by James D. CrosbyHow to Make Money! Tips for Financial Success in a Solo or Small Firm Practice.
We lawyers are privileged to do interesting, significant, challenging work for the benefit of others. But we also need to make money to pay our bills, support our families, and do the things we want to do – money to sustain our personal lives. So, we must figure out how to turn this interesting work we are privileged to do into a sustained flow of money that allows us to continue to do this interesting work we are privileged to do. Despite the public perception of lawyers rolling in dough, turning the practice of law into a profitable business, at least for a lot of lawyers, and especially young attorneys striking out on their own, is not always that easy. Last year, I published an article here providing “Tips for Solo Success”. With this article, I narrow my focus to provide tips for financial success as a solo or small firmer.
To sustain any degree of long-term financial success, lawyers must run their legal practices like businesses. Fee arrangements with clients must be business deals with well-understood risks and benefits, and off-ramps for both sides if terms are not met. Lawyers do provide services guided by professional and ethical responsibilities. Requiring clients to meet their fee obligations, running efficient practices, and turning good profits are not inherently at odds with those professional and ethical responsibilities. One can always choose to stay in a case too long for a non-paying client, or cut one’s fees to get a case, or make any number of bad business decisions in furtherance of case, cause, or client. Sometimes, you just can’t walk away from the case, or the new client who can’t pay full freight really needs help and you can’t say no, or you just hang in with a slow-pay client because you like the guy and believe he will get you current in six months. We are all people driven by emotions, perceptions, and impulses, good and bad, and not always by the calculated need to make money. But one needs to make those types of decision fully understanding the likely ramifications and not with pie in the sky hope it will all work out. Run your practice like a business based on thoughtful, deliberate, decision-making. That is the key to long-term success. Here are some tips to help you do just that and to help you find financial success in your practice:
1. Set Market Rates and Hold to Them.
This is, at times, a hard lesson to learn. Discounting your rates or fees to get new clients is bad business. It is a race to the bottom. There is always an attorney around the corner who will work cheaper than you. Your attorney time is valuable. It has a market value. Investigate the market, determine what your rate/fee should be, and then stick to it. Discounting your rates/fees undermines your value to your practice, and the perception of your value to your client. If you want to give some money back to a good client, give a courtesy discount for work done.
2. Get Fee Agreements.
Needless to say, you are required to do so in most instances under State Bar Rules. So, there’s that. But fee agreements are also just good business. They provide, in black and white, the obligations and expectations of both attorney and client. They set forth in detail how the attorney will be paid, how her fee will be calculated, and the ramifications of non-payment. It provides exit points for attorney and client under articulated circumstances. It is the source and basis for any successful enforcement effort in the event the client breaches. Further, negotiation and execution of the fee agreement requires both attorney and client to reflect on the seriousness of, and significant obligations arising from, the to-be-undertaken work. It’s easy to say I want to sue so-and-so for this-and-that! It requires more thoughtful reflection when to actually sue so-and-so for this-and-that, one has to sign a fee contract with significant financial commitments and pay a retainer. And that is as it should be!
3. Require Replenishing Retainers.
Require a retainer in every case and the replenishment of that retainer if it falls below a pre-determined level. If a prospective client cannot, or will not, provide a retainer, then that client is likely not serious about sustaining, has no idea what it costs to sustain, or will not be able to sustain, the financial burden of the matter going forward. Set a fair minimum retainer on all your cases. Modify upwards dependent on the nature and scope of the case. Tell prospective clients you have a minimum retainer on all cases and let them move on if they cannot meet that retainer. Don’t negotiate below your minimum retainer or, if you do, do so with the clear understanding that it is not a wise business practice. The replenishment requirement, if enforced, allows the attorney to remain current and above water in a matter on an ongoing basis. If the client does not meet the replenishment requirement, one can withdraw without getting significantly underwater on the fee. Plus, assessing and setting a fair retainer in a case requires the attorney to seriously consider and assess the nature, scope, cost, and financial risk of the prospective matter. A “sign them up, worry about the fee later” approach to client generation is not good business.
