When you (eventually) buy malpractice insurance, you’ll be asked to name a ‘backup attorney’. Most lawyers will put down the name of a colleague without even asking that colleague about it, just to complete the form. It’s not malicious — the lawyers who do that just have no intention of using that person to cover for them when they’re not available. That’s a mistake. Formally anointing a backup attorney — telling that person about it, and creating an agreement — can be essential for small firm managers, on a number of levels. If you’re a solo, having a backup attorney offers your clients some comfort, in case anything happens to you — not to mention a similar level of comfort it will provide your family, none of whom want to wind down your law practice, if you can’t. Having a backup attorney forces you to document your policies and your law firm access points. Last, but certainly not least: engaging a backup attorney means you can finally go on vacation again.
I don’t know about you, but I went to law school so I wouldn’t have to do math. Most lawyers hate math; and, that extends to various areas of law practice management. Lawyers don’t want to put together budgets. Lawyers don’t want to learn accounting. Lawyers don’t want to project revenue. Heck, lawyers don’t even really want to know who owes them money! Now, while that ostrich-style strategy may seem comforting in the short-term, in the long-term, it will short-circuit a budding practice. And, there is no surer way to lose money than to avoid paying attention to it. So, as a start-up law firm manager, take the time to understand the basics of accounting practices — like the difference between cash and accrual basis, and what accounts receivable are. The important thing to remember about law firm finances is that they’re your responsibility and that you won’t be able to provide effective oversight if you don’t have a formal understanding of your law firm’s financial operations.
Start your financial management crash course by gaining a handle on what trust accounting is and what three-way reconciliation means. Whatever your state’s policy on maintaining effective IOLTA account management (from depending on bank and client notifications to mandated audits), there is no surer way for an attorney to get into hot water than by mismanaging client funds. It’s one of the easiest places for investigators to discover and prove misappropriation and malfeasance, which is why it’s such a focus for ethics agencies. The thing is, though, that it’s relatively simple and straightforward to remain in compliance. By regularly reviewing your check register, bank statement and client ledger (the balances all have to be equal) and memorializing that review via a worksheet — or (preferably) software — which you can then show to official parties that inquire, it’s pretty easy to keep your nose clean. Now, one of the first things you should hand off to a vendor, when you have the money to do so, is accounting, including trust accounting; but, since compliance is so important to maintaining a ding-free license to practice, the reconciliation process is something you should understand intimately before overseeing someone else’s version of it.
The rise of social media and in-app search on smartphones have combined to take some off the shine off of search engine optimization; but, that doesn’t mean you should abandon your website. Even if clients aren’t going to be finding you as often exclusively via search engines, having a modern, mobile-friendly website is essential even for word-of-mouth referrals who just want to check to make sure that you’re running a viable business and/ or have spent a significant-enough amount of time developing a formal web presence. Without a viable website, you won’t look like a reputable business — especially as a new solo or small firm that’s arisen from some primordial swamp or other. If you build your own website, it’s going to involve more time than you’d care to spend, and more frustration than you’d care to encounter — not to mention the fact that you won’t update it as times passes, which means your new website will become stagnant, in a hurry. Your website is perhaps the most important outward-facing aspect of your brand; and, it should be a testament to your professionalism. To that end, you should not ask your kid, or your cousin, or your garbageman to build your website for you, just as you wouldn’t ask those people to be your accountant. Hire a professional to design a website that is unique to you, and that resonates with your clients, and begin the long, steady process of establishing your law firm’s online footprint.
One of the surest-fire ways to accomplish law firm growth is by adding staff and taking advantage of economies of scale. It sounds simple enough: once you’re making enough money to pay someone a reasonable wage, you go out and hire the perfect candidate and live happily ever after. The only problem with that fairy tale is that it very rarely holds in real life. An excellent paralegal can be more valuable than an excellent attorney; and, there can be stiff competition for those professionals, especially in and just outside of urban areas. It’s not even a matter of throwing money at people; in many cases, legal support will appreciate larger firm environments, and the perceived stability of those entities. And, that psychological component doesn’t even begin to address one of the primary concerns of job-filling: drafting and publishing a compelling posting. The dirty little secret of small firm law practice is that most support staff and support attorney positions are filled behind the scenes, based on referrals and direct contacts that have been established for years. In other words: Start looking for your next hire now!
Almost universally, new attorneys starting law firms bill out at $150/hour. That’s what you were thinking, too — right? But, why have you decided to settle on that number, or something close to it? It’s likely because a more experienced attorney that you trust told you to do that. However, that bare number has no actual relation to the practice you want to build. Neither does $200/hour, or even $300/hour, for that matter. Unless you’ve figured out your overhead, and created some revenue projections, you’ll have little to no idea what you need to make, or what you want to make. Neither should you blindly choose to bill by the hour. With hourly billing, you’re capped by the number of hours you can work during any week. Why would you cap your income in such an aggressive way, especially when you’re starting out? Instead, consider value bulling or flat fee billing. If you set the value correctly, it can be a win-win for you, and for the consumer. If building an estate plan takes your three hours, and you decide to bill at the $150/hour rate, you’re getting $450. Maybe you get quicker over time; so, do you then reduce your rate because it takes less time to produce your product? No way. Establish a value billing plan from the outset. Focus on producing quality work. And adjust the value upward over time, as market factors allow. In that way, you detach your value from the clock and attach it to quality. You may get soaked sometimes when you’re setting that value — if you’re off on the calculation, you might lose money starting out — but, in the end, value billing is the best method for capturing what an attorney does at her highest level of work, and can be more effectively adjusted as your firm builds momentum.