Making Money: Maximizing the Business Side of Practicing Law

Law is both a profession and a business. So what pearls of wisdom did the experts at the 2014 ABA TECHSHOW have to say about the business side of law practice? Read on…

How Are We Doing?

  • According to Lexis’s Chris Anderson, over 50% of solos have no accounting software at all. @MrsMacLawyer RT @lawyerist (My 2 cents: true and sadly ineffective – the return on investment in purchasing quality billing and accounting software can’t be overstated.)
  • Law firms used to raise rates 10% a year; now just about 3% says @gnawledge – @Business_of_Law
  • Key Business Challenges for Lawyers [INFOGRAPHIC] – MyCase Blog @nikiblack

Talking to Clients about Fees

  • Calling a client that’s behind on payment is a hard thing to do; manage expectations — says Steve Best of @affinitytech @Business_of_Law
  • Lawyers are not comfortable having conversations about fees (both sides) – feels “salesy” and “confrontational” says @gnawledge – @Business_of_Law

Setting Rates and Crafting Agreements: The Rule of 3

  • Law firm billing discounts are a 1-way street; once you give them, you’ll continue to give them; protect the price – @gnawledge – @Business_of_Law  (My thought: I don’t believe in continually marking down bills.  I do believe in offering early payment discounts.  The client saves money.  The lawyer is paid more quickly.  Win-win.)
  • Rule of 3 in law firm pricing: 1% cut in price = 3% cut in profit – @gnawledge – @Business_of_Law
  • Rule of 3 defined: Attorney bills at $300/hr; 1st 100 is salary; 2nd 100 is law firm cost; 3rd 100 is profit – @gnawledge – @Business_of_Law
  • Bills Out – Money In – #ABATECHSHOW session @PeggyGruenke makes this case for flat fees – @Business_of_Law
  • New meaning for AFA: “appropriate” fee arrangement – @gnawledge – @Business_of_Law
  • The better law firms are at pricing, the better it is for the market – @gnawledge – @Business_of_Law
  • Resources for law firm pricing: LMA Group (Legal Marketing Association) | ILTA. (International Legal Technology Association) @gnawledge – @Business_of_Law

Billing

  • Some firms have 300 billing codes…but just 20 are used. Need to think through codes – @gnawledge – @Business_of_Law
  • Billing codes are gamed; got a cap on one code, the hours get logged in another. @gnawledge – @Business_of_Law
  • Where’d those billable hours go? Right here in the matter management system – @Business_of_Law (Link to LexisNexis FirmManager “Money Finder.”)

Trends and Where to go from Here

  • Litigation finance is a growing trend — several financing companies have raised lots of capital @gnawledge – @Business_of_Law  (My input – this can be a slippery slope.)
  • The Essential Survival Guide for the Independent Attorney: summary here. @Business_of_Law
  • Session Summary: 5 Effective Law Firm Billing Techniques – @Business_of_Law

All Rights Reserved – Beverly Michaelis [2014]

Cyber Security – Horrifying Stats and Tips for Dropbox Users

For the last two weeks, I have been featuring a potpourri of posts gleaned from tweets posted during the ABA TECHSHOW.  Today we explore cyber security with extra bonus tips for good measure.

Cyber Security – Numbers, Trends, Protecting Your Firm

Tips for Dropbox Users

  • Dropbox security: use third party apps – like Viivo – to encrypt. You own the key. @VIIVOkey happens to be in attendance.… @MrsMacLawyer RT @rocketmatter
  • Dropbox security: use 2 step authentication but put recovery code in safe place. It’s not retrievable. @larryport RT @rocketmatter
  • Also see my post, The 7 Rules of Using Dropbox and search this blog for related Dropbox posts.

Thanks 2014 ABA TECHSHOW tweeters for the tips!  And check out these resources for lawyers posted by the author on Scribd.