[3.5. For Litigators Only – Get Trial Deposits!]
If you’re not a litigator, you can move to #4. For litigators, seriously consider including a provision in your fee agreement that allows you to increase the retainer size as you move towards trial or other significant case event. Litigators are most at risk, financially, as cases ramp up for trial. The work, the fees, the costs increase, often times explode, outpacing retainer levels set early in the case. Then, post-trial, one finds oneself in deep to a client, with a concluded matter, and a client wanting to negotiate the fee. It’s even worse when you didn’t get the desired result at trial. Include a provision that allows you, within a set time before a trial or other significant marker, to require a deposit of fees that fairly covers the cost of that event. Not only does such a provision give the attorney some degree of protection from the risks of a trial, it also requires the attorney and client to seriously focus on and assess what the case will cost to go to trial and whether settlement is a viable alternative. Heading to trial with a case on financial cruise control is bad business.
4. Record Time Concurrently.
Easy to say, hard to do. I hate recording time. Every attorney hates recording time. For those of us who principally work on an hourly basis, it is, without exception, the worst part of practicing law. But, in the context of running our businesses, it is the most important thing we do. That recorded time is the life blood for our practices. And our clients are entitled to fair billing, accurately reflecting what we did for them and what we are billing them for. The only fair and accurate way to record our time is to do it as we do the work. The major billing programs all have running clock features to record time as you work and mobile time-keeping functions for work on the go. They work great. It just takes discipline, excruciating discipline, to use them. In this age of email, we all have email roadmaps to create time entries for past work done. And, if we are honest, we will all admit to having done so, perhaps quite often. But, we really shouldn’t. It’s not fair to the client, it serves to delay prompt end-of-the-month billings and, for the attorney, invariably results in the underreporting of billable time. Further, it takes much more time to recreate billed time than it does to record the time while you work. So, if you don’t record while you work, you will ultimately end up spending more time, creating less accurate billings, which underreport your actual billable time – spending more time to produce less accurate billings which make you less money! Dumb, huh? Currently, I use the Time Capture function in TimeSlips – works perfectly when I am disciplined enough to use it, which is most, but surely not, always. But I try!
5. Capture All Billable Expenses.
Your fee agreement will detail what expenses are to be charged to the client and how they are to be charged. Promptly charge the client for and collect those expenses. Expenses are incurred and documented in many ways in this digital age. Many services, like filing fees and online research fees, are drawn directly from bank accounts with emailed receipts. These can get lost in the daily deluge of email, then not billed and recovered. A few unbilled filing fees or service charges a month can add up to a sizable chunk at year’s end. And, that’s money right out of your pocket. In my office, both my paralegal and I double check our draft bills at month-end against withdrawals reflected in my online operating account statement. We, invariably, catch charges, usually small ones, that otherwise may not have been billed. Try that approach – works for us.
6. Bill Fairly and Promptly.
Bill promptly at the end of your billing period. Cash flow is critical in a solo or small firm practice. Billing delays interrupt regular cash flow. Don’t sit on cashflow in the form of un-billed, un-invoiced time. You don’t bill promptly, you don’t get paid promptly, you can’t pay your bills or bring money home promptly. It’s pretty simple. Plus, prompt, regular billing creates a positive client perception of office efficiency. And, the more you delay your billing in a case, the more work you put into the case without corresponding case cash flow, placing yourself at greater financial risk in the case. And, bill fairly. Work and bill the case as and when required, and not as the billing calendar dictates. Do not cram in a bunch of work on a case into the last couple of days of the billing period just so you can squeeze it into this billing period as opposed to the next. Clients will see that and properly question it.
