April 2003  Volume 29, Issue 3
April 2003 Issue
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Your Future: Chair's Message
Show Me The Money
"My advice from the client side is that you, too, should be thinking about costs. While these may be pass-through items to you, many of us clients are looking for ways to cut legal fees-and expenses add up."
 

The other day I received an overnight package from our lawyer. Pulling the zip strip, I wondered what might be in the envelope. To my surprise, all it contained was a federal trademark certificate showing that the CaseShare slogan I had cooked up one morning in the shower-"Better than paper!"-was now federally registered.

Although this was good news, my temperature started rising as I thought about the method of delivery: "Why in the heck did she overnight that document?" Even worse, my next thought: "Is she going to charge me 15 bucks for the privilege?" Steam started coming out my ears as I pondered being billed for something that could have been sent by pony express or even wagon train. Does anybody use regular mail anymore? Does my lawyer care how hard we are working here just to make a buck?

I suspect that she does care but she didn't give the issue much thought when she told her secretary to overnight the package. Few lawyers do, probably because they pass on these costs to their clients. In contrast, clients spend much of their day thinking about costs. Indeed, the first requirement for a successful business is to control costs. As most of us learned the hard way in business, every dollar saved brings a dollar of profit to the bottom line. And vice versa.

My advice from the client side is that you, too, should be thinking about costs. While these may be pass-through items to you, many of us clients are looking for ways to cut legal fees-and expenses add up. More to the point, how you spend our money says something about how you value us as clients. And this isn't just about mailing routine documents. When is the last time you sat down with your vendors to negotiate a better deal on these pass-through expenses? How many litigation groups negotiate volume discounts on court reporter fees, which clients end up paying? How many large firms secure travel and hotel discounts for client travel?

But thinking about costs goes way beyond mundane items like those. What does it cost you to provide that contract? How much will that trial add up to? What will you charge for that TRO or divorce proceeding? More to the point, what kind of profit are you making on any of these services? If you don't know that, how can you decide what to charge me?

These are the kinds of questions businesspeople regularly ask and constantly monitor. On a fixed-fee contract, you care passionately about what it costs to provide your services and how efficiently you provide them. You have to because your clients expect a price up front and expect you to live by that price. Ultimately, your business's profits depend on how efficient you are and how creative you can be in finding better ways to deliver your services.

Why Not Innovate to Greater Revenues?
Law firms have reasons to think about these kinds of issues, too. Granted, in the billable world the whole trick is to ensure the hourly rate exceeds the hourly wage you pay those associates, which seems simple enough. But there are lawyers out there who are looking at innovative ways to charge for their services. And they are being rewarded with more business and happier clients.

Mark Tamminga, a partner in the Ontario firm of Gowling Lafleur and Henderson (and an LPM active), doesn't handle any of his mortgage work on an hourly basis. Rather, he has assembled a team of four partners, two associates and thirty paralegals and clerks to handle thousands of matters for his clients. All on a fixed-fee basis. Ask him about costs and he can tell you to the penny, every day. After all, a slow associate or paralegal doesn't translate to greater revenues for Mark. Just the opposite.

Once you move off the billable hour, you also will have to start thinking about costs. Even better, you'll get to start thinking about innovation. Mark designed an elaborate work flow system that keeps track of matters, generates documents and keeps the client informed, almost without human intervention. Charging by the hour, this would be a bad thing. How would you recapture development costs? Or the lost billables? On a flat-fee basis, this is a great thing. Better profits and better service to your clients.

Innovators are usually the ones who succeed in the business world, often reaping great rewards. It can work that way in the legal world as well, for those willing to step off the beaten path. Law firm finance represents a great opportunity to innovate, not just the humdrum of collecting receivables. The rewards will come from happy clients and the buzz they generate. And yes, I promise. If you innovate, I will show you the money, too.


John C. Tredennick, Jr. ( jtredennick@caseshare.com) is a partner at Holland & Hart and CEO of CaseShare Systems, an Internet company building paperless systems for the legal and business communities.