Welcome to the
March 2004 edition of “KMS ProfitPower Tips For
Lawyers”.
As I write this
column, in mid-February 2004, the Profession in New South Wales at least is
a-buzz with discussion about the Premier’s recent threatened attack on lawyers
charging “too much”, threatened fee regulation, and newspaper articles on the
imminent death of “the billable hour” (again!).
Lawyer
involvement in Family Law disputes is the subject of examination by yet another
committee, while the Family Court itself plays its part in helping keep fees
down by introducing yet another upheaval of its own procedures for the
profession to digest.
Life goes on
pretty much as normal.
Where does it all
lead us?
In my view, back
to where we all should have started and remained…professionally looking after
the needs of individuals, businesses and organisations in a manner that
demonstrates sufficient value for them to pay us well.
We can thereby run practices that offer a
long-term future for all those who deserve a long-term future with us, and make
a decent return on our investments after being paid a proper salary for
our efforts.
“Make yourself
useful, and the world will give you bread”, is as valid today as it was when it
was first uttered, save that there is room in our society for capable
professionals to make themselves especially useful and to have cake
rather than bread, if that is their preference.
Economic
conditions in 2004 are expected to be excellent in most areas of the economy,
and there is plenty of opportunity to make ourselves really useful.
Here’s to a year
very focussed on the real needs of your clients and prospects, in which they
prosper therefrom and ensure that you do too!
TIP #1. Set up your spam filters with some care…it’s very
frustrating to get an e-mail from a client then find your reply is returned as
undeliverable because it was blocked by their spam filtering program!
TIP #2. The
recent spate of hoax e-mails has caused some real problems. KMS has been
deleting in excess of 100 per day despite various filters being in place.
A few things to
watch out for…
Don’t react to e-mails which tell you how to
fix the problem, by deleting certain files on your computer for example. These
are often hoax e-mails themselves, designed to cause further chaos.
Get your IT
advisers to tell what you need to do, if anything.
Don’t send an e-mail to everyone in your
Address Book telling them they may have an e-mail virus.
Often the hoax
e-mail has come from someone unknown to you (not the apparent sender), and has
selected a random hoax “sender” from e-mail names in their address
book…not yours!! Sending an e-mail to everyone in your address book just clogs
up the system further and confuses novice users even more.
Do download the
latest anti-virus upgrades for your software and get help to ensure they are
working…it is surprising the number of users who do not realise that they don’t
even have the available software properly switched on and working to detect
possible viruses.
Do have an e-mail use policy and operate
it rigidly. It could save you tens of thousands of dollars in downtime.
Team members
downloading material from websites and opening e-mail attachments from friends
are a major cause of viruses being introduced to your system and it does not
help you if they did it in their private time…lunchtime for example.
They are putting
your computer system and all your stakeholders at risk by their lack of care.
In an earlier
newsletter we asked….”What do you need by way of Management Training which is
not apparently being provided in the marketplace?”
After conducting
a random survey of legal firms throughout New South Wales towards the end of
last year, the information gathered pointed strongly to the view of those
surveyed that there is need for a better quality of coaching session in Legal
Practice Management than what is largely being offered to Lawyers and Practice
Managers in the Australian marketplace...usually "boring old seminar"
style...
Lawyers are
saying that the topics covered are often too general, and the groups too large
for really effective sessions...in which attendees can have all their questions
answered and particular concerns addressed, in an environment where there are
truly like-minded attendees and a really experienced practice management coach.
We'll also be
addressing what I see as the critical success factors for practice success in
2004...and beyond.
People are saying
they'd be happy to invest a little more than usual if they were sure of the
quality and the benefits they'd get for their investment...
I've put together
a series of focussed Coaching Sessions of 4 hours... 2pm-6pm... in
This will not be
a typical seminar with a paper you could have read anytime...but a powerful
interactive dialogue with the most experienced small-medium firm practice coach
in
Years ago we ran "new approach" type sessions... “Survival in the Nineties”, and from those we still support many very successful firms 12 years on...a pretty powerful endorsement of the value of intensive coaching.
Attendees who are
entitled to claim MCLE points will certainly be able to do so…4 hours worth!