7. Religiously Monitor Your Finances & Pinch Every Penny.
Again, cashflow is king. Regularly monitor your collections, your billings, and your expenses to maintain cash flow. If a client is not paying when she should, call her. On the expense side, buy what you need. Beyond that, pinch every penny. It’s not the big, fully vetted expenditures that hurt. You have done the cost-benefit analysis on those. It’s always the accumulated small expenditures that hurt. Get what you need – after that, pinch every penny!
8. Enforce Fee Agreements.
Enforce your fee agreements. If the client is not paying in accordance with the fee agreement, get out and move on to the next client. If the client will not replenish a retainer per the agreement, get out and move on to the next client. You are running a business. You need cash flow to meet your business obligations and take money home. Make sure the clients meet their contractual fee obligations. If they don’t, get out. You’re their lawyer, not their legal line of credit.
9. Make Your Quarterly Tax Deposits.
Make your quarterly tax deposits. Religiously set aside the money you need to pay your taxes. Once you start slipping back on your tax set-asides/deposits, you will soon find yourself getting extensions on your returns to make the money to pay last year’s taxes. Been there, done that! It gets brutal and it’s a difficult cycle to get out of.
10. Pursue Arbitration to Get Paid.
This will be controversial, But I generally will not let a former client, who can pay, walk away from a bill for my services. It’s just not fair. I will let a client pay off a bill over time, even a long time, and will cut deals to get immediate payment. But, unless it is a fairly small amount or I am satisfied after investigation the client no longer has the ability to pay, I will enforce my agreement and pursue that unpaid bill through arbitration or otherwise. I have rarely been in that position and it has usually been because I did not follow my own advice noted above. And the accepted rationale for not doing so – the invitation of a cross-complaint for malpractice – is surely valid. But I will just not walk away from getting paid for my work. And in those rare instances where I have pursued enforcement of fee agreement, I have gotten paid and there was no malpractice claim. If I follow my own advice noted above, I should not find myself in that position again. And the vast majority of clients, including mine, are good people who understand their obligation to pay for their legal services, and make every effort to do so. So, hopefully, I never have to follow my own advice on this one again!
As a final and rather obvious piece advice, do excellent work and provide good service. Happy clients are paying clients!
With some minor differences, this article appears in the July/August 2019 issue of San Diego Lawyer magazine, available here – https://bit.ly/2LOPQmn. It is reprinted with the permission of the San Diego County Bar Association.
by James D. CrosbyMeet & Confer – First Episode Recorded and Available Soon!
Renee Stackhouse and I recorded the first “Meet & Confer” podcast yesterday with SDCBA’s Technology Officer, Adriana Linares. And it will be available soon! “Meet & Confer” is a podcast for and about our unique San Diego legal community sponsored by the San Diego County Bar Association. We had lots of fun recording this first session and hope you will give it a listen when its up and available. I am excited about this project and to be working with my friends, Renee and Adriana. So, watch for “Meet & Confer” – A SDCBA Podcast for San Diego Lawyers. Make sure to let us know what you’d like to hear about on “Meet & Confer” at [email protected].
by James D. CrosbyComing Soon! “Meet & Confer” – A SDCBA Podcast for San Diego Lawyers
I am excited to announce or, perhaps more precisely, leak that Renee Stackhouse and I will be co-hosting a new podcast, “Meet & Confer” – A SDCBA Podcast for San Diego Lawyers. The podcast will be sponsored by the San Diego County Bar Association and produced by the SDCBA’s very-talented Technology Officer, Adriana Linares. The podcast will be for and about the San Diego legal community. Adriana, Renee and I have a growing list of potential topics for the show, including the generational divide between younger and older San Diego lawyers, interviews of prominent San Diego lawyers, new tech, the San Diego legal marketplace, practicing law in San Diego, practice tips, San Diego lawyer artists, and some mystery topics like “What Happened to the Blackstone Ball?” It won’t just be Renee and I chatting. We will have interesting guests discussing informative and entertaining topics, all in an effort to explore and celebrate our unique, diverse, and interesting San Diego legal community. I am quite excited about this project and to be working with my friends, Renee and Adriana. So, keep an eye out for “Meet & Confer” – A SDCBA Podcast for San Diego Lawyers. Coming very soon!!
by James D. CrosbyAdjunct Professor at USD School of Law – Fall 2019 – Experiential Advocacy Practicum, Litigation.
