Make More Rain : subscriber content, management

Downloads Page

Admin — Sat, 09 Feb 2008 08:00:12 GMT

Click here to download attachments posted after February 24, 2008.

Rick Borstein (Adobe Systems) Podcast

Admin — Thu, 07 Feb 2008 00:48:39 GMT

Rick Borstein is a Business Development Manager specializing in the Legal Market for Adobe Systems Incorporated. Rick is a veteran of 20 years in the software business, the last fourteen with Adobe. During his tenure at Adobe, Rick has had broad exposure to all of Adobe's products including intelligent documents, digital imaging, publishing and digital video.

Rick is an Adobe Certified Expert in Acrobat and a member of the American Bar Association and International Legal Technology Association. Over the years, Rick has presented hundreds of talks targeted to the legal industry.

He has been a featured speaker at the American Bar Association’s annual Techshow, LegalTech East, LegalTech West, the National Solo and Small Firm Conference, International Legal Technology Association Conference and a variety of state and local bar conferences including the California Bar Association Conference, Missouri State Bar Solo and Small Firm Conference and many others.

Rick’s AcroLaw Blog is a popular destination for those interested in the legal application of Adobe Acrobat. The blog may be found at http://blogs.adobe.com/acrolaw and contains more than sixty illustrated how-to articles. Rick has contributed articles to Legal Technology News and various legal-focused websites.

Headquartered in San Jose, California, Adobe Systems Incorporated is a $3B, Fortune 500 company with over 6000 employees. The company's popular Adobe Reader software is installed on over half a billion PCs around the world.

To listen to the podcast, click on the player or download link below.

Firm Profitability - Best Industry Practices

Admin — Wed, 06 Feb 2008 23:33:43 GMT

Sat in on Thomson West's presentation on Firm Profitability. The attendance was relatively light, which from the perspective of someone who writes a blog on financial management was disappointing. It was later in the day so it may have been a bad time to talk money.

The panelists discussed the importance of leverage to profitability, except one noted that clients demand the most skilled to run the trials which typically fall to the equity shareholders.

They talked about the use of client satisfaction surveys as a way to ensure clients were happy with their work.

When it came to how they determined profitability, the discussion immediately went to cost allocation. There were some interesting ways the panelists allocated costs to timekeepers in their firms, but it came down to allocating the direct and indirect costs and determining a cost per hour from which to compare to the timekeeper rate. One panelist went into detail, explaining the 150 line items tracked per timekeeper to determine costs. Another panelist didn't track timekeeper cost at all (part of a smaller firm) but rather determined profitability on a matter-by-matter basis.

The panelists also talked about FTE analysis - (full time equivalency) - One uses historical average to project into future, another tracked in two ways: if the timekeeper was only there for part of the year, they credited for length of service. For part timers, they allocated for the entire year since the office, secretary and liability insurance among other costs remain throughout the year even though when the part timer isn't there.

I sat in for about 30 minutes, which was longer than the other ones today, but I couldn't sit any longer. I am not a big fan of the panel discussion for a CLE track. It isn't focused enough and goes in many directions, sometimes leaving the audience confused (could have just been me - it is hard for me to sit still too long).

No surprises in this discussion - except I would have focused more on the metrics to increase profitability - which they might have done in another format.

Calculating the "Time Value" of Law Firm Accounts Receivable

Admin — Fri, 28 Dec 2007 14:00:00 GMT

Lawyers are keen to know what their peers are doing. Surveys, benchmarking applications, and business intelligence tools are all geared to give the firm a competitive edge relative to what others are doing. They tell you the "what". However, these tools don't tell you the entire story. They don't tell you the "how".

Take rate, for instance. What if you were charging the highest rate of those in your demographic yet still were not the most profitable? How do you know if the rate you are charging to one client is ultimately worth as much as a lower rate billed to another client? The difference lies in the time value of your accounts receivable.

In addition to considering what the market may bear, efficient billing practices, reduced write downs, and other pre-invoice processes, you should consider the time it takes your clients to pay for your services after the invoice is billed.

For example, if two firms bill their client in the same month $5,000 for services rendered, one pays at 45 days and the other pays at 120 days, the first firm retains a higher rate and is thus more profitable. How?

