September 01, 2021 The Finance Issue

Virtual Practice: Lower Overhead and Other Benefits Could Become New Normal

Will brick-and-mortar law firms abandon pandemic-forced changes or transition to a more virtual work environment?

Laura O'Bryan
What does it cost to run that law firm with the goal of being profitable and happy with your work and personal life?

What does it cost to run that law firm with the goal of being profitable and happy with your work and personal life?

via Studio Marble / iStock / Getty Images Plus

COVID-19 changed our seemingly never-changing legal industry. This is an undeniable fact. I’ve often said that we are the “walk uphill both ways in the snow” industry—thinking that the way it has always been done is the way it has to be done now and forevermore. Even though some like to think these pandemic-related, forced changes are here to stay, that’s not the case in many jurisdictions. Attorneys and law firms are chomping at the bit to go “back to normal.” In this article, we will assume that “normal” means fully staffed, brick-and- mortar offices and in-person client meetings. Now, a lot of this depends on the geographical location where you practice law. Things may be different in San Francisco than they are in Chicago, Atlanta or rural parts of every state. I live in Little Rock, Arkansas, which is a typical biggest, but still small, city in a small state. Here, many firms went back to their offices in summer or fall of last year. But why? Perhaps it is because that’s the way they’ve always operated. Did they learn nothing about the convenience and affordability of a virtual work environment?

Let’s talk about a lawyer’s favorite subject: money. For attorneys who have an ownership stake in their law firm, have founded and/or own a law firm, or are contemplating hanging the proverbial shingle, money is at the forefront of their minds. Specifically, what does it cost to run that law firm with the goal of being profitable and happy with your work and personal life? What are the advantages of a virtual workspace versus a traditional brick-and-mortar?

Why Me?

I was contacted about this subject because I’m the co-founder and chief operating officer of a successful virtual law firm and virtual attorney consulting business that have been in operation for over six and two years, respectively. However, there is more to my experience that lends to the practical ability to speak on the topic of firm overhead in brick-and-mortar spaces along with a fully virtual firm. I started my career in 2002 contracting for a two-attorney traditional firm located in a converted haunted house in a bad neighborhood of Little Rock. And yes, it was truly haunted and creepy to be stuck in there alone with paper shredders randomly going off and spirits running down the attic stairs. Seriously, that happened. Have I lost you yet?

I then moved to an associate position in a fancy office downtown, working for a traditional litigation law firm, before starting at Thomson Reuters, West, where I worked for almost 12 years. Except for a two-year stint in cubicle world, I was a home-based, remote employee working with law firms and government agencies in Arkansas, Oklahoma, Louisiana, Texas, New Mexico and finally Chicago and the entire state of Illinois. As a vendor, sales rep and account manager for Thomson Reuters, I worked with lawyers and law firms on their internal budgets so they could buy more of the company’s products. I saw the ins and outs of budgets for all sized law firms from solo to large law, where many of the issues we will discuss here remain the same despite the varying geographies.

When I left Thomson Reuters, I had lofty goals to move back home and help people. I consulted and worked with a start-up, low-fee, limited scope representation, brick-and-mortar law firm before starting my own domestic violence family law firm where I worked from home and met clients either at shelters or a classmate’s conference room. This was all before I met my partner in 2017 and joined the wonderfully freeing world of virtual lawyering, where I’ve happily been ever since. The gist here is that I’ve had a fairly unique career path, working in many different legal environments, and have seen more than my fair share of law firm budgets. In this article, we’ll focus on the individual needs and overlap of traditional and virtual spaces.

Overhead

A traditional, brick-and-mortar law firm will inherently have higher overhead needs than a firm with virtual or digital space. Unless you’re the one paying the bills or setting the budgets, you may not even realize how many line-item costs go in to having a physical space.

Rent or mortgage is often the highest overhead spend of a traditional law firm. Commercial leasing is typically long term—10 to 15 years—with annual increases built in; and because it’s difficult to move an office, law firms have been happy to lock in and pay these prices. However, along with rent of a physical office, there are costs like office furniture and decor, utilities, office supplies, insurance for property damage and potential injuries on-site, ADA compliance needs, beverages or snacks and cleaning services. My partner loves it when I tell stories about visiting law firms in various cities and how I would strike up conversations with the contractors who were hired to water plants. The clients are paying so that you can outsource the watering of your plants? Those lawyers believed they had to make everything look pretty and inviting so that people would want to pay their high billable fees!

A virtual law firm is one that operates and delivers services to its clients in an entirely virtual environment. Because virtual is mobile, a physical office space is not necessary, and therefore many of the highest overhead expenditures of a traditional practice are not applicable. The top three overhead costs for a virtual practice are, in order, payroll, marketing and technology (hardware and software).