I am very excited to be an Adjunct Professor at the USD School of Law this coming Fall. Sounds quite lofty – really, not so much. I will be helping to teach a litigation skills course to 1Ls in USD’s very successful Experiential Advocacy Practicum course. I will be leading small group sessions of 1Ls where the students learn and practice litigation skills, like conducting client interviews, taking depositions, or making closing arguments. I thank USD, my law alma mater, and, specifically, Linda L. Lane, Annsley and George Strong Professor-In-Residence for Trial Advocacy, for this new and unique opportunity. This is not a change in careers – my civil litigation/trial practice continues, full speed! This is just something that sounds interesting, allows me to continue my involvement with USD SOL, and provides the opportunity to use my litigation skills, acquired and honed over several decades, to help what will be a new crop of San Diego attorneys.
Jim the professor! Well, kinda.
Should be interesting and fun.
by James D. CrosbyJoined Housing Segregation Case Against San Diego Housing Commission.
I am pleased and quite honored to now be representing, along with attorneys Parisa Ijadi-Maghsoodi and Bryan Pease, the plaintiffs in an action against the San Diego Housing Commission seeking to address significant long-standing housing segregation in San Diego. The action alleges the Commission administers Federal Section 8 program funds in a manner which perpetuates racial segregation and the concentration of poverty in San Diego in violation of state and federal law. The action seeks to enjoin the Commission from continuing to administer its Section 8 program in this discriminatory fashion. A successful result in this case will have a significant positive impact in San Diego and for thousands of its residents. That is why I joined the case and why my fine co-counsels and I will work hard to try to deliver that successful result.
NAACP San Diego Branch; San Diego Tenant Union; and, Darlisa McDowell v. San Diego Housing Commission – San Diego Superior Court Case No.: 37-2019-00012582-CU-WM-CTL
by James D. Crosby“Young Lawyers Giving Back” & “Practicing Law in Changing Times” in the May/June 2019 San Diego Lawyer.
I have a new piece – “Young Lawyers Giving Back” – in the May/June 2019 Edition of San Diego Lawyer. It highlights three young San Diego Attorneys who, despite very busy lives with significant personal and professional demands, spend hundreds of hours providing pro bono legal services and giving back to our profession and communities. These young talented attorneys are not alone. Many young, very busy, San Diego attorneys find the time to do significant work on behalf of others and give to others in need. That bodes well for our profession and for our city!
I also had the recent honor of moderating a SDCBA Panel Discussion on Practicing Law In Changing Times, which is also reported in the new San Diego Lawyer. As you will see, it was lively, interesting discussion!
Check out these pieces and the other fine articles in the new San Diego Lawyer.
by James D. CrosbySolo/Small Firm Tech – Lean, Efficient, Effective – New Article in The Practitioner
I have an article – “Solo/Small Firm Tech – Lean, Efficient, Effective” – just published in the Spring 2019 edition of The Practitioner, the magazine of the Solo & Small Firm Section of the California Lawyers Association. If you belong to the section, check it out! If not, join and then check it out.
by James D. Crosby2019 San Diego Super Lawyer for Business Litigation.
I am honored to be selected a 2019 San Diego Super Lawyer for Business Litigation!
by James D. Crosby12 Tips for Solo Success!
This piece was originally titled “Tips for Solo Survival”. But mere survival is not really a viable long-term option for most attorneys. You will tire of the struggle to make ends meet and the demands on your time without acceptable corresponding financial reward, and eventually move onto something different. The goal is to succeed professionally, financially, and personally. Here are some tips from a long-time solo trial attorney to help make that happen!
