September 18, 2012 Practice Points

Is It Smart to Lower Overhead to Lower Fees?

By Cindy Albracht-Crogan

Many solo and small-firm practitioners have had success in lowering fees and increasing business by lowering their overhead. Although there are many benefits to reducing overhead expenses, San Francisco small-firm practitioner Tom Wallerstein cautions lawyers to consider the risks in cutting overhead costs.

For example, many lawyers have abandoned the traditional office to work from a virtual office in their homes. While this is cost-effective, a physical office can provide credibility for clients, motivate the lawyer, and keep the lawyer focused on work. In addition, cutting payroll should be carefully evaluated. One thing to consider is whether the employee performs billable work. Employing someone who bills will increase profits, provided the firm is generating sufficient work to keep the employee occupied. Thus, Wallerstein advises that "keeping overhead low by hiring fewer associates makes little sense."

Also, careful consideration is required when deciding which nonbilling employees to eliminate. For example, a younger associate may need less assistance from a secretary than a senior partner who still dictates memos. Nevertheless, attorneys should not be spending otherwise billable hours copying invoices, stuffing envelopes, and formatting briefs. Administrative assistance, when streamlined, can be invaluable to a law practice and set the stage for future growth.

Cutting overhead costs is smart when the economics call for it. But, if you can afford it, don't skimp on the essentials.

Keywords: litigation, solo practitioners, small firms, cutting costs, overhead

Cindy Albracht-Crogan is with Cohen, Kennedy, Dowd & Quigley in Phoenix, Arizona.

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