Based on data from the Department of Commerce, the value of a dollar decreases by 10% at 60 days and 20% by the time the debt is 120 days old. Studies also show that there is a 90% chance to collect a debt under 60 days, but that you only have a 20% chance of collecting the debt after 120 days. Finance companies use formulas based on percentages more restrictive than the above when providing loans secured by a firm's receivables.

Taking the above into consideration, the value of services for the firm which was paid at 45 days comes to $4,500 and the services for the firm which was paid at 120 days was only $4,000. The amount paid is still $5,000, but there is a $500 difference in the "time value" of the cash received for the first firm and a $1,000 difference for the second.

Now consider what this does to rate. Suppose the $5,000 represented 20 hours of work at $250 per hour. For the firm which was paid in full at 45 days, the collected rate would be $225, a full $25 less per hour. For the firm which was paid in 120 days, the rate is reduced to $200, or a $50 credit to the client per hour.

The above looks at the value of the debt owed. It does not take into consideration the chance to collect on the debt (not to mention pre-bill adjustments). If you want to forecast earnings, projections of revenue need to include the probability that the invoices will be paid. These percentages may differ from company to company. In the below graph (click on graph to download spreadsheet), I use a 95% chance to collect on AR up to 60 days. It decreases to 85% between 61 and 90, 60% from 91 to 120, and 20% after 120.

Calculating the aged receivables and multiplying the value by the percentage representing the chance to collect, your AR doesn't look nearly as nice as it does if you only consider the billed value. This combined with the decreased value of the service dollar makes for a dire forecast for those who don't take collections seriously.

The above takes a firm-wide look at receivables. You can replace the aging values with a specific client and determine whether your client is providing better or worse value for the rate charged. In this way you can determine the time value of existing client receivables.

Some may think that if you eventually receive the money, then you ultimately receive 100% of the money and the analysis above merely complicates a simple process. This line of thinking neglects to consider the time value of money. Financial institutions, insurance companies, and law firms consider the time value of money when calculating probabilities. In fact, when determining rate, firms often start with increasing their billable rates by the average percentage of inflation that may or may not be reflective of the cost of doing business in their region. It is a probability factored into the rate. Why would you not also take into consideration the negative impact of inflation on aged receivables, which is what the chart above (at least in part) represents?

Firms who don’t consider the time it takes to collect their receivables leave an important variable on the table when negotiating rates. Further, they decrease the value of their services since the debt that is collected after 120 days is likely induced by a discount if it is ever paid at all. Why spend time worrying what your billed rate is relative to others if you are ultimately going to devalue it by not seeing that the value for the work performed is retained?

Firms need to focus more attention on collections. In fact, a commitment to collecting debt within 60 days should be considered crucial to maintaining the value of the services you provide. With a monitored collections strategy, you will end up spending less in resources for future collections which will give you an effective rate increase without the client paying a penny more per hour.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center
877/377-3740, e-mail info@juris.com or go to www.Juris.com .

A Prosperous New Year For Law Firms

Admin — Thu, 27 Dec 2007 19:22:18 GMT

To Law Firm Leaders: Wishing you a Prosperous New Year

As I head into retirement and turn this blog over to those who will carry on in the years ahead, I leave you with two thoughts that, if you take to heart, will mean more partner income for 2008 and the years ahead.

I had to learn them the hard way. They are the core beliefs that have guided me throughout my business career. At least they guided me during the most successful part of that career. It took a while before I came to understand that these two certainties govern the success or failure of businesses—including law firms.

You are always judged by others
Business is a journey that involves constant change.

You are only as good as seen through the eyes of those that judge you. For a law firm, that primarily means your clients, your peers and your employees. But don’t forget all of the others that your success depends on, including vendors and service providers. The only sound business strategy is to pursue excellence. And excellence must be earned through their eyes, not yours. Excellence can only be pursued through change. You either purposely change to improve or the natural forces at work will pull you down to lower and lower performance.

Steering the course for excellence takes measurements. You have to set goals. You have to decide how you are going to achieve those goals. You have to measure your progress, make adjustments and set new goals as you continue to chase the allusive standard of excellence. It is a moving target. It takes constant innovation not to lose the race to others. Rather than stay too long with what has worked in the past, you must diligently simplify, eliminate and reinvent.