1. Market, Market, Market!
You have to commit to robust, regular, never-ending marketing – lunches, dinners, drinks, articles, professional organizations, blogs, email campaigns, social media, …, whatever works best for you! You are in a highly competitive marketplace with tons of lawyers hustling for business. If you don’t market, all the time, if you don’t compete for business, all the time, your solo practice will, at best, survive and, at worst, fail. You will not have a firm brand or in-house marketing professionals to help with client generation or partners sending you work. You’re on your own, you have to market, market, market!
2. Guard Your Professional Reputation and Image.
Your professional reputation and image go hand-in-hand with your marketing efforts. Prospective clients and referral sources will check you out before they hire you or refer you work. Your reputation and image matter. What other attorneys say about you and your work matters. How you treat opposing counsel matters. What your on-line presence says about you matters. Continually build, with everything you do, and tenaciously guard, with everything you do, your reputation. It is the lifeblood of your practice.
3. Do Excellent Work and Provide Great Personal Service.
This seems obvious, but to succeed, solos simply have to work harder, perform better, and provide better service, than firm attorneys. With many clients and referral sources, there is an inherent perception that solos cannot compete with larger firms. That’s really BS. But, you have to work hard to overcome, or more precisely, not validate, that perception. Start with promptly returning calls – do that and you are way ahead of a good chunk of your competitors!
4. Case Selection is Key – Take Good Cases, Don’t Take Bad Ones.
You must be disciplined in your case selection. More precisely, you must have the discipline to say “No” to a marginal case even when you are not that busy. Slow-pay or no-pay work, or poorly vetted contingency matters, will kill a solo practice. Cash flow dies, and better work is squeezed out or not properly attended to. You are better off hustling for new business than spending that valuable time on lousy cases that don’t make you money.
5. Enforce Fee Agreements.
Get written fee agreements and, more importantly, enforce them. If the client is not paying in accordance with the fee agreement, get out and move on to the next client. If the client will not replenish a retainer per the agreement, get out and move on to the next client. You are running a business, you need cash flow to meet your business obligations and take money home. Make sure the clients meet their contractual fee obligations. You are their lawyer, not their legal credit line. It’s no fun, and bad business, to be at the office at 10:00 p.m. on a work night, or on a weekend, working for a client who is not meeting his fee obligations. There is plenty of worthy pro bono work you can do, by choice! Don’t let your supposed-to-be-good-paying clients become pro bono ones.
6. Set Market Rates and Hold to Them.
Your attorney time is valuable. It has a market value based on your experience, reputation, and expertise. Investigate the market, ask other lawyers, determine what your rate should be for what clients, and then stick to that rate. Discounting your rates to get new clients is bad business. It is a race to the bottom. There is always an attorney around the corner who will work cheaper than you. Discounting your rates at the outset undermines your value to your practice, and the perception of your value to your client. If you want to give some money back to a good client, give a courtesy discount for work done on the bill. Don’t cut your rates.
7. Religiously Monitor Your Finances & Pinch Every Penny.
Cash flow is critical in a solo practice. Regularly monitor your collections, your billings, and your expenses to maintain cash flow. If a client is not paying when she should, call her. (Honestly, if you can’t call a client to ask for payment on a past-due invoice, you are probably not cut out for solo practice!) Get your billings out promptly – don’t sit on cashflow in the form of un-billed, un-invoiced, time. Track and promptly bill all expenses. You paid those expenses, that’s money out of your pocket. Promptly bill and get reimbursed. On the firm expense side, buy what you need to work harder, perform better, and provide better service than other attorneys. But beyond that, pinch every penny. It’s not the big, well-thought out, fully vetted, expenditures that hurt. You have likely done the cost-benefit analysis on such purchases – they will make you money. It’s the accumulated small expenditures that hurt. Get what you need – after that, pinch every penny!
