Welcome to the December 2003 edition of our newsletter.
As I travel
around the country working with or addressing groups of lawyers and practice
managers it is an unusual day if I don’t get asked by someone what trends I am
noticing in the Profession.
I am not going to
try to give a comprehensive list here, just a couple of interesting ones that
spring to mind.
There is a
rapidly accelerating trend to more and more practices
realising they have to get serious about business development.
This will put a
bit of pressure on those firms which already have programs in place to spice
them up a bit to keep the files coming in at the target levels or above, and
profits solid.
There are also a
few “experts” to watch out for.
A few firms are
falling into the trap of allowing their lawyers to have far too much say in the design of business development efforts.
Just because lawyers are intelligent does not mean that they know anything
useful about developing or marketing services.
Unless they truly have relevant skills, keep lawyer involvement to relationship building, and supplying “war stories” for your information stream aimed at referrers clients and contacts in your chosen markets.
There are
thousands of potential employees out there with Marketing
degrees. In my experience they appear to learn little in a basic degree course
of use to the average small-medium practice.
There are also
many potential employees who have been involved in marketing products.
Most legal firms need people with experience in marketing professional
services, and preferably legal services.
Remember that all
business development efforts must be measured against clear objectives.
For
example, an increase of 7 files/business day worth an estimated $X each, at an
“acquisition” cost of no more than $Y.
I am seeing a lot
of business development activity that is clearly textbook-based, with little or
no focus on informing clients about issues which will lead to existing file
loads being maintained and targeted numbers of new files being opened.
Another
interesting trend is the further rapid acceleration of numbers of lawyers in
part-time work, especially in the suburbs of large cities.
It appears that
this is caused by a combination of growing numbers of female lawyers wanting
part-time work and the inability of firms to find enough suitable full-time
employees.
Many firms are
simply paying such employees a proportion of the full-time salary, and this has
some potential downsides for maintaining a healthy level of profit.
Firm Time for an
employee working say 5.5 hours a day on average is usually disproportionate to
that recorded by a team member working 9 hours a day.
Many of the Legal
Education and in-house training and other Firm activities are required whether
someone is part time or full time. It behoves firm management to be
particularly careful that a reasonable return is being obtained for the
proportion of salary being invested.
WorkPlans™ are
particularly useful in ensuring that part-time employees have clear guidelines
on what is expected from them.
Finally,
an issue which is not so much a trend as a “continuing pestilence”.
I am still
noticing plenty of advisers, often well-meaning Accountants, advising firms to
adopt a strategy of improving profits by beefing up partner Client hours and
keeping staff numbers down.
Most readers will
recognise this False “strategy” as reverse leverage.
How they expect
to be able to get business development carried out properly and staff properly
supervised is anyone’s guess.
For most firms,
having partners leading teams, mentoring, training and maintaining key client
relationships until others are capable of being introduced, is the way to better
profits and a greater chance of creating decent succession options.
Does it mean that
partners have to be truly multi-skilled? You bet!
I take this
opportunity to wish readers and their staff and families a wonderful Christmas
season, and a very stimulating, satisfying and most prosperous new year in 2004.
There is plenty of potential for law firms on
the Internet, but also plenty of scope for wasting money.
Many small firms
are now on to the third or fourth re-write of their website, and still have
very little idea how well it is achieving objectives for the money spent.
Even firms with
small relatively unsophisticated sites can get superb statistics on traffic to
their site from any worthwhile website hosting service.
Someone should be
trained to visit the data regularly, analyse it and report on what visitors are
doing on the site.
If your website
hosting service does not offer sophisticated reports that you can access for
free, or no charge beyond basic hosting charges, get one which will.
Tip #1…There’s no need to give away both the
“eggs and the chook!”
Every lawyer
worth their salt gets many enquiry calls a week. How you
handle them can make a big difference to your revenue, and profit, of easily a
hundred thousand dollars a year.
In our experience
most lawyers have a bit of a chat on the phone with people, tell them all the
basics, and suggest that they ”have a think about
things”, and ring and make an appointment if they need any more assistance.
In 9 cases out of
10 that’s the last you’ll ever hear of them.
There’s a much
better way to handle these calls, it’s proven, and it will add many hundreds of
dollars a day to your bottom line.
Listen carefully
to the caller’s expressed problem or challenge, then
offer the solution.
For example…”I’m sure that once I get the full picture
I’ll be able to help you with that and put your mind at rest.
I suggest that you pop in for a fixed
price Initial Consultation…we have a half-hour one for $165 inclusive of
GST…from the sound of it most of what we’re likely to need to do can be done on
the spot and there’s no further obligation.
I can see you between 3.30 and 5.30 this afternoon or between 8 and 10 in the morning…which of those will suit you best?”
You’ll get the
drift.
Make clear that
it’s money up front, cash or credit card…and have your appropriate staff
provide refreshments, collect basic data, collect the money and provide a Tax
Invoice and receipt before the consultation commences so you can cut straight
to the chase.
Will this
approach scare some callers off? You bet! So you can get on with your other
work having quickly identified those who are likely to value your assistance.