PS: Morepartnerincome.com just received Dennis Kennedy’s nod as the Best Overall Law Related Blog and also takes home the Blawggie Award for Best Law Practice Management Blog. Being recognized for your work beats a gold watch every time! Thanks Dennis.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Lawyers Appreciate The Enablers

Admin — Wed, 26 Dec 2007 14:00:00 GMT

Lawyers appreciate the respect of their peers. The practice of law, like most professions, carries a high responsibility with it. Those who work diligently to represent their clients with the integrity and respect for the rule of law are not always appreciated by those who share the same work space.

Take the managing partner, for example. Like other partners, they ascend to their position through the accumulation of work and clients. They are then challenged with the responsibility to manage the practice and "herd cats", often with no additional pay and sometimes with no less obligation to maintain their revenue.

Ascending to the rank of partner is an expression of faith, respect and honor to a lawyer. It means you are highly valued within the firm. On the other hand, ascending to the rank of managing partner may seem like a prison sentence, pulling you away from what you do well to do what seems impossible (just ask David Maister).

It takes a lot to take on the responsibility of increasing firm profitability while having to mediate the special interests of the other owners. Lawyers should appreciate managing shareholders.

By the same token, all those who support lawyers appreciate fairness and respect as well. Something all lawyers shouldn't overlook.

We all know the difficulty in getting work done quickly. Having competent support staff makes lawyers look better. Without painting too broad a brush, for many attorneys crisis is the norm. Staff are constantly challenged by the needs of attorneys that need something now. No matter what they have piled up on their desk, there will be things that have to take priority and many times take up most of the day.

Having support staff you can trust is golden - whether it be in the back office making the numbers work or just outside your office handling your crises.

Don't forget to thank the people who enable you to focus on the practice of law.

Happy Holidays

Admin — Mon, 24 Dec 2007 14:00:00 GMT

As many are still frantically searching for the perfect strenae to offer to their loved ones, I want to wish everyone a safe and Merry Christmas (or whatever holiday you favor). Historically, the holiday we are celebrating has several purposes, most of which tie in to the new year.

In ancient Mesopotamia, the end of the year came with the return of chaos. To battle this, the people would offer their king as a sacrifice to their god, Marduk. The line of thinking appeared to be: We kill the king, he becomes immortalized and then can help our god Marduk battle chaos and give us another year of moderate temperatures without glacial melt (or whatever pressing form of chaos existed for them). Funny how it ended up, however. Rather than killing their king, they would offer a criminal. The criminal would be a "king for a day", dressed in royal garb and treated to all the respect and privileges of the king - until sundown, when he was stripped from his royal clothing and slain. Ostensibly, Marduk wasn't peeved that he received a criminal rather than the king (or had a sense of humor) and granted another year of calm.

The Persians and Babylonians were a bit more friendly, taking only the "switching of roles" part from the Mesopotamians. Every year at the celebration of Sacaea, the slaves became the masters and the masters had to obey them. That had to be interesting.

And, of course, ancient Romans exchanged strenae to celebrate the coming of the new year. There are other variations of the holiday, most notably the adoption of the celebratory mood by Christians. In 350 AD, Roman Bishop Julius I choose December 25th as the observance of Christmas. And here we are.

To whatever extent you celebrate, please don't forget to reflect upon the year and do whatever ritual (short of slaying someone I hope) to fight chaos and bring in the new year with a calm to tackle the opportunities of 2008.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Retained Earnings Prepare Law Firms For Unexpected

Admin — Fri, 21 Dec 2007 14:46:11 GMT

Our political climate is warming to the idea of cutting back on sources of energy that produce carbon emissions. At the same time, energy prices are increasing. This may very well cause a crisis within the next 10 years as our population grows and our ability to provide cheap sources of energy decreases. An estimate by Cambridge Energy Resource Associates claims that $900 billion needs to be invested in our energy infrastructure within the next 15 years. Much of this is upgrading existing power sources - but there is also expansion needed to keep up with demand. Worse, the still unknown cost of expected reductions in carbon dioxide emissions that the world is working hard to mandate isn't factored in this estimate.

