It is an unfortunate fact that although you love the law, you do have to spend a lot of time and suffer a great deal of anxiety around getting paid. It can destroy your enthusiasm for practice and is a cause of client complaint. Fortunately, if you are responsible for ensuring that salaries and overheads are paid every month, there are practical things you can do to minimize the time and anxiety surrounding getting paid. Here is a checklist: Provide your clients with flexible and easy payment options – online, BPAY, credit card, DEFT. The more options you provide, the quicker you will collect.
Tips to avoid losing profit:
• Get a trust funds deposit before you start work – every time
• Set a trust funds retainer limit – and regularly and routinely get it topped up
• Set fee and cost estimates and know when you are approaching the limits
• Always provide a good fee agreement, and keep your client informed if circumstances change
• Keep a close eye on debtors and unbilled WIP and disbursements
• Monitor all employed attorneys closely – their concerns differ from yours
• Produce regular bills for smaller amounts (as you know, a big bill at the end of a case will create an unhappy client and an inevitable dispute. Regular bills for small amounts eliminate this hazard of practice)
• Ensure that every bill is in plain English and easily understood
• Apply your own payments terms with discipline (stop work if you are not properly instructed)
Challenge 2 – Increased Competition
The number of law firms is set to grow at 3.6% per annum over the next five years. The United States population is only growing at 1.5% per annum. This means increased competition and increased pressure on charge out rates. Fortunately, you can do something about this. You can compete more effectively and hold up your value in the market.
How to beat the competition:
• Lower your cost base by doing more work with fewer people – this gives you the flexibility to lower your rates but retain your profit margin
• Minimize non-productive administrative time by automating as much data processing and bookkeeping as possible
• Respond to your client’s questions when the client calls because you have all information about each matter in one place
• Work more efficiently – clients notice promptness, particularly when expecting a document or email
• Provide a broader range of services and cross-sell effectively – stop referring work away
• Attract new clients with a great Google optimized website (most small firms don’t have one)
• Bill regularly for smaller amounts
Challenge 3 – The Skills Shortage
The other major issue is that it is no longer fashionable to become a bookkeeper or legal secretary. In rural and regional areas firms are finding it very difficult to even find lawyers. But you can respond to this threat in a structural way – put systems in place that enable you to do more work in more areas of law, but with fewer people.
How to avoid skills shortage:
• Attract the best staff by providing the best and most widely used software systems
• Train and empower your staff to provide more paralegal assistance so that they earn fees for you and have more rewarding careers
• Do more work with the same number of people using productivity-boosting software
• Enjoy higher profit margins so you can attract and employ the best because you can pay higher wages than your competitors
Challenge 4 – Dependence on Real Estate
Most small law firms provide a full service. It is a luxury to be able to specialize. A healthy small law firm needs a broad range of revenue sources to provide structural financial resilience. By choosing a range of common practice areas, the worst consequences of downturn in the economic cycle can be avoided. And you will have a stronger business.
How to not depend on Real Estate:
• Practice confidently in more areas of law
• Use proven pre-configured case documents to capture all the information you need to run the case
• Have all the legal forms in all common areas of practice automated and available at your finger-tips
THREAT 5 – Communication Breakdowns
When you are running a small law firm and are almost certainly the main fee earner, you always put urgent client interests first. So, the busier you are, the easier it is to overlook routine communication, conduct regular file reviews and keep your clients informed. This can get you into trouble. In fact, 40% of the complaints against attorneys are related to communication breakdowns. You can avoid being complained about.
How to enhance your communication:
• Use an electronic system to keep all information, incoming and outgoing correspondence including emails, and other documents in one place – impress your clients with your ability to respond when they call
• Make fast, contemporaneous notes in timesheets, so that you have an irrefutable audit trail of all client and case conversations
• Have standard templates and emails setup so that you spend minimal time on routine reports to clients
• Set critical dates so that you don’t miss anything that you will need to explain to a client
• Create workflows to prompt you to create important documents at the right time
• Have good client engagement letter in all the areas of law you practice
• Bill regularly using concurrent note records – many allegations of communication breakdown relate to disputes over money
The challenges for small law firms are many. With these steps, you can overcome them. For more information, visit www.leap.us.