Payroll is payroll no matter what type of setup you have. However, in a virtual work environment, attorneys are embracing outsourcing and virtual contractors at a higher rate than traditional brick-and-mortar spaces. Outsourcing lends itself to 1099 contractors or lower-cost virtual employees with the convenience of remote work and not requiring employee benefits overhead like insurance. For example, my virtual law firm has only two employees—the two attorneys who are also the firm’s partners. That’s it. We contract out to vendors and individual people for reception, administrative work, automation assistance, paralegal drafting and marketing.

Marketing is a large overhead budget line item for all law firms, but it’s necessarily one of the top two for a virtual firm. You have to let people know who you are in a different way than a traditional law firm can with its name on a building marquee. Your potential clients are going to find and work with you entirely online, so you need to have a prominent presence that can be found and that is easy to digest and navigate for the average consumer.

Software is the bread and butter of a virtual practice. You cannot function as a virtual law firm without embracing cloud-based technology to internally organize and communicate with clients. These services can be available for less than a couple hundred dollars per month per person.

The client portal is the foundation of your software as a virtual attorney. All communications with clients, including document sharing, center here. Many practice management systems have a client portal built in, yet, inevitably, when I speak on virtual lawyering at in-person events, attorneys tell me they have never used this amazing tool. The client portal is the safest and most effective way to securely communicate with clients and force internal organization by taking out the hackable email and often annoying and drawn-out phone conversations. By having a good communications policy in place that is transparently laid out to clients, you can streamline your successful, virtual practice using this as your exclusive communication tool.

Along with the client portal, a virtual attorney greatly benefits from software like:

  • Chatbots
  • Virtual reception
  • Cloud calendaring/booking tool
  • Cloud payment tool
  • Automation tools for drafting
  • Contract building and analyzing tools

Shared types of overhead expenses for all configurations of law firms include payroll, marketing, malpractice insurance, hardware, technology and software, attorney licensing, CLE and travel.

Lessons Learned

One of the biggest lessons we have learned in creating a virtual law firm is not to try too many things at once. That can be crushing to development, success and mental health. When we started in 2015, there weren’t as many options for cloud-based tools that fit the type of practice we wanted to design. Inevitably, as more and more software was created and released, we tried it all—or at least it seemed like it. Now, we have a good fit with two major tools: one for all client communication from pre-hire to close and the other for document automation. We continue to test out new products but don’t waste time on things that either don’t work with our current workflow or don’t offer an improvement to the way we operate.

A common problem with all firms is marketing, and we have had our fair share. When my partner created our virtual practice, she sat down with a storyboard for ideal clients that would fit our services. We still use that today, with some tweaks, in all our marketing efforts.

We also learned that many marketing agencies overpromise and underdeliver. When we severed ways with an agency in 2018, my partner took on all marketing to learn the ins and outs so that when we outsourced again, which we have, we’d have a better idea of what questions to ask, how to direct the efforts and how to read reports to see how our money was being used.

In 2018, we also created a separate business called MVL for Attorneys so that lawyers who wanted to add a virtual, hybrid component to their practice or create a virtual firm from scratch could do so without reinventing the wheel. The brand has become a collection of virtual law firms in the United States that focuses on sharing within the community trials and errors along with successes and solutions. We’ve had lawyers who want to add a new, virtual practice area to an existing brick-and-mortar firm, lawyers coming back to practicing after raising children and others who wanted to leave a high-pressure larger law firm environment to find a better work/life balance to have time for themselves and their families. One of our success stories is in her second year of virtual firm ownership after leaving a long-term, medium law partner position for a better life.

At MVL, personal happiness and mental well-being is at the forefront of everything we do, and creating a successful, virtual working environment has allowed us to thrive. Whether you’re a single parent primarily responsible for caretaking, a parent in general, like to travel, have a chronic illness or just generally don’t want to work 50 to 80 hours a week, a customized, virtual practice has allowed us all to map our lives for living versus working.

What Does This Mean?

Not everyone will be able to go fully virtual as we have, but there are options out there for hybrid workspaces and ways to incorporate virtual practice into an aspect of your firm. Law Practice has a plethora (still a favorite word I learned from Three Amigos) of archived articles that address the emerging virtual law firm option. Also check out the 2020 ABA Profile of the Legal Profession and Clio’s 2020 Legal Trends Report, both of which shed light on where the profession is moving. Take it from this six-year veteran of this “new” concept. It’s worth exploring!

Laura O'Bryan

Co-Owner

Laura O’Bryan is the co-owner and operations director for MyVirtual.Lawyer and O’Bryan & Moore, the flagship MVL Partner law firm located in Arkansas. laura@myvirtual.lawyer

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