All Rights Reserved – Beverly Michaelis [2014]

Strategies for Coping in Difficult Financial Times

money-treeMoney is a significant source of stress for many of us.  Lawyers who are unemployed or underemployed understand the pressure all too well.

If you feel stressed by lack of money, how can you get on track?  Meet your goals?  Create a vision for the future?  The answer is to take a multi-dimensional approach.

Step 1: Coping With Your Feelings

The American Psychological Association has some excellent tips on how to cope with the tension and stress caused by personal financial problems.  Among their suggestions: ask for professional support.

In Oregon, we are fortunate to have the Oregon Attorney Assistance Program.  The OAAP is available to assist Oregon lawyers and their families with any issues that affect a lawyer’s ability to function.  This includes depression or anxiety caused by financial worry.  If financial problems are affecting your own mental health or the mental health of a loved one, friend, or colleague, contact the OAAP and speak with an attorney counselor.  OAAP services are free and confidential.

Step 2:  Communicating about Money Issues

Many of us don’t know how to talk to others about money.  We are fearful, anxious, and may even engage in self-sabotage.

Whether you are struggling to speak openly to a loved one or your law partner, help is available.

In 2010, the OAAP held a program entitled Money Matters featuring Brian Farr – a licensed professional counselor specializing in individual, couple, and financial therapy. Oregon lawyers can order the Money Matters program and download the handout at no charge from the PLF Web site.  (MCLE credit for this CLE has been extended through the end of this year.)

In Money Matters, Mr. Farr reviewed how to communicate about money issues and create a clear and accurate financial picture.  His handout includes a self-test for financial troubles, spending worksheet, monthly income and expense snapshot, and balance sheet.

If you are looking for guidance on how to talk to loved ones or colleagues about money issues, order this program.  If you are looking for practical tips on how to get a handle on your finances, order this program.  For one-on-one support, speak confidentially to an attorney counselor at the OAAP.

Step 3:  Getting Your Finances in Order

Beyond the insight and tips available in Money Matters, you will find excellent advice in this recent post by Sheila May: Managing Personal Finances During Periods of Unemployment and Underemployment.  Ms. May is a CPA specializing in forensic accounting and litigation support in Scituate, Massachusetts.

Step 4:  Additional Tips for Solos and Small Firm Practitioners

If you are a solo or small firm practitioner, add the following Business Essentials to your financial toolkit:

Do your homework on law firm economics and learn to avoid the pitfalls that lead to non-paying clients.  Details are available in this OSB Bulletin article.

All Rights Reserved [2014] Beverly Michaelis

Six Compelling Reasons Why a Contingent Firm Should Track Time

Contingent fees are appealing in part because many lawyers believe that charging a percentage of the client’s recovery frees them from tracking time.  True: you are not rendering a detailed hourly billing each month to your client.  But before you brush aside the necessity of tracking your time entirely, please consider the following:

Defending Your Fee

1.  If the client challenges your fee as excessive under Oregon RPC 1.5, tracked time will prove the effort you have put into the case.

2.  If the client fires you and hires someone else, you are entitled to a portion of the settlement or judgment collected by the new firm.  With time records, it will be much easier to apportion fees.

3.  If a lawyer in the firm leaves your office, taking a contingent fee client, tracked time will help resolve the fee allocation between you and the departing lawyer.

Fee Recovery

4.  If there is any chance of recovering fees – either by statute, under the terms of an arbitration, or in the form of an enhanced prevailing party fee – the court or arbitrator will want a detailed breakdown of time spent, not bulk billing or reconstructed time. Reconstructing your time and presenting it to the court or arbitrator as if it was contemporaneously recorded could be construed as a violation of Oregon RPCs 8.4(a) 3 and 4 and possibly 3.3.  Bulk-billed time could be used to “hide” activities that aren’t recoverable.  Fees submitted via a sworn Affidavit and should be accurate, detailed, honest, and complete.

