Geneva Yourse was a relatively new attorney when she took a big risk: she quit a secure job as an attorney with a family friendly firm. Why? Because she wanted to pursue something bigger: to hang her own shingle.
Hanging up a shingle, maybe a solitary endeavor, but it isn’t an isolated dream. LexisNexis research indicates there are roughly 450,000 solo- or duo-law firms in the United States.
Categorically, solo shops tend to be founded by attorneys who are a bit older and have broader experience as practitioners of law. This experience is often helpful, but stepping outside the infrastructure of an existing firm, has drawbacks and also introduces an entirely new set of challenges that come with running a business.
Mrs. Yourse anticipated some of these challenges such as developing a book of clients, but she was caught off guard by a number of problems she never foresaw. Problems like time wasting activities. This might seem obvious since every practicing lawyer knows unless you are operating under an alternative fee arrangement, if you aren’t billing you aren’t earning money.
It’s an easy concept to acknowledge in theory. Who, in the legal profession wouldn’t disagree that time is often literally money? The test comes at the end of each day in the tally of billable hours.
For one and two person law firms, billing research shows for every hour sitting in an office, 24 minutes is not billed, and according to the research, you work on average a 9 hour day. This equates to 3.6 hours, or 40% of your time, not adding to the bottom line of the law firm.
Getting a Handle on Time Management
For Mrs. Yourse, the answer was simple: she would track all her time. This would provide her with a record of time keeping for analyzing her all activities. To be clear, this wasn’t just to account for billable hours, but also to account for how she was spending her non-billable time. Only by analyzing those non-billable hours could she see where and how she was spending such a large chunk of time and develop a plan to refocus her priorities.
What she found was keeping account of all her time – whether billable or not – was especially useful for making data-driven business decisions. For example, she had accepted some cases based on a contingency fee model and when the case was settled, her timekeeping enabled her to understand whether or not a contingency was a) profitable or b) more profitable than her hourly billable rate.
Business Process, Policy and Billing Efficiency
For a solo practice a policy might sound a bit overboard, however this is driven at two overlapping objectives. First, putting a goal, even personal business goals in writing, is often the first step towards crystalizing the intent and developing a strategy for meeting it. Secondly, solo-firms often grow into duo-firms, or at a minimum, hire paralegal or support staff to enable the billing attorney to focus on practicing law.
Here are seven things solo- and small-law firms can do to improve billing efficiency.
1. Require all time keepers to bill for all hours. Like Mrs. Yourse found, it’s hard to manage time if you are not measuring how we’re spending that time. Certainly this will enable decision making about priorities, but also as the business grows, this tracking will enable you to spot when it makes sound business sense to hire additional support staff or to bring in a partner.
2. Require non-timekeepers to account for hours too. Billing drives the motivation for timekeepers to account for time, but how support staff are spending their time can be equally important from a business perspective. This will enable the attorney to see how support staff contributes to non-billable activities enabling attorneys to focus on billable work. In addition, this can lead to the business justification of new tools, technologies, or a reset of priorities that can help reduce expenses.
3. Set categories and codes for non-billable hours. Law firms often have precise codes to associate with billable hours. For example, document preparation on behalf of a client is coded differently than a phone call or email communication. Likewise, it’s a worthwhile endeavor to put some thinking into non-billable codes and the activities that should be included under those codes. Professional development, operations and marketing are examples of high level categories, which can be further broken down into subcategories. As a case in point, marketing might be broken down further into networking for attending events, content marketing, if you’re writing contributed articles and speaking, if you’re presenting at a local social club or bar association.
4. Look for ways to hand off non-billable tasks. With good timekeeping records and a solid understanding for how time is being spent, you’ll begin to see other ways to hand off non-billable tasks to support personnel. Indeed this is the value proposition behind support staff: to keep you focused on billable work!
5. Clear and simple invoices. For some firms, it may be less about the amount of the bill than it is the bill itself – that is to say what it communicates or fails to communicate about the work being completed. Complicated invoices that are too hard for the client to understand, invoices that fail to make it clear exactly what the client is being billed for, or don’t match up with client expectations – all can create resentment in the client’s mind. This in turn increases the likelihood of a bill challenge and means clients are less likely to pay them in a timely manner.
6. Habitual write-downs. There’s a cartoon floating around on the web with a scruffy looking attorney carrying a sign that asks for donations to support their pro-bono habit. It’s easy for lawyers to slip into a habit of writing down bills, even without client prodding. Whether it’s merely goodwill, lack of enough value on their own work or because they’re trying to curry favor with their clients, making a regular habit of credit memos or write-downs not only creates client expectations of more write-downs, it devalues the importance of the firm’s work, literally and in the mind of the client.
7. Legal technology. There’s no shortage of tools available to small businesses for billing and accounting, but there is one guiding principle worth considering: Look for tools designed for lawyers. From trust accounting to e-billing compliance, practicing attorneys have unique needs (and ethics) that generic tools are simply not designed to handle.
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Three years after starting her firm, Geneva Yourse sold her firm to slightly larger firm, an exit that would not have been possible without sound business practices, including billing efficiencies. She continues to practice law for Cauley Pridgen, P.A. and entrepreneurial law firm based in North Carolina.
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