What’s more you
have improved cashflow… and future contact details from the others to add to
your Business Development database.
Recently a sole
practitioner contacted us to relate his experiences with this
approach...implemented at our suggestion. He was quite delighted with its
success, and had a total change of mindset about the future of the profession
for small firms, and the way what he perceived to be “tyre-kickers” absorb
valuable time.
One or two $275
(GST inclusive) Initial conferences per day on average for say 230 days…up to
$115,000 pa extra professional fees and a much happier practising
environment…how easy is that!
It’s important to
sort out the wheat from the chaff early, and provide easy solutions for the
“wheat”.
CSF #1…The big Work in Progress write-off
trap…
For firms that
time-record and create “Raw” Work in Progress (don’t laugh, there are still
many which don’t) there are many circumstances in which there may be write-offs
when a bill is done.
Be aware of where
there should be write-ups!
Most importantly, keep reviewing write-offs to see whether a culture of casually writing off is developing with a fee-earner, a team, or the whole firm. It can cost tens of thousands of dollars per partner, even hundreds in a larger firm.
A good example is
Raw WIP created when a fee-earner is on a big learning curve.
In many
Australian firms at present, fee-earners are having to
re-invent themselves as personal Injury practices decline.
In new areas
practitioners will naturally “spin the wheels” to some extent, and some WIP
will need to be written off.
The important
thing is to not abrogate responsibility for monitoring reality, and allow
inexperienced or naive practitioners to casually throw your profits away by
writing down WiP more than needs to be the case.
If you have set
their rate lower for the learning period there can be a real double whammy for
you if they write down the WIP again on billing, especially if through lack of
confidence they have set out an estimated fee which was too low in the first
place!
Here’s a
practical example from a KMS client firm in October 2003.
A practitioner
transitioning from PI to Family Law ran up around $7000 in WIP over and above
the $2000 billed.
$2000 was billed
because the practitioner felt that was all that was warranted for the work
done.
If a more
experienced practitioner had supervised the billing process and the discussion
with the client our experience says that there’s a good chance the client would
have been happy with the value received at a bill level of $3275…especially if
the original estimate had been properly set at $3500!!
The point is that
there would still be a big write off but profit on a $2000 bill might be around
$660.
Adding a further
$1275 to the bill takes profit up to around $1935…nearly 3 times the profit
actually achieved.
Do this a few
times a month with every fee-earner and you’ll make far more impact on your
bottom line than by substituting paper flowers for real ones in the Reception
area, or plastering imperious stickers with the firm’s name on them all over
the magazines provided to keep clients happy while you keep them waiting!
The bottom line…don’t be too busy working to look for
areas where your profits are being heavily eroded.
The big benefit
of WorkPlans™ is that they allow for proper planning of potential outcomes on
an individual basis.
Coupled with
accurate time-recording they give you good information about the way each team
member is actually using his/her skills in pursuit of the firm’s business
objectives.
Knowing that a particular individual records mostly Client work and very little Firm Time, may help you in setting WIP creation and billings targets higher for that individual than peers who are more involved in, for example, building of the firm’s knowledge base and training of staff.
Understanding
whether a particular team member has opportunities to leverage can assist
better comparison with others.
Query whether
it’s fair to reward on billings when an individual is only given work by the
firm that has little leverage opportunity.
Recently I was
approached in a firm by a young team member who thought he must have been
recording poorly in some aspect because he was present the same hours as some of
his peers, whom he had identified were achieving
significant leverage in their recording.
On my analysis
he’s an excellent recorder of tasks carried out and time used.
When we analysed
his work there were almost no opportunities for leverage, and this will be
useful when comparing his exceptional recorded input to that of his peers on a
more sophisticated basis than billings (or even collectable WIP)…and for
setting his next WorkPlan™ with him.
Ever had someone
contact you to say that an e-mail attachment you sent was an old one, and not
the current one?
It happens from
time to time.
Certainly
sometimes you have sent the wrong one, but often when you check your “Sent”
mail folder the e-mail attachment is the correct one.
What’s happening
in cyberspace?
Nothing!
What does happen
sometimes is that the recipient’s computer still has your old attachment with
the same name, and simply opens it first, so the recipient thinks they are
looking at the latest attachment.
Simple
solution…always name newer versions so they cannot be confused.
When sending
Invoices by e-mail always ask for an acknowledgment …that way if payment
doesn’t come you will at least know that the Invoice was received in the first
place.
Follow up, follow
up, follow up…
Experienced
Credit Controllers know that there are almost unlimited reasons for people not
getting paid in full on time…and one key one is a failure of the firm wishing
to get paid following up.
Follow up to
ensure an Invoice has been received and is properly “in the system” to be paid.
With individual large accounts make a courtesy call to check with the recipient
that the account is within expectations, and will be paid as per the
arrangements in place.
Make a note of
when it is expected and follow up to see why it hasn’t arrived.
Never assume a
payment has been made because someone you trust says they’ve paid it. Follow
up…check all the paperwork, receipts, bank deposits etc. It is surprising how
often someone has confused another payment with the one you feel is overdue.