We don't have many politically friendly energy sources. Coal, the country's most plentiful and most used resource, is disfavored as a means for energy. Oil is hated for several reasons (though we are increasing our investment in the fossil fuel, as noted later), and there is a better chance to build on the habitat of an obscure endangered species than get a permit to build a nuclear power plant. The remaining "green" choices are either not sustainable for large populations or (at least currently) too expensive to replace exisiting infrastructure without causing serious effects on the economy.

Based on the above, it is possible that energy costs will increase massively in the near future. Then again, we may be stricken by a disease that reduces our population significantly, rendering the energy problem moot. Unforeseen events, the "black swans" that shape our economic and social life, must be considered when making long-term plans.

Is your firm prepared to absorb the costs of an expected or unexpected hit on the economy? Is your firm positioned to take advantage of such a happening?

There is only so much for which we can plan. However, the occurence of the unforeseen cannot be ignored and those who can anticipate and plan for unexpected events are at an advantage - and may save the firm from financial ruin. Think it can't happen to you? Talk to firms from New Orleans who ignored calls for disaster recovery planning before Hurricane Katrina literally destroyed their businesses overnight. Talk to business in New York after the twin towers fell where both life and livelihood were suddenly gone. It can and does happen. And will happen again.

What can be done? First, understand what your firm's strengths and weaknesses are. Do you have attorneys who practice commercial law? Those in Texas seeing an increase in oil and gas business due to increased drilling in the Gulf of Mexico typically would also see an increase in manufactured housing purchases. This means mom and pop brokers making deals and selling paper to finance companies that bring in lots of business, be it financial paper swapping, fraud, bankruptcy, warranty defense or arbitration. Yet the cost of housing has been so low, the recovery of the manufactured housing market hasn't materialized yet. As the lenders get stingy in providing mortgages to those with imperfect credit, costs of ownership will rise to the point where it is likely that the manufactured housing market springs back, with all the related business to catch. Are you positioned to take advantage of this? What are the firms with a large staff of attorneys who focused on real estate going to do now that that business is in a trough? Make sure your firm is diverse enough to absorb market cycles.

Track the important profit drivers - not monthly, but daily. If you don't have time for it, pay someone else to manage it. Have them report to you on a weekly basis to make sure the numbers are within acceptable ranges for your financial objectives. Have them prepare charts and detailed reports before meetings that can be explained to the other partners. Better yet, have these numbers in front of you on a dashboard so you know the story before you get the reports.

Just as you budget for increasing per partner income, budget for business need. To prepare for the unexpected, set aside a percentage of revenue towards a "black swan" reserve (yes, I mean retained earnings!). The percentage is dependent on your assessment of need. Cash flow latency should be a part of the equation. One way to lessen the impact to income is to install tools that will streamline workflow and increase cash flow which can lead to higher margins. Other things would be to review markdowns, effective rate, and collection realization to see where you can improve. This will bring in dollars without having to work harder or use new clients/ matters to fund the reserve.

In the summer of 2000, no one knew with certainty that the end of the tech market boom was about to end. Some could predict it - the Federal Reserve had been increasing interest rates consistently to slow growth - but no one could accurately foresee the fallout and the disaster to the tech market after the inevitable market crash. Those companies that saved their money and didn't distribute all the revenue to shareholders (and were closer to showing a profit) were the ones who survived to buy up the good ideas left behind.

Are you prepared for the unexpected?

Margin's Role in the Law Firm Practice Model

Admin — Tue, 25 Sep 2007 17:36:38 GMT

Margin, as used in the Law Firm Practice Model, is the percent of fee revenues left over for law firm partners after deducting all expenses other than compensation or distribution payments for the law firm owners, its partners.

In terms of dollars, margin divided by the number of law firm partners yields profits per partner or PPP.

Parkinson’s Law is always at play. Without effort to the contrary, work expands to fill available time and expenses rise to meet revenue. Thus, prudent management requires that firm expenses be watched to prevent Parkinson’s predicted gradual increase that will eat into partner income. However, expenses are just one of the factors influencing a law firm’s margin level. As it turns out, other than salary-related cost and facilities cost, operating expenses within a law firm play a rather minor role. Margin is driven more by the fee revenue line than by efforts to reduce expenses. Management’s time is better devoted to increasing productivity (utilization), effective rate and realization.

