be viable, but it sounds like a tad of a hassle to be doing billing 3/4 times per month.

Don’t ask for money yourself. Separate yourself from the billing function.

If necessary, use a collection service. I DISAGREE with this. From my experience collection agencies can be as much of a pain in the butt for the creditor as they can be for debtor. We used to use a collection agency as sort of our last resort. I soured on them because we had a client who we referred out to a collector who called then called him. Then we didn’t get immediate payment but we cut a deal with the client about how to proceed. But the collection agency would not stop contacting this person and it became a real problem between the client and I. I’ve sworn off collection agencies. It’s kinda like dealing with foreclosure law firms as part of a real estate transaction, they can’t unlearn the harassment habits no matter the type of scenario.