Importantly attendees will also be entitled to 5 hours of free follow up coaching via phone and e-mail over the ensuing 12 months, worth a minimum of $2800...to ensure they get the best chance to follow through fully on the stimulus gained from the initial session.
Your investment
is just $865 inclusive of GST and will be subject to our usual 100% money-back
guarantee of total satisfaction. Simply put...if you're not happy, tell us at
the end of the session, and we'll arrange with you to fix the problem totally
for you or give you your investment back in full.
At this stage I
am just looking for expressions of interest...no obligation. All you need to do
to be put on the list for information on planned dates etc is to e-mail us a
very short message direct at focus@lawfirmprofit.com or
via our website lawfirmprofit.com. In
due course we'll get back to you with a schedule of proposed dates and a very
short questionnaire.
Looking forward
to working with you in one of the sessions...
Tip #1…Marketing Confidence Tips...developing and promoting a specialist
niche...
As an expert in
banking disputes he has established a strong reputation, running many leading
cases and assisting many borrowers (and lenders) resolve disputes.
In recent years
he has developed an expertise in the carbon credit area arising out of concerns
about climate change and with the Kyoto Protocol in mind in particular.
Peter points out
that this area has advanced well past the planning stage and that, for example,
in June 1998 State Forests of
A report in the
“Australian Financial Review” indicated that one contract was for $35,000 to
provide 2,400 tonnes of carbon over the period of one year. This means that $14.60 was paid for each tonne
of carbon absorbed by the forest. The
area of forest was 1,000 hectares and the carbon rate of 2,400 tonnes per 1,000
hectares is conservative as it is generally considered a rate of 6,000 tonnes
per hectare is more likely for a plantation of the type in the agreement. Another trade involved a plantation as small
as 35.5 hectares.
Over the last
several years a number of energy efficient projects have been undertaken, for
example, a Romanian thermal energy project involved the reconstruction of two
heating systems with new high efficiency boilers, burners and distribution
systems.
The project life
time is 15 years with heat reduction and distribution initially with existing
low efficiency equipment for the first eight years of the project for the purpose
of establishing a base line, and with new medium efficiency for the remaining
seven years with central coal based power generation throughout.
The project
investment involves a total of US $6.4 million and is estimated to result in
130,000 tonnes of carbon dioxide reduced, costing US $8.00 per tonne of carbon
dioxide equivalent or US $32.00 per tonne carbon.
In 1992 a swap of
allowances took place between Elsan in
More recently Peter has been advising a client on a wind
energy project. The project will involve
up to 150 turbines and will be the largest wind energy project on one property
in
Peter’s
development of this expertise is a good example of how to develop a specialist
niche and build a reputation as an expert through articles, press releases,
news letters, e-mail updates, speaking engagements etc … with little or no paid
advertising.
Agreements
and options in the carbon credits area are complex and require specialist
knowledge to maximise benefits to clients.
For all readers
with clients with forest plantations (as small as 50 hectares) or planned
energy projects, a chat with Peter Jackson or visit to his web site www.jacksonsmith.com.au
may well pay dividends all round.
Tip #2…Marketing Confidence Tips...Business development is basic commonsense
Often when I’m in
firms teaching team members about business development it’s clear that many are
far too advertising-oriented.
I suppose that
it’s really not surprising, given the advertising pervasiveness in the society
most of us have grown up in.
The problem is
that in most cases legal services business development really needs to be relationship
based, and advertising simply isn’t enough, or is not cost effective.
Someone years ago
wrote of the AIDA principle…Get ATTENTION, hold INTEREST, build DESIRE, and create ACTION…AIDA
Unfortunately for
those who want to advertise, even if your ad truly does get attention, it has
to have very special qualities to hold interest and build desire….it has to be
relevant to the right audience and helpful.
Informative,
educative content works best.
Then there needs
to be a strong call to action…to get those who are interested to do something
to obtain the benefits they now perceive.
They must go to
your website for a free checklist, register for a seminar, e-mail you with a
question, pick up the telephone…make some form of contact.
Drafting ads like
this requires skill and experience…and the results must be tested carefully
against set goals and against the cost of the ads.
The same
principles apply to most small law firm websites…and as a result many are
pretty ineffective because they simply aren’t relevant and helpful enough…they
are glossy brochures in electronic form, with most of the focus on the firm,
and not on the needs and interests of the visitor to the site.