It may surprise you to learn that law firms with the highest per-partner income spend more per attorney than those with lesser PPP. On average they pay higher salaries for better people and more leverage. They spend more on overhead, technology and marketing. At the same time, they reported a higher margin percent. What is their secret? While they spent more, they also achieved higher revenue per attorney. They had higher leverage, productivity and effective price.

The Juris Law Firm Economic Survey of Midsized U. S. Law Firm results for the year 2005 included a table of operating margins. Reporting firms were divided into quartiles based on per-partner income. The average operating margin for the top performing 25 percent of firms was 42.8 percent. Law firms in the next highest performing group were not far behind at 40.0 percent. The chart below reflects margin results by quartiles:

The most successful firms plan, set goals, measure performance and hold their people accountable. In the absence of those management efforts, a firm's margin level is merely an accident, one that is likely to erode over time. The question thus becomes, what will the margin level goal be for your firm? Start by comparing your firm’s margin to those of comparable firms. A low margin rate as compared to peers of equivalent sized firms in similar geographic areas can indicate that the firm is addressing less favorable practice areas, is under utilizing its resources, or is under-pricing services for the value delivered. Less likely, the analysis of a variation from peers can disclose that the firm’s tastes are too expensive compared to the competition. Click here to download an Excel worksheet to model your firm’s financial performance. Work with the key metrics with an eye toward a combination of achievable goals that will yield the competitive per-partner income levels your partners deserve.

While the path to higher margins is higher revenue, prudent expense management is important. However, over management of expenses may have a negative or even destructive impact on the efficiency and success of the firm. For example, see my post Cost Cutting Isn’t the Answer. With the need for a balanced approach in mind, you can find ideas for reducing operating cost in the following posts: Cost-Cutting Tips for the Law Firm, Internet Shopping and Parkinson’s Law in the Law Firm.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center: 877/377-3740, e-mail info@juris.com or go to www.Juris.com.

A Law Firm Can Not Live In The Past

Admin — Mon, 24 Sep 2007 17:26:04 GMT

As any organization increases in size, what worked as a smaller organization begins to break down. It becomes increasingly important to have a “play book” so everyone in the organization understands what is expected of them and what rules (core beliefs) should guide the decisions and actions of all in the firm.

Consider the real life example of a 50-attorney firm that will not allow its attorneys to enter their own time. The founding partner doesn’t believe attorneys should do “administrative work”. I’m sure that practice worked fairly well when the firm was small and everyone, including secretaries, knew what everyone was doing. But for a sizable 50-attorney firm, the practice is surely folly and will, sooner or later, get the firm in trouble.

Forty two percent of corporate clients think law firms pad their bills and the courts are not understanding about lax law firm practices for accurately tracking attorney time. The attorney is the only person who can accurately answer “What work was been done and how much of the attorney’s valuable time was spent doing it?"

Many first generation firms are the product of defections from big law. The firm was founded as a rebellion against rigid big law policies and procedures. As the product of the environment from which they fled, the founding partners didn’t require their own rule book. They were already disciplined by their experience. They did the right things without the bureaucracy. With growth, new people enter the organization without the benefit of a similar experience in a structured environment. They need the current law firm to provide structure since they bring none with them.

What about your firm? Do you still have “small firm” traditions in place that are no longer appropriate? Are you still trying to preserve an environment where there are no formal rules to play by? We have to change as we change and as the world in which we do business in changes. You can be accidentally successful for a while, but long term success and durability takes purposeful management.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Uncollected Law Firm Fees related to Business Model

Admin — Wed, 19 Sep 2007 17:33:00 GMT

The Law Practice Business model illustrated below is an important tool for forecasting and estimating per-partner income. It is the standard by which one firm can be compared financially to another. While the model explains the key factors influencing partner income, it ignores the timing difference between doing the work and collecting the result of that work. For a firm with an ongoing moderate growth and consistent billing and collection practices, the omission of the timing factor may not be material. However, it is important to note that the cash distributable to the partners is influenced by more than just the five variables (leverage, price, productivity, realization, and margin) used in the Law Practice Business Model. An increase or decrease in either unbilled fees (Work-In-Process) or billed but uncollected fees (Accounts Receivable) can have a material impact on funds available for distribution to the partners.

