Billing Practices and Lawyer Compensation

The new OSB 2017 Economic Survey is available for download. In it, you’ll find a plethora of information about Oregon lawyers, including employment characteristics, compensation, billing practices, career satisfaction, and future plans.  Here are a few highlights:

Employment Characteristics

  • 28.3% of survey respondents reported being a member of at least one other state bar.
  • 86.1% reported working as an Oregon lawyer; 13.9% were not.
  • Lawyers who chose to work part-time did so to maintain work/family balance, pursue other career interests, or because they were semi-retired.
  • Slightly more than 60% of working Oregon lawyers reported being in private practice, with just under 20% in government positions.
  • The most dominant areas of private practice are business/corporate (transactional and litigation), civil litigation (plaintiff and defense), tax/estate planning, family law, and real estate/land use/environmental.
  • The most common practice size was a 1 lawyer office, followed by 3-6 lawyer offices, and 7-20 lawyer offices.

Compensation

  • The statewide mean compensation was $143,277.
  • The amount of compensation was highest in the Portland metro area and lowest on the Oregon coast.
  • The highest paying area of practice was real estate/land use/environmental.
  • Statewide, female lawyers reported earning less than male lawyers.
  • Peak earning years were 50-59, with compensation generally decreasing after age 60.

Billing Practices

  • Statewide, the mean hourly rate was $286, ranging from $226 to $324 regionally. (The highest reported hourly rate was $850 in Portland.)
  • By area of practice, the highest hourly rate was for business/corporate – litigation, with a mean of $333.  Other top billing areas were: real estate/land use/environmental, civil litigation – defendant (excluding insurance defense), and business/corporate – transactional.

Career Satisfaction

  • On a scale of 1-5, with 1 being very dissatisfied and 5 being very satisfied, lawyers statewide had a mean career satisfaction rate of 3.98. In general, the more years in practice, the greater a lawyer’s satisfaction with his/her career.
  • By location, employment, and area of practice, the most satisfied lawyers were:
    • In the Upper Willamette Valley
    • Working as judges or hearing officers
    • Practicing in civil litigation defense, real estate/land use/environmental, or criminal law (private bar).

Future Plans

  • 19.2% of lawyers statewide reported they were planning or contemplating retirement.
  • 6.7% were planning to leave the profession, but not retire.
  • Another 10.3% were planning to reduce their practices.

All Rights Reserved 2018 Beverly Michaelis

 

I Don’t Want to Create a Business Plan!

I get it.  I really do.  They involve work and you’re busy.  And if you’re not trying to sell someone on why they should give you money to start or grow your law practice, why would you bother?

Because, my friends, every once in a while you should be selfish and do something for yourself.

client-meeting-cropped

Six Good Reasons Why Every Lawyer Can Benefit from a Business Plan

Everyone can benefit from the business planning process, especially startups.  But existing businesses need a vision too.  Creating a business plan will give you:

  • Clarity about what you want to do
  • Control over your own fate
  • A strategy for staying organized and on track
  • Accountability
  • A way to measure and monitor your progress
  • A path to help you move forward

For associates in law firms, creating an annual business plan is the only way to build a successful strategy for bringing in business – something all associates are expected to do sooner or later.

For partners, annual business planning is likely to be more about reflection: now that I’m an experienced lawyer with a book of business at XYZ Law Firm what do I want to do? If the answer is: make a lateral move, creating a business plan will likely be required.  If the answer is: something else entirely, then time spent reflecting and planning will help you ferret that out.

Why Lawyers Don’t Write Business Plans

Aside from the obvious excuse that creating a business plan is time consuming, you may also perceive it as too difficult.

But there is an even better reason not to write a business plan.  If you don’t put specific goals and objectives on paper you can’t fail.

Here’s What You’re Really Missing Out On

The problem with avoiding failure is that you also set yourself up not to succeed. And you miss out on the other benefits that go along with creating a business plan.

Create a Direction and Lower Your Stress

When you know what you want to do, where you want to go, and how you’re going to get there (the specific objectives included in your plan), it lowers your stress level. There is no more floundering or misdirection.  Having a plan means you’re back in control.

Doing What You Want to Do For People You Want to Work For Means Reduced Exposure to Liability and Ethics Complaints

There’s a huge difference between practicing door law because you’ve always done it versus purposefully choosing a niche.

