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.

Click here to view the embedded video.

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.

Or if you don’t, these are some great insights into how to better compete with other attorneys.

The headline stems from this article here, How Do Lawyers Get Away With This Stuff?, that I read recently in the NYTimes’ Small Business Blog – You’re the Boss, The Art of Running a Small Business. As an aside that blog gives some of the best, consistent small business advice that I’m aware of…most of the columnists are small business leaders.

First let me summarize and extract some quotes directly from the article. Notably, the author of the piece is Jennifer Walzer, President of Backup My Info! which I think has gotten a fair amount of publicity as a hot, up-and-coming business in the fast growing online/off-site data backup marketplace…I mention that because when you hear her complaints about lawyer service I would think she and her company would be pretty welcome clientele for 90% of lawyers out there. The background of the article is Ms. Walzer hired a lawyer to review a new lease for her company and the article describes her experience in dealing with the particular lawyer/firm. This opening ‘graph is great:

At my company, we try so hard to provide great customer service that I sometimes forget that bad customer service exists. And then I hired a lawyer.

First…

We sat down to talk, and I explained that I had a relatively straightforward sublease agreement but wanted to make sure that I was protecting myself. The lawyer said he was happy to help and asked for a $2,500 retainer fee, explaining that based on what I had told him, the total fee probably wouldn’t exceed that amount. Fair enough. I sent the check and the agreement for him to review. I had enough on my plate and wanted to trust him and his firm.

It was another lawyer from the firm who got back to me. He informed me that the agreement was relatively standard but needed a few changes. I reviewed the comments and my impression was that some of the changes he made were a bit of a stretch, but again, I wanted to trust their judgment. I let them make their changes. I had paid for $2,500 worth of service, so I figured I might as well let the lawyers do their thing. And did they ever …

Okay, sounds pretty routine, and next…

I had a few more conversations with the first lawyer in which we discussed forgoing the good guy guarantee versus providing a larger security deposit to the bank (I didn’t like the idea of having to personally guarantee the rent for four years). That prompted them to send me an additional bill — for $1,450. I wasn’t thrilled, but I figured it was O.K.  because I’d raised some more questions. At that point, the deal was pretty much done, so I paid the bill and called it a day.

And, finally the REALLY GOOD STUFF…

Imagine my surprise when a few weeks later another bill arrived. This one was for approximately $2,500. It contained a long list of itemized charges that made little sense to me. I checked my phone log to try to match the calls with the charges, and the numbers weren’t there. I assumed there must be some mistake.

I called and left a polite message for the billing manager, asking her to call me back whenever it was convenient. Instead, the two lawyers called me together on speakerphone, addressing me right off the bat in a hostile tone. They demanded to know why I had an issue with the bill, which caught me off guard. I asked if we could review the bill since it wasn’t adding up for me. They immediately became defensive and asked me to prove to them which charges were inaccurate.

I picked an e-mail from the list. I had been charged for 0.2 hours at $300 an hour ($60) for one lawyer’s reply to an e-mail I’d written letting him know that I was not going to be available and would review his comments when I was back in my office. I wrote this as a courtesy to let them know my status. It demanded no reply, but I got one anyway. It said: “I hope everything is O.K. Take your time.” I thought it was nice of him. It never occurred to me I would be charged for it.

Flabbergasted, I asked how they could charge me $60 for a courtesy e-mail. The answer left me even more flabbergasted. “Jennifer,” said the first lawyer, “your e-mail took me away from a multimillion dollar agreement I’m working on, so if I have to stop what I’m doing to view and respond to an e-mail, then I have to charge you.”

That’s an incredible tale at one level but sadly so NOT surprising on another level. Particularly in some of my court-appointed contempt work it’s eye-opening at some of the lawyer treatment and lawyer billing I hear and see first-hand when I take my first meeting with these clients and also review the court’s case file and see huge fee petitions against former clients with very little having been accomplished.

Why does this sort of thing exist with lawyers and what to do?

There’s likely many reasons but I tend to think that older generations of lawyers say the 50+ crowd who are managing many firms these days are relics of an era where the legal field was rather immune from competition. In other words there were way fewer lawyers out there and thus less competition. The last 15 years or so has seen a huge increase in the number of practicing lawyers. Lets face it, there are surely aspects of legal services where the offerings are commodity services where there’s virtually no difference from one lawyer to the next, at least on the substance of the issue. Whether it is or not, I would suggest really competing with the mindset that the legal services you’re offering are a commodity and you’ve got to hustle, be innovative with alternative billing, and provide great customer to win business. I mean McDonalds isn’t going to get away with the crap that was described above, right? I’d just go to Wendys.

How might you compete with the sort of billing and customer service practices listed in the article above?