Both work-in-process (unbilled fees) and accounts receivable (billed but uncollected fees) need to be on management’s radar. Let them get out of control and distributable income will take a hit; reduce them through improved procedures and partners will take home a bonus.

The role of work-in-process related to distribuable income was covered in the prior post Unbilled Law Firm Fees (Work-in-Process). This post will address accounts receivable. According to the Juris Law Firm Economic Survey for 2005, the average midrange law firm has 76 days of billed but uncollected fees receivable from its clients. From experience, we know that the likelihood of collecting those receivables decreases over time. Deals get made to encourage clients to finally write a check. Those last in line for payment are the most likely to suffer bad debt losses. Clients less inclined to value services provided months ago can demand an adjustment prior to payment.

As in the case of work-in-process addressed earlier, there two approaches to measuring the firm’s billed but uncollected fees (accounts receivables):

For internal management purposes, the best tool is an Aging. For example, what percent of the firm’s receivables is less than 30 days old, 60 days old, and 90 days old and more than 90 days old? How quickly a client pays its bills is often influenced by practices and procedures within the law firm, which can differ from attorney to attorney. Thus, in addition to firm-wide aging information, firm leaders need aging information by office, practice class, billing attorney and individual client and matter.

Surveys and benchmarking services tack the metric Fee Days Outstanding or Days to Pay as the indication of a law firm’s collection efficiency; therefore, in order to gauge a firm’s performance relative to the completion, it is important to track Days to Pays for comparative purposes. Since most midrange law firms report fee revenue on a cash basis, the metric normally uses fee collections for a twelve month period divided by 365 to arrive at the value of one day's billings. That divided into the dollar value of billed by uncollected fees (Accounts Receivable) yields the number of Days to Pay.

Dashboards like that shown below from Juris provide a continuous field-of-view over key performance metrics that influence law firm financial performance including those for accounts receivable and work-in-process. Dashboards can be tailored to each responsible leader in the firm. The managing partner can have a firm view while a particular billing attorney’s dashboard might be limited to client/matter and operations for which he or she is responsible. The key to dashboard technology is that when metrics are off target, the responsible individual can drill down from the dashboard to detailed information as needed to identify the problem point and take corrective action. The top-down view provides the busy attorney with instantly digestible information for continuous situational awareness and with power drill-down business intelligence to reach actionable information.

Shortening the collection cycle has a significant positive impact on distributable income to the owner/partners. Improving performance first takes measurement. Measurement needs to be backed up with planning, goal setting and holding people accountable. For a check list of ideas to speed up the billing and collection process, read the prior post, What to do When Clients Don’t Pay?

All billing systems will provide law firm leaders with aging information in some form. On the other hand, Days to Pay is often not available as a standard feature. Your vendor may, however, offer custom features for an additional fee. If not, you may wish to use the attached copy of the spreadsheet shown below to measure and keep the Days to Pay metric front and center on a monthly basis.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Law Firm Economic Outlook for 2008

Admin — Tue, 18 Sep 2007 17:20:10 GMT

Larry Bodine has joined the chorus warning of a coming recession with a post titled Get Ready for the Recession—Part 2. In his post Doom and Gloom for the legal profession—it’s coming, Gerry Riskin provides detailed warning signs that there is trouble ahead.

2007 is going to go in the books as another good year for most law firms. However, the bust in the sub-prime market and resulting credit collapse brought the good times to an end for others. The dot com experience and the current sub-prime bust are proof again that law firms heavily dependent on a few clients or single industry are at risk. It is important to consider the susceptibility of firm practice areas and major clients to the particular kinds of risks we face today.

2008 appears to be problematic. We know what goes up comes down--recessions happen. 2008 could be the year. They say “What doesn’t kill you makes you stronger”. That saying has a ring of truth to it for those who go through a recession successfully. Recessions can be a time of opportunity and increased market share, if one is prepared and plays it right.

In times of uncertainty, you should avoid overextending the firm in terms of debt, merger activity, or overreaching in terms of talent additions. Use the time to consolidate your gains, strengthen your law firm financial health and improve operational performance. You should emphasize improved planning, workflow efficiency, and tweaking the firm’s performance metrics. Focus on improved effective rates, better scheduling and delegation. Speed up your billing and tighten collection efforts. Get rid of people you should have already let go—those who are not making a positive contribution to the firm’s goals and objectives. Use this period to replace any remaining legacy systems. You don’t want to depend on systems that lose support during a recession or are operationally unsoundly. Nor do you want to have the competitive disadvantage of being behind your peers. Convince you partners that they can win by being conservative with partner distributions in order for the group to hold back some rainy day funds for the uncertain period on the horizon.