If someone pays a monthly account out of sequence, don’t assume they’ll pay the missing one shortly! Follow up, point out what appears to have happened and get them to check their records. Send them a copy of both accounts and if necessary a schedule of all Invoices and payments since the date when they were fully up to date.
Make it easy for
someone to realise their oversight and fix you up.
If you send your
contact an Invoice and they’re not in the Accounting area of the client send
Accounts a copy…they will always push to get it paid, tidied up and out of
their system…even if the original remains “filed” away in the mess of your
contact’s desk!!
The bottom
line…most people genuinely intend to pay you, fully and on time…you have to
make it as easy as possible for them to get it right!
The first your Editor knew of Graham’s misfortune was relayed at his Motel near the famous sandbelt courses…Royal Melbourne and Kingston Heath amongst others.
Graham Wall wasn’t joining us. He’d been hit by a car, crossing the road in Cessnock the night before, and would spend the next three and a half weeks in hospital, and three months off work.
In November I shared a motel room with Graham at Yarrawonga on The Murray, where we had convened for the 2003 Victorian match, and over breakfast took a belated opportunity to chat to him for the benefit of readers interested in the pitfalls of this type of insurance.
Graham’s advice…look carefully at Business Continuation insurance if you don’t already have it, because it can happen to you!!
He had a Business Protection Cover and a Trauma/Personal Injury cover in place…paid monthly by automatic deduction.
Despite having excellent staff…as a sole practitioner there is no-one to help out …to carry you through…you really need this type of cover.
Graham had a Manager appointed to the practice by the Law Society on his wife’s application.
His insurance covered an agreed amount of money paid so long as could prove was still unwell… on figures submitted to show loss of income.
His Doctors’ advice was to take six month’s off, but Graham is a Sole Practitioner and that didn’t seem an option. It may have been a mistake to go to back into the office too early
It turned out that there was substantial argument with the Insurance company because Graham’s doctors said twelve months before he was fully fit for work…even though he was attending the office. An issue arose with the Insurance company claiming he was medically ok, but Brain Damage specialists said “no”.
Graham feels he went back three months too soon…and even though he was back in the office he was not working fully, and having suffered brain damage in the accident he later realised that he was not concentrating fully.
His Insurance company said he was, “back at work”…but his diary showed he wasn’t seeing people, not running cases etc. Graham makes the point that keeping an accurate diary is vital.
Even with insurance there was a significant cashflow issue…funds generated were just keeping the practice going until insurance companies paid funds…drawings were out of the question.
The business can be brought to its knees without the right cashflow.
Good records are essential for easily showing before and after Income and expenses. Trauma/Personal Injury cover does pay a welcome lump sum but it must not end up being utilised as a substitute for income replacement funds because you can’t fully demonstrate the income you have lost on an ongoing basis.
Graham warns that even with a reputable company it naturally ends up being a fight over what they will be prepared to pay, and that this was a most disappointing aspect of the whole saga.
Final key point…best to take up cover at any early age because it’s harder to get later and a lot more expensive. Don’t lightly cancel an existing policy with a view to changing insurance companies…you may be in for a nasty shock.
Footnote…with earnest, but modest, contributions from your Editor and Graham Wall, the New South Wales solicitors managed to defeat the Victorian solicitors well at the exceptional Cobram-Barooga course on Friday 14 November…it clearly takes more than an errant motor vehicle and a testy insurance company to keep a good man down!
Free KMS Special Report on Direct Screen-Based Time-Recording…
Many readers will know that my view over many
years has been that there are real potential traps in direct screen–based time
entry which if not handled properly can cost partners a lot of money in lost
profit, due to a failure to capture
Client (and Firm) activity at reasonable WorkPlan™ levels.
In my experience many firms which report improvement or do not deteriorate from results obtained from hard copy timesheets recorded time relatively poorly in the first place. Many of those firms do not use WorkPlans™.
In some firms there is an approach to management which does not seem to care how long it takes a fee-earner in real time to record target hours, as long as targets are reached.
Recently we have been observing fee-earners agitating for direct screen entry saying that they are more comfortable with it and that they were used to using it elsewhere. It is possible that it is becoming part of the mix of factors that fee-earners will consider in assessing their employment options.
In a tight employment market, from an employer’s perspective, any little niggling issue which might influence a suitable candidate is worth addressing at the appropriate time.
The KMS approach is to set reasonable individual targets for investment of real time, then strive to ensure that all the real time invested is captured, and that leveraging activity is also captured.
Direct screen-based entry is a growing trend in
small-medium firms, and experiences are starting to improve, and it is worth
looking at what firms are saying about results of direct entry, and trying to
identify the keys to getting it right.
The bottom line…I still see lots of potential
problems, but have an open mind on whether doing a pilot with good operators,
getting all training and software and systems configuration right, then if
successful moving other people to direct recording in stages, might be the best
way forward. KMS client firms experiences, warts and
all, seem to be pointing strongly in this direction.
For a free copy of the full report please e-mail
us at pptipsoffer@lawfirmprofit.com
or visit our website…www.lawfirmprofit.com