It’s a new year, but old habits may be stealing your law firm’s profits. While the legal profession unquestionably includes some business savvy attorneys, it is also filled with attorneys who are much more comfortable in the courtroom than the boardroom. Unfortunately, when this is the case, practice management may not be handled with an eye towards growth and profitability. This can lead to bad habits, with policies that steal profits and keep law firms from growing into successful businesses. Below are six bad habits that may be holding your legal practice back. If any of them sound familiar, you’re in luck. It’s January and what better time to break the bad habits and create profitable new ones.
- Not planning for financial downturns – Things may look good right now. New matters are rolling through the door. Your current caseload is generating more profit than initially anticipated. You even found a new office space that is saving you almost a grand each month. Law office life is good, but chances are that a rough patch is just around the corner. That’s the thing about the practice of law. One month, the dollars are falling from the sky and the next month, you are in a financial drought.
That’s why it’s extremely important to plan for those uncomfortable luls in business. For example, are you adequately utilizing the resources available at your banking institution? A reserve account is an effective way to save some of your current excess funds, while earning interest. You may also want to consider establishing a line of credit with your bank while finances are good, which can provide an emergency financial resource when things are bad.
- Inadequate business sense – Some attorneys are content to run their law offices like a lemonade stand on the side of the road. Commingling business funds with personal funds. Working without a sufficient support staff. Not establishing marketing goals. Knowledgeable business professionals understand the necessity of running a company as a business, which includes maintaining separate banking accounts, hiring a skilled support staff, and developing an effective marketing plan.
These basic elements are required to effectively build and maintain any successful business, including a law firm. If you have been running your practice without them, it is passed time to get some business classes under your belt or consult with a professional who can get your office cleaned up and using better business practices.
- No plan for development – I’m sure you’ve heard the old saying that a failure to plan is a plan for failure. You hear it so much because it is absolutely true. Growing your law practice requires thoughtful consideration about where you want to go and how to get there. A development plan forces you to create specific objectives for increased profitability within your firm. By creating concrete goals and developing actionable steps to reach them, you better situate your firm for financial success. Check out this month’s blogs for a detailed post on development plans and how to create one for your law firm.
- Inflexible fee arrangements – Are you still stuck in billable hour mode, when flexible billing is taking over the legal profession? From flat fee services to hybrid arrangements, flexible billing can provide you with greater control over your profit margin, while leaving your clients happy and ready to refer your services. With fixed fees, your clients know the cost of your services upfront, which eliminates the fear of surprise fees or unexpected charges. Instead, they are able to agree or disagree with your fees right from the start, lessening the possibility of difficult and frustrating fee disputes down the line.
When coupled with project management planning, fixed fee arrangements can help your firm be more efficient, which leads to greater profitability. By taking the time to plan commonly handled matters, you can identify areas where time and resources are being wasted. You can also craft a fee amount that adequately addresses your firm’s efforts and leaves you feeling like you and your team have been sufficiently compensated.
- Stale technology – Are you still using an antiquated computer system? What about that moody copy machine that is incredibly expensive to lease and constantly requires service? Maybe you still rely on a legacy billing system that diminishes your profits and impedes your mobility. Innovation generally has two purposes. It makes life easier and/or it makes life less expensive. Within the legal industry, there are numerous innovations that effectively do both.
Instead of fighting with that old copy machine, why not go paperless. It’s much more efficient and you would be shocked at how much money you could save on paper and toner and service calls… oh my! Trade in that legacy billing system for an innovative time tracking and billing service like TimeSolv. These folks have been providing law firms with inventive billing tools for more than 15 years. With TimeSolv, you aren’t restricted by an expensive and cumbersome server. Their cloud-based service provides you with the freedom to accurately track your time from wherever you may be working at the moment.
- A blind eye – Lastly, and possibly one of the most profit-inhibiting bad habits, is turning a blind eye to the current state of your law practice. As pointed out by Brooke Lively in her post for Attorneys at Work, even if you have a solid plan in place and a firm understanding of how business grows, a failure to regularly assess your practice can affect your profitability. This is something that should be happening quarterly, or even monthly. Look at what you projected to accomplish and compare it with what actually occurred. This way, you can catch the problem areas quickly and make informed decisions about where to make changes.
Bad habits are hard to break, but you must break them if you are to meet your goal of increased profitability for your law practice. Look at your practice with a critical eye and don’t hesitate to switch out those old money-stealing habits for new profitable ones in 2018.
About Erika Winston:
Erika Winston is a freelance writer with a passion for law. Through her business, The Legal Writing Studio, she helps legal professionals deliver effective written messages. Erika is a regular contributor to TimeSolv and a variety of other publications.