Most of your competitors will cut back on firm travel, advertising and capital expenditures. That early reaction to a down turn is usually followed by a cut back in hiring, then a reduction in support staff and finally a cut back in legal talent.

The smart people go into a recession with dry powder and they increase expenditures on advertising and other business development activities. They have positioned the firm to take advantage of opportunities created by the disadvantage of others. They make moves that strengthen and grow their firm while others are eating their own flesh, cutting back and shrinking.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Law Firm Game Plan for the Coming Year

Admin — Mon, 17 Sep 2007 17:18:00 GMT

October is almost here, so it is time to lay out the Game Plan for 2008.

As the saying goes, it all starts with a sale; everything else is an expense. Clients (customers) are the only thing that give a law firm the opportunity to succeed. Since it all starts with the top line, “revenue”, that is the best place to begin putting your game plan together. Marketing and revenue-generating activities set the pace. The firm’s legal talent and operational areas must then develop plans in support of and is response to revenue-generating activities.

Here is my checklist for laying out the marketing game plan for a new year:

Branding and Image Considerations
Positioning Considerations
Key Strategies the Firm Will Rely On To Win New Clients
Key Strategies the Firm will Rely On To Retain and Develop Existing clients
Pricing Plans
Media Advertising Plan
News Releases
Newsletters
Direct Mail Plan
Directories-Printed and On line
Printed Material
Key Word Purchases-internet and Internet Ads
Conferences/Organizations/Speaking/Writing
Other Events
Blogs
Web site
Technology
Individual Attorney Plans and Goals

An annual game plan is not a substitute for strategic planning nor is it the budget. Your game plan for the coming years represents operational decisions you are making in order to implement longer term strategies. However, one or two new ideas always come up in the operational planning phase that will reshape strategic thinking. That is the way it should be. When it comes to strategic planning, the plan should always be to change the plan! Strategic planning (thinking) goes on 365 days of the year. Your strategic plan shapes how decisions are made but decisions also shape and reshape the plan. As for the budget, you can’t have one until you have laid out your game plan. Budgets come last. They are financial estimates and targets in support of the game plan.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Unbilled Law Firm Fees (Work-in-Process)

Admin — Thu, 13 Sep 2007 17:27:50 GMT

Maister’s Law Practice Business model is an essential tool for forecasting and estimating per-partner income. It is a tool for expressing the firm’s financial targets and measuring progress against them. It is the standard by which one firm can be compared financially to another.

As important as Maister’s model is, however, it doesn’t tell the whole story. For example, while not used in Maister’s model, unbilled fees (work-in-process) and billed but uncollected fees (accounts receivable) have a controlling influence on partner distributions and should be consistently tracked. Reduce either and per-partner distributable income goes up. Yet, because most law firms use the cash method of accounting, both work-in-process and accounts receivable are off balance sheet. Like the old saying implies, both are often “out of sight, out of mind." As a result, both categories of uncollected work value receive too little management attention.

This post will deal with unbilled fees, aka work-in-process, WIP or inventory. The typical law firm has 60 to 80 days of unbilled fees in its inventory, making it one of the largest assets of the firm. It is earning nothing. It is a wasting asset! Unbilled fees become less valuable with every passing day. We know from our own experience and from the experience of other businesses that the likelihood of collection decreases with time.

The striking thing about this valuable asset left to waste on law firm’s shelves is that there is little reason for it; nor is anyone happy about it. There is no reason a law firm cannot bill timely for work performed where work is provided on an hourly basis. Likewise, except for pure contingency work, there is no reason a law firm cannot bill progress payments for work performed on a flat fee or other alternative arrangement. On the client side, no one is happy about getting a bill for work performed months prior. Tardy billing frustrates the corporate client. Rather than celebrate the free loan from their law firm, they scoff and joke at the lackadaisical and un-businesslike billing practices.

