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February 2006

You Have to Spend Money to Make Money

Our law firm is at a stage where we are rapidly growing and expanding, not in the area of attorneys but in the area of staff and support.  As we continue to bring more support people on in order to provide better legal services, increase quality and improve responsiveness, I have to wonder.  Will this increase in expenses result in an increase in revenue?

There's an old saying that I think that applies well in my situation.  You have to spend money to make money.  One of the things I learned my first year as a law firm is that it is important to take risks with capital.  I took a tremendous risk by investing my own money in start-up operations.  All of my start-up costs were re-reimbursed by the end of the year.  The good news for this year is that the firm gets to invest a portion of its revenue back into the company.  but I suppose it doesn't make a difference since the money would otherwise be distributed to me as income.  Regardless, we are taking a healthy dose of risk in reinvesting money in ourselves.  I'll let you know how it works out. 

The Hidden Walls

There are a lot things you never really realize when your working in a traditional law firm with many attorneys.  Looking back over the last year, I have to remind myself how different things are now as an independent practitioner.  I love the word "Independent" because it really does capture the experience.  When you're in a position to make all of your own decisions without the influence of a firm, partners or other limiting factors, you're able to move effectively and quickly toward your goals. You're able to select your goals based on your own needs.

You don't realize it when you're working for a firm.  But there are hidden walls virtually everywhere.  Those ways affect how you bill, which opportunities you pursue, what kind of technology is in a place to help you perform your tasks, your client base, your billing structure and virtually everything else.

I have very few walls or barriers professionally or personally.  This is one of the best parts of being a independent practitioner.

Case Manager Update

We have spent the last couple of weeks updating the computer equipment and software needed for the off site case manager to step into the virtual program.  Recall that our case manager is an ex-in-house attorney for a large corporation who will be responsible for the management, focus and forward movement of tasks within the legal extranet, as well of the assignment of the tasks to law clerks.  We will still have a few more technology pieces to put in place but are drawing ever closer to achieving the ability to collaborate and manage projects effectively. 

The best part has been having someone to brainstorm with concerning a task based and legal budget approach to legal services.  A lot of these thoughts rumble around in  my head.  It is nice to have someone to share them with.

Building Relationships is Not a Billing Event.

This first year of practice at my new firm certainly involved a lot of hours which were, under the old model, deemed as uncompensated.  Reaching out to all the new clients, introducing them to our new billing model, preparing project proposals, creating legal extranet projects and populating them with initial data and status phone calls are all unbilled in our office.  These are all things which build a foundation of client relationships.

Of course, once those relationships are established, the start-up cost on launching a new project for a client becomes less.  Once you train a client how to use the extranet using “ ” you don’t need to train them again.  The next project you bring online for them is easy and seamless.

I continue to spend a lot of time developing relationships.  What I am seeing, however, is that by putting in that time and letting the client know that they don’t have to pay for it, I’m distinguishing myself in the market and building a solid foundation for further work.  Importantly, those very clients are telling their friends and other business owners about how we do what we do. 

In many ways, we are investing in our future.  To me, it makes all the sense in the world.  It is hard for me to understand the slash and burn mentality of law firms who gobble up client pocket books like a 3 year old who finds himself alone with a bag of chocolate chip cookies.

The Importance of Process and Efficiency in Revolutionizing Legal Services

When I started my law firm a year ago, I had some major anxiety built up and a healthy dose of hostility toward the hourly billing system.  The further I get into my practice I realize that there are gains to be made in both productivity and process. 

Obviously, there are lots of lawyers who bill on an hourly base, but who do so ethically and professionally.  There are many lawyers around the country who eat time all the time.  There are many attorneys who view client relationships as far more important than their daily billing sheet.  Most of the lawyers work, one way or the other, for themselves or with a small group of people. Inevitably, they have autonomy to make decisions for themselves. 

When you’re in a large firm, or when you’re in a small firm that’s dominated by one or two hourly billing dictators, you simply don’t have the luxury to use your own discretion.

But I digress.  The point of this post is to acknowledge that there are tremendous efficiencies to be gained within the legal services market which will inevitably deliver higher quality services to clients at lower costs.  By lowering costs, real services will become available to more individuals and businesses.  Instead of spending $1,000 and getting virtually nothing in return, Clients will be able to spend a thousand dollars and feel like they’ve received tremendous value for their money.

The importance of process is in the area of quality control.  If a process for handling a particular activity is documented, you’re drastically reducing not only the amount of time which that activity takes but the possibility that an error will occur.  We are working hard to document internal processes this year so that we can plug and play people into those processes. 

While process has a positive impact on productivity, it is the Internet and technology which offers the greatest possibility for revolution within legal services.   Technology can put teams of people together regardless of where they are located.  Technology can make sure that mission critical information is available to every member of the team.  Technology can ensure that knowledge is captured and leveraged moving forward.  And technology, while not free, can be obtained at a cost point which is achievable to the vast number of attorneys who are practicing.

The problem is there are too few, in the legal services market, who thinks much about these things.  Technology is great but too few firms spend time making sure that technology increases quality and reduces costs.  As we have noted previously, technology can be used for evil as well as good.  No one questions that some firms use technology to take a fifteen item and turn it into a three minute item, but still charge the client for a twenty minute item.  I would guess the majority of firms leverage the explosions in e-mail to simply create more and more 12 minute billing events which they can pass on to the client.

Of course, there will be a great divide between those firms which use technology to increase billing and those that use technology to revolutionize legal services.  There is no doubt in my mind as to which approach will dominate the market five to ten years from now.