Law Firm Economics

5.  Tracking time allows you to better gauge which areas of contingent work are more profitable.

Building Good Habits

6.  Most contingent lawyers do a mixture of work – some of what they do is hourly or at least eligible for fee recovery or enhanced prevailing fees as described above.  In this instance, it makes good sense to form the habit of tracking all time spent.  Otherwise, lawyers and staff must go through the mental exercise of trying to remember when they have to track time and when they do not. Time tracked without exception is more efficient because no time is wasted speculating whether to write an activity down.

All Rights Reserved [2014] Beverly Michaelis

Getting Ready for Year End

With all the demands on our time during the holiday season it’s easy to push aside the task of getting records organized for year-end.  But dofilesing so is an absolute necessity – especially for the sole practitioner.  Here is some solid advice from the experts:

If you have any doubt that this is serious business, peruse the Attorneys Audit Technique Guide published by the IRS.

All Rights Reserved – Beverly Michaelis [2013]

Calling all Contract Lawyers: A Must-Attend CLE

Do you provide contract services?  Do you hire contract attorneys?  If so, consider attending this CLE on November 19:

Contract Attorneys: Managing Expectations and Getting Paid
Tuesday, November 19 – 3:00 pm to 5:00 pm
Stoel Rives LLP, 900 SW Fifth Ave., 19th Floor, Portland
Sponsor – Oregon Women Lawyers
Registration $20

Topics include:

  • Nuts and bolts of establishing a relationship
  • Managing expectations for client access
  • Conflict checks
  • Timing of payments and deadlines
  • Determining project rates
  • What to do if it all goes wrong
  • Remedies and potential consequences

Free Law Practice Transition CLE

On November 1, the Oregon State Bar is offering a FREE Law Practice Transition CLE for lawyers who are interested in buying or selling a law practice.  Here is the announcement:

The legal profession is undergoing a demographic shift as baby boomers retire in large numbers and a steady stream of law school grads enter the marketplace. In the meantime, the ratio of new lawyers to entry-level positions has caused many new lawyers to hang out their own shingle when they don’t find employment elsewhere.

To address this issue, a free CLE will be held on Friday, November 1, from 3:00 to 5:00 p.m. at the bar center in Tigard, with a social/networking hour hosted by LawPay immediately following. “Law Practice Transitions: Buying, Selling, or Transferring a Law Practice” is the first in a new series of seminars designed to help lawyers looking to move into our out of an existing practice.

Whether you want to sell or you are looking to start a career (without starting from scratch), this CLE will give you valuable insight into what works and what doesn’t work when it comes to transition planning. Plus, all attendees will receive a coupon code to post a practice for sale on the bar’s online Career Center for FREE!

Thanks to LawPay for graciously hosting the social/networking event immediately following the CLE.

Special thanks to the Oregon New Lawyers Division and the Sole and Small Firm Practice Section for the assistance with this program.

 

Learning the Ropes 2013

Are you new to private practice? Then I have just the ticket for you!

Attend our three day conference – Learning the Ropes: A Practical Skills & Ethics Workshop – for a mere $65.  Attendance at the full program satisfies the MCLE requirements for new admittees’ first reporting period.

Choose from these concurrent sessions:

  • Domestic Relations or Criminal Law
  • Tort Litigation or Estate Planning
  • Civil Motion Practice or Bankruptcy
  • Creating a Firm or Joining a Firm

Can’t decide?  All tracks are recorded for later viewing at no charge.

Plenary sessions include:

  • How to Develop a Successful Practice and Avoid Legal Malpractice
  • Client Communication and Other Practice Management Survival Tips
  • Alternative Dispute Resolution
  • The Ethics of Practice Management
  • Recognizing Child Abuse and Fulfilling Your Duty to Report
  • Negotiation Tips, Tricks, Traps, and Tools
  • Courtroom Do’s and Don’ts
  • Employment Law and Conscientious Communication
  • Bridging the Cultural Gap

Day 1 includes a “Meet the Judges” luncheon.  Day 2 features a networking luncheon with bar leaders and respected practitioners in the fields of Appeals, Criminal Law, Employment Law, Intellectual Property, Business Litigation, Debtor/Creditor Law, Estate Planning, Litigation, Business Transactions, Elder Law, Family Law, and Real Estate.