Speeding up the billing process serves everyone’s interest and puts more income in the pockets of the partners. Doing so takes management attention and that translates into planning, setting goals, measuring performance and holding people accountable. The first step is measuring the firm’s current level of performance.

There are two approaches to measuring the firm’s inventory of unbilled fees:

For internal management purposes, the best tool is an aging report—for example, what percent of unbilled items are less than 30 days old, 60 days old, 90 days old and more than 90 days old? The managing partner will want that answer on a firm-wide basis with the ability to drill down to the same information by location, practice class, billing attorney, client and matter.

Externally, surveys and benchmarking services tack the metric Unbilled Days as an indication of a law firm’s billing efficiency. Since most midrange law firms report fee revenue on a cash basis, the metric normally uses fee collections for a twelve month period divided by 365 to arrive at the value of one day's billings. That divided into the dollar value of unbilled fees (WIP) yields the number of unbilled fee days.

Your law firm’s business system should be able to track both unbilled days and the aging of unbilled items for you. To keep billing efficiency in the eyes of the firm’s managers, including practice area leaders and billing attorneys, both unbilled days and aging metrics can be included in dashboards custom designed for each law firm leader. Dashboard technology, like that available from Juris, provides continuous “situational awareness” over each individual’s area of responsibility. When top level area measurements indicate a problem, the responsible individual can quickly drill down to identify the problem point and take corrective action.

The Excel® spreadsheet below illustrates the computation of Unbilled Days. A copy of the spreadsheet is attached for your use if your accounting system lacks the capability to measure and keep the metrics front and center on a continuous basis.

Shortening the billing cycle has a significant positive impact on distributable income to the owner/partners. While every law firm is different, the average firm has 72 days of unbilled work. Reducing the bill time in half would free up cash for distribution equal to more than a month of fees! With faster billing, adjustments will also decline since client appreciation for work is highest at the point the work is performed. That appreciation declines with the passage of time. Fewer adjustments increases margin and that means a permanent year-after-year increase in per-partner income Steps to speed up billing often result in other indirect financial benefits, including increased productivity (utilization) from better time tracking methods, lower overhead due to increased accuracy and improved administrative practices, greater client satisfaction with the firm’s billing and communication process, etc.

I have attached an Excel template should you wish to use Excel to track unbilled days for your law firm.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Why Some Law Firm Plans Never Go Anywhere

Admin — Wed, 12 Sep 2007 17:21:34 GMT

A few days ago I posted Why Some Law Firm Won’t Plan. The answer to that question and the one above are similar. Jeff Gillingham with London-based SSG Legal summed it up in one sentence:

The problem is that culture eats strategy for breakfast.

Gillingham’s comment appeared in the July/August 2007 edition of Managing Partner. He was writing about selecting the right successor to a retiring managing partner and was making the point that selecting a successor who is counter culture is a path to trouble. But his comment also explains why so many law firm plans go nowhere. The culture (the core beliefs and biases) of the entrenched partners controls behavior. A firm’s culture is a product of the people in the firm. You don’t change a firms’ culture without changing the people.

Any plan with a chance of success has to start with the answer to the question, Who are we and what do we believe?. You can’t ignore the answers and planning without asking the questions will be a waste of time. A plan has to build on the firm’s culture and on the firm’s strengths if you expect buy-in by the firm’s legal and administrative team.

It is not surprising that people rising to a leadership position feel they have a mission to transform the organization. Few people move into a leadership position with the mandate to preserve the status quo; however, transformation is too strong a word. Transformations require either brain surgery or wholesale personnel changes. I should add that transformations are rarely successful. Rather than a mission to transform the firm, what people really want is to energize the firm. Problems tend to hide opportunities and usually solve themselves through the pursuit of opportunities. Weaknesses are often no more than strengths carried to an extreme. Rather than eliminating a weakness, a sound plan can harness its strength aspects. Perceived cultural negatives are likely to be the building blocks of a firm’s value proposition and brand. A plan that works will energize the firm rather than transform it. It will capitalize on the strengths of the firm’s culture. It will pursue opportunities rather than problems. It will market the firm’s culture as a strength.

A new leader or a new plan that is counter culture will go nowhere. Culture will win every time. As Gillingham says, “Culture eats strategy for breakfast”.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.