8. Make Your Quarterly Tax Deposits.
Make your quarterly tax deposits. Religiously set aside the money you need to pay your taxes. Once you start slipping back on your tax set-asides/deposits, you will soon find yourself getting extensions on your returns to make the money to pay last year’s taxes. And that is a difficult cycle to get out of. It requires discipline and, sometimes, a leaner take-home than you might like but don’t get yourself into the “get an extension to make money to pay last year’s taxes” cycle. Been there, done that, it can get brutal.
9. Invest in Good Equipment & Software.
Invest in good, reliable equipment and regularly updated, established, software. These are the tools you use to efficiently produce quality work and provide good service. Yes, pinch pennies and scrutinize expenses, but don’t cheap out on the core functions of your practice.
10. Prepare for the Unexpected – Redundancy and Backups.
Expect failures – build in redundancies and regularly back up your data. Don’t let your practice become paralyzed by a hard-drive, or equipment, failure. Computers, hard-drives, and basic office machines (printers, scanners, etc.) are pretty cheap these days. Have an extra desktop, or printer, even cheap ones, ready to go in the event of a failure. And, back up your data! Any IT professional will tell you, your hard-drive, with all your data, will fail. It’s just a matter of time. Lost data, without back-up, is a disaster, even a practice-killer. Lost data, with back-up, is an annoyance.
11. Keep it Simple!
This is a pretty simple business. The law can be complicated and complex, and the legal work can be challenging. But, as a business, a law practice is quite simple. We do work, we bill for that work, we collect money in response to billings, we pay our firm expenses and taxes, and we take the rest home. The law can be difficult – the business of law is not. Keep it that way. Don’t complicate things with complex, untested, software where simpler, tested, software will do the trick. Don’t invest in complicated case management/calendaring software, where dual calendars and a regular calendar review will do the trick. Don’t maintain labor-intensive physical files when most everything either comes to you electronically or can be easily scanned and maintained electronically. Don’t mail statements when you can email them. Don’t pay bills with mailed checks when you can pay them on-line. Don’t re-invent a document every time when you can create a document template for repeated use. Don’t write your time down on a yellow pad and then enter it again into your billing program – enter it directly into the program the first time. Simplicity means efficiency. Efficiency means reduced overhead, solid hours worked and billed, better service, and happier clients. Happy clients, solid billings, and low overhead means more money in your pocket. More money in your pocket makes you happy. Keep it simple!
12. Hustle, Hustle, Hustle!
Solo practice offers many rewards. Independence. Full control of your time and schedule. Freedom to take the cases you want. It also can be quite lucrative. But, it is not for the faint of heart. You are on your own. If you don’t have work, you make no money. If you don’t get your bills out, cash flow dies. You don’t have partners making money to smooth over slow periods or to send you work when nothing is coming in. Bad case selection and poor business decisions can be disastrous. You must continually compete for business in a tough marketplace and regularly do battle with well-heeled, well-staffed, adversaries. And no matter how much you crunch the numbers, estimate billed hours, do the “hourly rate x hours you have to work” calculation (“wow, I only have to work X hours a day to make a X dollars”), and plan for expected compensation, it almost always turns out different from what you expect or plan for. And, to be succesful at it, and not just get by, you simply have to hustle, hustle, hustle, all the time, every day, year in, year out. But, for me, it’s the best way to practice. Why? Because its my gig – my practice to run, my decisions to make, my adversities to face and problems to solve, my cases to try, my clients to serve, and my money to make. And I like that.
With some minor differences, this article originally appeared in the November/December 2018 issue of San Diego Lawyer magazine. It is reprinted with the permission of the San Diego County Bar Association.
by James D. CrosbySolo/Small Firm Tech
This interesting new ABA Tech Report – https://bit.ly/2EjtpAX – states that only 1/3 of solos and 1/2 of small firms budget any money for tech. The budget percentages for larger firms are much higher. These findings are a bit staggering given that solos/smalls most need the tech to effectively compete with big firms and that cost-effective, useable, efficient, small firm tech is readily available and getting cheaper all the time.