THIS MONTH LAW PRACTICE IS INTERVIEWING TOM BOLT (TB), managing attorney of BoltNagi PC, a full-service business law firm on St. Thomas, U.S. Virgin Islands. Tom is vice chair of the ABA Law Practice Division (LP) and chair of LP’s Member Development Committee.
LP: Tom, thanks for answering a few questions about law firm finance for our readers. Please describe systems of accountability you have successfully employed in your firm in the area of time and billing—such as those to encourage timely and accurate recording of billable time and monthly billing.
TB: The first word in law firm accountability is transparency—the ability to know that all attorneys in the firm, both partners and associates, are on the same page. At BoltNagi we have facilitated this by developing a system of accounts and regular reports. Each week our attorneys receive a listing of their weekly, monthly and year-to-date time and billing. They have access to various graphs and reports on demand, noting their time and billing entries, as well as those of other attorneys in the firm, and are given the flexibility to develop their own reports to address their needs as well as those of their respective clients. In addition, we have a series of event-driven email notifications to alert our attorneys to past-due accounts receivable, aged work in progress, late time entry and client payments.
While we have implemented a weekly due date policy for time entry, encouraging attorneys to regularly enter their billable time continues to be a perennial challenge for many firms, including ours. Law practice leaders in the ABA LP have consistently stated that when time is not entered contemporaneously with the work performed, attorneys lose more than 30 percent of their billable time. Recording time upon completion of a task is the best way to capture billing and ensure accuracy. When faced with having to reconstruct their day, week or month of work after the fact, attorneys find it quite challenging and often continue to postpone the inevitable. This procrastination leads to generalizing the amount of time and the exact work completed on behalf of clients. To facilitate this reconstruction, we routinely encourage attorneys to review their email, phone logs and appointments to re-create their day.
LP: What process do you use in your firm to establish meaningful and realistic financial goals for associates and shareholders? How do you hold the members of the firm to these goals?
TB: In establishing and attaining any goal, it’s critical to develop a plan of action. I have always advocated strategic planning for law firms, as with any organization that has a stated mission. We implemented an annual firm retreat early in the firm’s formative years that we continue today, during which we review the past year and map our goals and objectives on a firm-wide basis.
As managing attorney I also work with each attorney to develop his or her own annual practice plan, which melds career aspirations, long- and short-term goals, technical capabilities and skills with the needs of the firm and our clients. An essential element to any credible practice plan is an investment in and budget for marketing to support firm business growth. We also produce a profitability analysis by attorney, practice group and client. These tools allow the firm to set realistic financial goals that are measured as we regularly consider promotions, salaries and bonuses.
LP: What types of alternative billing systems have you found most effective for your firm? How have you been able to implement these systems in your firm?
TB: After reading Winning Alternatives to the Billable Hour: Strategies that Work by Mark Robertson and Jim Calloway, I was convinced that there had to be a better way than traditional hourly billing. Clients have demanded it, and today’s market simply does not support hourly billing.
We began to explore value-based billing, which required an open discussion and collaboration with our clients. Variations on the billable hour through fixed- or flat-fee billing, monthly retainer arrangements and other forms of “alternative billing” are no longer merely isolated experiences. They are becoming increasingly more commonplace.
At BoltNagi we have found that fixed fees work well for our clients, particularly in our transactional practice groups with corporate work, residential real estate and government relations. Under the fixed-fee arrangement we meet with our clients and agree upon the fees to be paid. Our clients prefer this arrangement as they can budget their legal fees. If there has been one consistent frustration that we consistently hear from our business clients, it is the need to budget their legal dollars. If they can anticipate the cost of almost every other facet of their business, why not legal fees?
To implement alternative-fee billing and maintain or increase the level of profitability, it is incumbent upon management to review the organization and management of each of the firm’s practice areas to ensure that the delivery of quality legal services for value is provided in a timely, efficient and cost-effective manner.
LP: How do you handle slow-paying clients and difficult collections? Have you adopted intake procedures in the firm that have reduced the number of slow-paying clients you have to deal with?
TB: We manage client expectations. We work with clients from the outset to develop realistic budgets for the anticipated legal services. Clients appreciate the adage “the best surprise is no surprise.” We attempt to spell out terms in our engagement letters to reduce surprises: Our scope of work, minimum billing increments, fee payment deadlines and specifics on the advancement of costs are several of the aspects of the attorney-client relationship we include. The financial expectations of both the client and the firm are detailed in our engagement letters, and working with clients we routinely adjust retainers to reflect the work anticipated.
As to client intake, we have refined the process. At an ABA LP CLE some years ago, I learned of the Pareto Principle—that is, approximately 80 percent of a firm’s revenue comes from 20 percent of its clients. We took this to heart and began to identify the common denominators in those 20 percent of our clients. Today we say that our firm’s focus is on business, particularly with Fortune 1000 companies that maintain a presence in the U.S. Virgin Islands. This has allowed us to target our marketing to our most profitable client base.
LP: Finally, you credit the success of your firm in part to your long-standing partnership with the ABA LP. What advice do you have for our readers?
TB: Join LP. Although I began working in a family law firm during high school, I was ill prepared to “hang my shingle” when I entered private practice. I was active in our territorial bar association and honored to be elected as its first representative to the ABA House of Delegates. Faced with going solo, I “partnered” with LP, attending its CLEs and reading its various publications, including Law Practice magazine. But the greatest value I discovered was the ability to network with internationally renowned law firm practice leaders. Within months of opening my doors, I hired my first associate. Today we have eight attorneys in the firm and one of the most successful law firms in the Caribbean. This was due in no small part to my partnership with LP. I continue to advocate to all attorneys, whatever their practice setting may be, the tremendous value of LP membership.