Billing Clarity. Surely there’s probably some “back story” to the article above but from what you read the client was quoted $2,500 flat-fee for a commercial lease review and she ended up being charged some $6,000. She seemed to be satisfied when the bill was at $3,600 since she had raised some issues that hadn’t been discussed up front. But however the client is being billed why not just be clear about an hourly rate, a specific flat-fee amount, or extra charges. If a client is unhappy with a result or your services that’s not totally unavoidable, but “billing surprises” are avoidable.

Billing Alternatives. A commercial lease review seems to me that it should be something a lawyer should charge either a flat-fee for or perhaps a combination hourly rate with a “fee cap” on the top end. I’ve done this sort of thing a few times in my career and I don’t think it’s too different than the sort of negotiation that occurs in buying a home…there’s a sort of set time for some negotiations of fairly standard things and then you get to an agreement and you’re done. So on the lawyer side it’s pretty predictable in terms of lawyer time needed. Why surprise a client if you don’t have to and create the potential for client ill will? Even with hourly billing a fair, honest thorough bill need not surprise a client…it sounded like there was some old fashioned “bill padding” going on in the example above. My firm is getting ready to start offering a flat-fee monthly billing option for even some unpredictable practice areas such as dissolution of marriages where someone will have to use an automatic payment option like a credit/debit card and then each month they’re charged somewhere in the $250-$750 range regardless of the amount of work done that month. I have a few final things I need to figure out about this before it’s a “go” but in other words we’re trading the potential for higher fees in some months for promised consistency and client won’t need to bring a big retainer in up-front and there will be no “billing surprises.”

No Charges. Do you ever use these on your bills? You should (I probably use them too much). The $60 e-mail above being a perfect example…doing work for a client and listing on your bill but not charging for it. I do it when someone calls for something like when is court tomorrow or that sort of purely logistical kind of thing where I’m not giving legal advice at all. I’d be pissed too for getting charged for the $60 e-mail listed in the article above.

There are great opportunities for lawyers to boost business big-time by focusing not on legal substance but rather customer service and billing innovations!

A Reluctant Retailer Decides to Open Her Books. Just substitute “law firm” for the word retailer in that headline and I think this article could be hugely impactful to you firm’s bottom-line. I think the key “take aways” from the article are really unlocking the unused intellectual value of your lawyer and non-lawyer staff alike and really building a business team. I haven’t done as good a job as I should over the years but I’m amazed at the ideas we generate when my legal assistant and I really dig into the business issues we’re confronting. The sort of all-knowing lawyer or CEO concept is stupid primarily because it so under uses the strengths of other employees.

Supreme Court Rules for Student Seeking Discharge of Student Loan Debt. Although not a fan of financial irresponsibility in lending and I am someone who does have moral qualms with bankruptcy discharge, it’s nice to know there may be some options for students. Here’s SCOTUSblog’s take on the opinion.

Staying Ahead on Retainers. This was part of the ISBA’s Illinois Lawyer NOW, Best Practices column recently. Likely a problem for many over-stretched sole practitioners. I definitely like the **get larger retainers and **actively push the use of credit cards ideas. Personal example with me is just comparing a handful of our clients who are on the “automatic credit card charge plan” versus the more typical mailed monthly bill people…the credit card folks I KNOW I’m getting paid that day we close our billing cycle whereas the regular mailed monthly billed people it’s more of an I THINK/HOPE I’m getting paid sometime sort of feeling. BIG DIFFERENCE! Here’s the link to the Illinois Law NOW Best Practices page with a bunch of free, useful practice management columns.

The Danger of Domestic Relations as a Practice Area…see here, here, and here. One piece discussed a lawyer’s alleged assault on an opposing party in an Order for Protection case…not surprising to me sadly. I haven’t been a part of any assaults but I see way to many lawyers losing their cool and even making harsh verbal attacks on an opposing party. Then there was the jailed deadbeat dad who tried to egg the judge…how’d he get the egg if he had been incarcerated?? And then the rash of religion/custody disputes that I’ve seen lately in domestic relations land. I think the divorce/religion package is more combustible than politics/religion.  I tend to view this litigation as attempts by custodial parents to over-intrude on the non-custodial parents’ parenting/visitation time.

Are You CEO of Something? This relates a lot to the first item above and really just getting more out of your people by being a good manager. And it’s a double-positive…you delegate and make your legal assistant “CEO” of certain areas of your business really empowering/growing him or her and it lets you focus on more important things. So far my part-time legal assistant is CEO of client billing, office supplies, and post-closing real estate file/mailing procedures.  Here’s a bit from the article:

We had this really motivated, smart receptionist. She was young. We kept outgrowing our phone systems, and she kept coming back and saying, “Mark, we’ve got to buy a whole new phone system.” And I said: “I don’t want to hear about it. Just buy it. Go figure it out.” She spent a week or two meeting every vendor and figuring it out. She was so motivated by that.

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!