Most make no real
attempt to trade the visitor’s contact details for some valuable benefit…such
as a free newsletter or Special Report on a relevant topic.
A good example is
a free report on the site of a web developer…purpose.com.au…”Seventeen Key Things You Need To Know
Before Selecting a Web Development Company”…very relevant, very helpful.
Yellow Pages isn’t effective for
every category of work but it’s still very powerful and cost-effective if done
properly.
Even in an area such as Employment, an ad which attracts a
single claimant can open the door to a class of claimants in that workplace or
industry if you “elaborate” fully.
In this context “elaboration” is a term I coined some years
ago to describe thinking generically about the work you are currently doing,
and where it came from, and who else in the marketplace might be affected.
Few situations are totally one-off and unique…so be always
auditing new files for possible elaboration to your client base and referrer
base.
Package up the benefits of your audience getting it right in
the particular circumstances, and communicate those benefits by phone, e-mail
or newsletter depending on the urgency….the potential impact on a client who
gets it wrong.
For example…If you have just solved a problem for a client
in a certain industry and saved him $38,000 in Stamp Duty, elaborate
the situation, and get an e-mail off to all your similar clients and all the
Accountants in your referrer database.
To not do so is a terrible waste of a powerful, relevant
helpful communication opportunity. Audit this months new
files today and communicate some suitable messages today.
ProfitPower™ Tip …
When your team
members are doing Conveyancing, record all tasks as coded either “Within the
Estimate” or “Beyond the Estimate”, or similar, so you can easily identify work
you need to be charging more to the client for by prior agreement.
In many cases
profit margins on work done within the original estimate are quite modest, and
of course are much worse if substantial extra work is done for no extra fee.
On the other hand
even four or
five hundred dollars extra charged makes a big difference to profit.
The most powerful
example I’ve heard of in practice recently is a matter in which the original
estimate was $2500 and the final bill $8500, paid “happily” by the client.
Being able to
recognise clearly the “beyond the estimate” work, and demonstrate it clearly to
the client, made a real difference to confidence in billing extra fees.
Frankly, builders
do it in every building contract…so make sure you have the “strike rock” clause
in your engagement materials and use systems to monitor exactly how many cubic
metres of rock you do need to excavate to properly assist each particular
client.
Most of the time
paying employed lawyers on the basis of a formula is crazy stuff…yet so many
firms still do it!
We’re still
seeing the old 1:3 formula, and variations up to 1:4.5
Better
strategy…get each lawyer to agree to work and record whatever their full
average day is to be…8 hours, 9 hours or whatever.
Paying a lawyer
to work or you effectively over a 45 hour week and record the work is not a big
ask…but if you agree to less so be it.
Work out what the
market wage is for such a level of input and pay that or a bit more.
Work out how much
Firm Time you expect the individual to invest in your Business Plan daily on
average…more than 2 hours a day is unusual.
The rest is
Client Time and you need to ensure the work is there for them, with their help
wherever possible…using some of the allocated Firm Time.
Using this KMS WorkPlan™
approach it is not at all unusual for employed lawyers to comfortably do and
capture in excess of seven hours of each day on average.
Unless you are
deliberately utilising many hours of Firm Time for an individual, the main
reason people fail to record decent Client Time is that they do not have enough
work.
Sometimes they
are poor at recording. You need systems to ascertain where the gap is being
created.
Readers will know
that your Editor is a big believer in the power of War Stories to help convey a
message.
Here’s one from
our files you may be able to recognise and identify with an employee or two.
The KMS WorkPlan™
approach to productivity planning relies heavily for its effectiveness on the
establishment of a “compact” between the firm and each individual team member
about what hours they expect to actually work for the firm on average.
It also relies on
optimal recording of both tasks carried and time use, whether on Client files
or projects that protect the long term future of the firm and all its
stakeholders.
The following is
an example of what goes wrong when someone for one reason or other tries to ‘pick
the eyes out” of the KMS system by trying to combine their own system of
recording inputs with an old fashioned approach to billing.