The door law route exposes you to greater risk of malpractice claims and ethics complaints.  Keeping up with a few areas of law is hard enough.  Trying to keep up with five or ten is bordering on ridiculous.

Imagine instead that you are working in one area, or a handful of areas, that you know well or can master.  With a focus, you can target clients deliberately and work for a client base that you truly want to represent.

You’ll Also See Gains in Efficiency, Money, and Resources

You are a resource.  Your staff is a resource.  Spend your resources on meaningful, designed goals.  This is what creates efficiency.  And with efficiency you can’t help but save money.  Or at a minimum, experience a better return on your investment.  You know it, you can see it, you can measure it.

Business Plan Checklist and Resources

If I’ve convinced you, contact me.  I’m happy to send along my business plan checklist and a list of resources for creating a plan.  Do what you want to do.  I am.

All Rights Reserved Beverly Michaelis 2017

Setting Your Hourly Rate

Value billing.  The words alone sounded so good in 2000-whatever or 1990-something. But transitioning from concept to reality?  It was never easy and still isn’t.

Keeping it 100

Here’s the reality: everyone who uses flat fees or AFA/hybrid fee arrangements referenced or started with an hourly rate.  That’s the math, folks.  Unless you’re a 100% contingent fee lawyer who never intends to change practice areas, you need to have a sense of how to price your services on an hourly basis.  Here’s how to go about it.

The Anecdotal Approach to Pricing

We could also call this: “If Susan down the street charges $200 per hour, so should I.”

If you’re basing your hourly rate on what one, two, or a handful of other lawyers are charging, your sample group is too small.  Period.

I’m not saying don’t gather anecdotal data.  It can be informative.  Most of us can learn a lot from talking to colleagues or mentors about pricing and billing practices, especially if we’re new to an area.  But anecdotal data needs to be balanced with something more.

Use the Data the Bar Gave You

Every five years the Oregon State Bar conducts an economic survey.  If the bar adheres to its quinquennial pattern, the next survey will occur in 2017.  For now, use the 2012 survey. The important data on billing practices begins on page 29, “Hourly Billing Rate by Total Years Admitted to Practice,” reported by years of practice and geographic region. To use this data effectively, find where you fit based on years admitted to practice and area(s) of law, then scroll over to your region of the state.

Billable Rates by Years of Experience: Lawyers Admitted 0-3 Years

  • In 2012, the lowest hourly rate billed by this group was $113 in the lower valley versus a high of $246 per hour in Portland.
  • Statewide, lawyers admitted 0-3 years billed an average of $156 per hour.
  • While there are a few geographic blips here and there, the data bears out what common sense would predict: the longer you practice, the higher your billable rate.

Next, jump ahead to page 31, “Hourly Billing Rate by Area of Practice.”  Find your area(s) of law, then locate the rates for your region of the state.

Billable Rates by Areas of Law

  • The average hourly billing rates ranged from a low of $190 per hour for civil litigation-insurance defense to a high of $291 for civil litigation-defendant (not including insurance defense).
  • Other statewide average rates were:  Bankruptcy $269, Criminal $214, Family Law $214, Real Estate/Land Use/Environmental $283, Tax/Estate Planning $239.

Keep on Keeping On With the Law of Averages

Once you know the average hourly rate based on years of admission and area(s) of law, tally the rates and take the average again.  Once you know this number, feel free to reflect back on the anecdotal data you gathered.  If your anecdotal data differs wildly from what the survey says, go with the survey.  Use this hourly rate when calculating flat fee and hybrid fee arrangements.

Cultivate Confidence

Some lawyers low ball their rate because they don’t feel they can charge “what the survey says.”  Newer lawyers often fall into this category.  But perspective is everything: if you did the same work as an associate for a firm, rest assured they would bill clients in the average to high ranges documented by the bar.  Why, intrinsically, should your rate as a solo be any lower?

Nonetheless, part of the process of setting your rate is finding a comfort zone for what you charge.  If you can’t quite stomach the average and need to take it down a tick or two, I respect that decision [even though I may try to talk you out of it].

Either way, you must be able to face potential clients and communicate your rate in a matter-of-fact, businesslike, manner – with confidence and without hesitation.

[All Rights Reserved 2016 Beverly Michaelis]