All meals, including the luncheons, are included in your $65 workshop fee.  The program is at the Oregon Convention Center November 6-8, 2013.  Register here or visit the PLF Web site > Upcoming Seminars (under the heading Loss Prevention – CLE).  Sign up early.  Space is limited!

Copyright 2013 Beverly Michaelis

PayPal: Lawyer’s Friend or Foe?

PayPal is a very tempting credit card processing service with nice extras like Web site integration and online invoicing.  There is no disputing its familiarity or popularity.  But before you jump on the PayPal bandwagon, do your homework

  1. Is it less expensive or more expensive than comparable services
  2. Is the Web interface user-friendly
  3. How long will PayPal hold your funds before disbursement?  (This has been a problem for some users.)  

The solution is to comparison shop.  All banks offer credit card processing, so check with your branch first.  Other options include:

If you prefer processors who cater to the legal profession consider:

To be clear, I had never heard of Lawyer Payments or Atticcus until I ran a Google search.  I’m not aware of any lawyers using these services, so conduct your due diligence – always a good idea when choosing a credit card processor.  Also of note: In 2011 Beacon Processing Solutions appeared to discontinue serving the legal profession, preferring to focus on doctors instead.  I’m happy to say that as of 2012 they are back in the business of offering specific credit card processing solutions for lawyers.

How One Lawyer Does It

Georgia Lawyer Leslie Stewart offers PayPal directly on her Web site with direct links for incremental payments of $200, $300, or $500  [scroll to the bottom of her page].  Clients are told:

“The retainer fee paid via the Internet can be paid by check or credit card.  Both of these require the use of a third party verification service, in this case, PayPal.com.  You must register and provide information to them to ensure that you are the person paying the fee and it is from verifiable funds. 

You are not charged an additional fee for using PayPal.com.  With a payment by electronic check or credit card, lawyer and client both agree that these funds are a prepayment for immediate compensation for the lawyer’s commitment to perform future services, e.g., a flat-fee agreement, the funds are the property of the lawyer and may be deposited in the lawyer’s operating or business account.  PayPal.com will remit payment to this office to be deposited in said account.

If you do not wish to enter into this arrangement, then you are welcome to mail us a check. 

Online payment will take place only after Attorney and Client have entered into an agreement concerning fees.”

Ethical Compliance: Payment Methods are Irrelevant

Make certain any terms you include on your Web site are fully compliant with the Oregon Rules of Professional Conduct.  For example, the above site contradicts itself by initially referring to the fee paid via PayPal as a “retainer fee” then later as a “prepayment for immediate compensation for the lawyer’s commitment to perform future services.”

Make your language clear, simple, and consistent. 

If your intention is to collect a fixed fee earned upon receipt, say so. See Oregon Formal Ethics Opinion 2005-151:  Fee Agreements: Fixed Fees.  A sample fixed fee/earned upon receipt fee agreement is available on the PLF Web site.  [This can be offered as a click-through agreement if desired.]

If the client is remitting a retainer for fees that have not yet been earned, and there is no written earned upon receipt fee agreement, the funds are NOT the property of the lawyer and must be deposited in your IOLTA Account.  See The Top 10 Trust Account Questions: Safekeeping Funds

Remember: the method of payment (cash, check, echeck, wire transfer, credit card) is completely irrelevant.  If the funds are earned by your actions (you did the work and billed the client) or by contract (you have a written, signed earned upon receipt fee agreement) they are yours and should be deposited into your business account. 

If the funds are not yet earned, use your IOLTA account.

Final Thoughts

Read more insightful tips about accepting credit cards in this article from GPSOLO and in this post from the Lawyerist.  For ethical limitations relating to credit card payments, see FAQ About Credit Cards.