A young
Queensland Family Lawyer had a WorkPlan™ for 2003/04 which required a total input
average of 42.5 hours per week, with a Client Time/Firm Time mix of 6.5 hours
and 2 hours. His hourly rate was $315 exclusive of GST.
The WorkPlan™ is
designed to focus the firm on keeping him busy and he certainly was.
He should have
created in a year a minimum Raw Work in Progress of $477,000 approx, and to achieve
an average Realisation Rate of that Raw WIP into rendered bills of 90%.
KMS experience is
that 95% to 98% Realisation is possible for a good operator even if they are a
very good recorder of time and tasks.
The team member’s
goal for the creation of billable WIP during 2003/04 was therefore about $429,500,
and depending on opening and closing WIP levels on 1 July 2003 and 30 June 2004,
would be expected to bill a bit more or a bit less than that during the
financial year.
Unfortunately,
despite training and counselling the lawyer concerned still has his own ideas
about recording and about billing, and actual averages recorded per day are
only around 4.5 Client Hours and 2 hours Firm Time…about 70% of WorkPlan™ goal
is actually captured via time-recording.
Here’s where his “intelligence”
comes in.
He consistently
expresses the view that he and his secretary know how to properly cost a file,
and regularly “pick up” fees over and above the recorded hours, and achieve
better for the firm…so full time-recording is a waste of time.
It’s a nice story
if it’s true, but here’s where the KMS FeedBack Report™ really comes into its
own.
There’s a section
in the FeedBack Report™ which projects elapsed months results forward over the
whole year, and in August 2003 the report for July was already looking sick.
The projection
for our “hero of the acquired management systems experience” was already
showing less than $200,000 productivity for the year, not $400,000 plus.
By October, all the
predictions of billing uplifts were out the window, as the actual Realisation
Rate on the paltry Client Time recorded was in the sixties, not over 100% which
fees uplift on recorded Wip would produce.
Billings were
less than 70% of budget.
Remember that all
this time our “super intellect” was still very busy.
My advice to the three
partners was that this one errant individual was about to rob them each of
about $70,000 in pure profit, and that something had to be done urgently to
stop the bleeding.
Annoyingly I have
no doubt that the subject of this War Story thinks he is a good performer
compared to his peers, and can trot out many examples of people he knows who
are performing at similar levels…so to expect more is unrealistic and unfair.
He simply would
not believe that there are people working about the same hours as him who
between secretary and fee-earner produce around $700,000 per year…on lower
hourly rates.
The bottom line…
There are many many lawyers in the profession who are capable enough
lawyers technically but absolute “babes in the wood” when it comes to financial
management and effectiveness.
If allowed to
operate their own “systems” they will send their employers broke…while
reassuring themselves of their importance to the firm and universe at large.
Footnotes…1. A capable Family Lawyer can easily
record 100 Client units of work during a reasonable average day, and 10-15 Firm
units.
Bear in mind that
even 70 units a day at $295/hr recovered at just 90% represents $427,455…how do
the lawyers you are thinking of right now compare?
2. If someone has the right
attitude and is otherwise a good recorder of time and tasks, the principal
reason for failure to achieve optimal results is that far too often during the
year there is too little Client work to do.
This is almost
always something within the control of the firm, through focussed Business
Development, and not a factor of the economy! The sooner a firm starts doing
enough Business Development properly the sooner the work pipeline will be full,
making it easier to sack those 10% of your current clients who simply do not
deserve your efforts!
If any reader is
interested in seeing a free, suitably “sanitised” copy (to protect the guilty)
of the KMS WorkPlan™ and KMS FeedBack Report™ in this situation, please e-mail
us at lawyersmarts@lawfirmprofit.com
Management and Personal Organisation
Tips You Won’t Hear From Us at KMS
Partners are usually the highest hourly rate performers in
the firm...the way to bigger profits is to get them to do more Client Time…that
way they’ll naturally have the maximum time necessary to use their experience
and contacts to bring in more work and supervise the quality of what other
people are doing.
If the partners feel a bit busy and can’t do it themselves,
hire an administration manager whose main experience is in counting paper
clips, and get that person to supervise the lawyers and other fee-earning team
members….they respond really well to leadership from people who haven’t got the
faintest idea what really goes on in the trenches...someone for whom they have
no respect whatsoever.