The Small-Firm Lawyer Considers Big Ideas

Volume 39 Number 4

By

About the Author

Jim Calloway is director of the Oklahoma Bar Association Management Assistance Program. He publishes the blog Jim Calloway’s Law Practice Tips (jimcalloway.typepad.com) and also produces, with Sharon D. Nelson, the monthly podcast, The Digital Edge: Lawyers and Technology. His Twitter handle is @jimcalloway.

Law Practice Magazine | July/August 2013 | The Big Ideas Issue

IT MIGHT BE EASY for solo or small-firm lawyers to read some of the articles in this Big Ideas Issue of Law Practice and think that the stories of megatrends in the legal profession and challenges to larger law firms do not really apply to them. Even if small-firm lawyers agree that systemic change is happening throughout the legal profession, they may think they can do little about those broad-based trends.

But small-firm lawyers can adjust their practices in many ways. Actually, the small-firm lawyer is better positioned to respond to changes than are larger institutions. You avoid a great deal of bureaucracy, partnership committee meetings and institutional lethargy when you decide to change direction. Or if you need a technological upgrade, you can buy it in units of one or two, instead of hundreds.

You may have gone to law school to learn to think like a lawyer, but to succeed as a small or solo firm lawyer in the future, you have to spend significant time thinking like an entrepreneur.

You may yearn to just practice law. But very few solo or small-firm lawyers now have the luxury of only doing that. Lawyers who just practice law can only be found in firms large enough to have their administration and business direction handled by paid administrators or managing partners who do not practice law full time. And even those lucky lawyers are periodically questioned about what new clients they have generated for the firm.

So the bumper sticker takeaway from all of these big ideas for the small-firm lawyer is, “Think Like an Entrepreneur!”

Let’s look at some big ideas from a small-firm perspective.

OUTSOURCING

A small-firm lawyer seems an unlikely person to consider outsourcing. You probably enjoy doing your own research and cannot imagine sending it off to be handled by a lawyer in a foreign country, as some in larger firms have been doing.

But many lawyers have lost valuable staffers who decided that full-time employment was not possible because of the demands of raising a family or taking care of an ill relative. Replacing them was probably a challenge. Think of that bankruptcy paralegal who knew how to complete bankruptcy schedules as well as you can. She knew the law and the possible concerns of the trustee. She would bring potential problems to your attention and, if there were none, have the completed schedules ready for your review and signature. She hated to leave, but her family needs came first.

An entrepreneur considers options and alternatives. Should you have kept her on as a “virtual” paralegal? She may well have been happy to work part time on her own schedule. Perhaps you could pay her a flat fee per bankruptcy so she didn’t have to keep track of time or give you detailed statements. Consider retaining this competent person on your team, even if in a different role.

Many small-firm lawyers are using virtual reception services. Some use contract paralegals for other tasks. Even if lawyers don’t use a virtual reception service full time, it can be great for the lunch hour or those times when everyone at the office is working on projects with impending deadlines, especially when the reception service can be instructed to put through only the outside callers involved with those projects.

Most lawyers prefer to have an assistant on the premises. But an employee must be paid without fail on payday. Virtual assistant services can be used frequently when there is a lot of work and less often when things are slower. This provides more flexibility with your overhead and smooths out the feast or famine cycles that challenge smaller practices.

PRACTICE FOCUS

Being an entrepreneur means constantly reviewing your operations and thinking of ways they can be improved.

An analysis of a law practice often reveals some part of the practice that is less profitable than the others. Maybe it’s an area the lawyer has handled for years that has just become less profitable generally. What to do? The professional advisors, armed with their self-help books, seminars and websites, will no doubt have answers for you. Invoke the 80/20 rule, and get rid of the least profitable 20 percent of your practice. Or grade your clients, and get rid of those grade-C clients so you can focus on the A and B clients. But in the real world, dropping a practice area is problematic when you are very competent and comfortable with it. Frequently, it’s not as stressful as other parts of your practice, and it sometimes leads to other more profitable work. With so much future instability, is it a good plan to give up regular, steady work? It certainly could be so, which is why many experts direct you to focus on your best, most profitable work.

What’s the right decision for your firm? This situation, combined with an empty office in your suite, might mean that it’s time to think of hiring an associate lawyer. Maybe he or she would accept a low guaranteed salary, with additional flat fees for completing each project in this area. The senior lawyer’s expertise in handling these matters, along with an eager young lawyer hustling to increase that practice area because of financial incentives, may grow that lagging practice area or at least pay for much of the cost of the associate, who can then do billable work for the firm on other matters.

ALTERNATIVE MODELS

Suppose a lawyer or firm does decide to shut down a practice area. It’s either been determined to be unprofitable or perhaps it’s just too much aggravation. But the lawyer or firm has a lot of valuable knowledge that will slowly grow stale. The entrepreneur does not easily abandon that knowledge base without some thought of how it can be used for profit.

A lawyer leaving family law practice could move into mediation of family law cases. Or maybe the local law school needs an adjunct professor to teach a class on the subject.

A lawyer who writes very well might decide to write a book for consumers about navigating a particular area of the law. You can sell e-books on Amazon or by means of your own law firm website, as a downloadable PDF. If the lawyer knows a local printer, perhaps he or she can investigate the cost to print 100 copies and test the market. Local lawyers might well pay a decent fee to get copies of a book on surviving a divorce or thriving in one’s first year of business to give to each of their new clients.

You might consider virtual practice for uncontested matters in this area. Free consultations are no longer a good idea because you do not seek the business, but 30-minute paid Skype advice sessions might be popular. You can tell the caller what you think of his or her claim and its chances (but keep a recording of the conversation to prove you said nothing wrong, in case you are challenged later).

GENERAL PRACTICE

Many small-town lawyers, and some in urban areas, say they operate a “general” practice. What does that mean? Normally it means that the lawyer will talk to anyone about his or her legal problems and try to handle them. And if your practice is in a very small community, you may do a little of everything.

Yet typically these local lawyers know that they would hire one particular lawyer for a family law case and another for defending criminal charges. There are usually only a couple of real estate gurus in town, and so forth. Most general practitioners refer a lot of matters to other lawyers.

So being purposeful about referrals is important. The first goal is to make certain the clients have competent advice and representation. But you also have a law practice to operate. Understand well the rules about referral fees and co-counsel fees so that you miss no opportunity. When I was in private practice, I did a lot of consumer bankruptcy work, including Chapter 13 filings. I knew several lawyers who only did “easy” Chapter 7 filings. Informal arrangements soon evolved, and ultimately several lawyers referred all of their Chapter 13 and complex Chapter 7s to me. I didn’t pay them a referral fee, but in return I offered them the opportunity to consult me at no charge when their “easy” Chapter 7 cases ran into rough waters.

CLOSING THOUGHTS

In conclusion, let’s summarize a few ideas:

  1. Think like an entrepreneur.
  2. What can you automate? What can you delegate? How do those changes impact the way clients are billed?
  3. Examine risk and reward in your practice areas. Billing practices are very important. A standard hourly rate may not reflect that some work is low risk/low value while other work is extremely high value.
  4. Have a strategy on referral fees and co-counsel fees, and then run it by your bar association’s ethics counsel or other local expert to make certain it complies with legal ethics rules in your jurisdiction.

Precedent is great for determining legal issues, but innovtion is today’s watchword for successful business operations. How you used to do it may no longer be relevant.

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