I have been teaching lawyers for years, who want to leave jobs at
big firms to "fly solo" that being out on your own vs. flying solo
inside the establishment of a larger organization is mostly a state of
mind.
But just like Neo in The Matrix who took the red pill and suddenly
woke-up and could see clearly how everything really works, lawyers who
finally wake up and understand "The Golden Rule" when it comes to law
firm management, can adjust their own "M Theory" and set themselves
free to earn alot more money, have alot more free time, greater career
satisfaction and alot more fun!
And the results can even be kind of scary (in a good way), when lawyers who are already out on their own finally "get it".
Large Law Firm Economics 101
Everyone knows I founded How To Make It Rain.com specifically to help solos and lawyers in small firms with five or fewer attorneys. I don’t like to speak of it often – and I like to think of it even less frequently – but I actually have a bit of experience consulting with larger firms too (20-70 lawyers). And there is an economic formula that gets discussed behind closed doors amongst decision-makers in large firms. I think it was Hildebrandt consulting that was the first to coin the phrase "The Rule Of Three". It means that across a wide range of practice areas, in markets all over the country most law firms divvy-up the loot like this:
1/3 – Current Year Overhead
1/3 – Associate Salaries
1/3 – Profit For Equity Owners.
By applying "The Golden Rule" which I coined myself and states that "He or She who controls the clients in a law firm large or small, rules the law firm" to either the above formula or a similar economic formula for small firms (50/25/25) it becomes pretty clear that if you learn how to generate business you can get control over your destiny pretty quickly since there will always be associates who are only too happy to have work fed to them like housepets. But only a precious few who koow how to make it rain.
In a recent post over at My Shingle (one of my favorite blogs) Carolyn Elefant writes about a franchise called Dinner My Way
where you pay to cook your own meals to take home and freeze for meals
throughout the next few weeks. As she explains, "Dinner My Way pre-cuts all of the
ingredients, provides recipes and utensils, but you still do the work." Carolyn says, "The apparent appeal of this set up is that you retain control over the
food, you prepare all your meals at once."
Carolyn’s take on Dinner My Way is that it’s insane for someone to actually pay to do their own work. I disagree one two points:
- The appeal is NOT that you get control over your food. What you pay for is the experience of cooking without the hassles. And the experience of being around other like-minded people in this busy, busy world.
- It’s not insane to pay to do work. You and your clients pay to do work all the time. Think about the last time you paid a gym membership, or paid to participate in any kind of sport.
As Carolyn correctly recognizes, it’s all in the packaging. A great book that anyone who is serious about growing a law firm should consider to be mandatory reading is "The Experience Economy". Basically, the gist is that over the past 30 years our present Service Economy displaced the previous economy based on goods.
In other words, it became less important to have a better mousetrap, than to be able to just catch the mice for your customers, who began to think of themselves as clients.
And what we’re beginning to see are signs of our Service Economy being replaced by one where a person’s Experience with a product or service is of tantamount importance. In other words, it’s no longer good enough to catch the mouse faster & cheaper & more reliably. Now you have to give the customer/client an interesting Experience, not just the expected result.
We’re already seeing this happen throughout the legal industry where so many legal services are percieved to be commodities. The
authors of The Experience Economy write, "Those businesses that relegate themselves to the
diminishing world of goods and services will be rendered irrelevant. To
avoid this fate, you must learn to stage a rich, compelling experience."
I know it’s scary to think that when you went to law school, all you were told you had to do was learn how to be a great lawyer and everything else would take care of itself. Then, reality hit you in the face and you begrudgingly accepted that not only did you have to be a great lawyer, but you had to give great service – fast, valuable and predictable service – which law school never taught you anything about.
And now here I am telling you even THAT is not enough! Not if you want to grow your practice and prevent clients from being poached by all your competitors.
So, the question you are faced with, if you want to make more money and have a better life, is how can you package your services to deliver an EXPERIENCE clients will pay for?
Q – Do you know what you get when you worry too much about making the average person happy?
A - Average results!
4 Part Formula For Financial Success & Happiness As A Lawyer:
1. Find an area of the law or a group of clients that you genuinely
give a crap about. Forget about going into any practice area(s) you
don’t know or care about, just because someone says you can make money
at it. You can make a ton of money in any area of the law if you know
anything about marketing and how to manage a law firm.
2. Run your law firm like a business, not a hobby or a higher calling.
Take an honest inventory of the skills you find yourself lacking in.
- If you’re struggling to get the work in, you need to learn more about marketing.
- If you’re struggling to keep up with the work you already have, you need to learn more about practice management.
- If you’re struggling with a/r, unpaid client bills, or
unpredictable cash flow, you need to learn more about financial
management.
A law firm is a relatively simple business to run profitably. And
there are plenty of cost-effective resources to help you, including a
bunch created by me. Don’t just sit around waiting for things to
happen for you, like a houseplant waiting to be watered. DO SOMETHING ABOUT IT!
3. Ignore 99% of your critics. If you’re doing things that are
extraordinary and above-average most of the other lawyers in your
market will hate you for it. That’s just a sad fact of life. If you
have no critics you’re not doing enough to push the envelope for the
benefit of the only people who matter. . . paying clients, productive
referral sources, and YOURSELF!
4. Laugh all the way to the bank. Attend every school play for your
kids. Make it home in time for dinner most nights. Turn-down clients
you don’t like. Celebrate milestones with your staff. And, get
control of your law firm business so it doesn’t control you!
You know, everyone goes around talking about the importance of customer/client service. There are whole books, in fact entire industries built around the notion taht consumers today have choices and if you don’t make things easy for them, your competition will. Less charitable books and experts speak of the consumer’s lack of "loyalty".
Anyway, I just got the 90-day warning on my complimentary virus protection software that came with my new laptop. Of course when I clicked on it, I was sent into the Circle of Hell. Here I am ready, willing and able with credit card in hand and I cannot figure out how to give them my money! Their process is THAT screwed-up (McCaffee, by the way)
What’s it like for YOUR clients to try and do business with you? Is it time to send in a secret shopper to find out?
Even though
HowToMakeItRain.com is geared specifically for solos & lawyers in firms
with five or fewer attorneys, an associate who claims to be on the partnership
track at a mid-size regional firm recently sent me an e-mail asking why I feel
so strongly that every lawyer should learn how to make it rain.
Below is part of my answer:
Big law firm economics depend
on the associates or non-rainmaking partners to NOT NOTICE OR NOT MIND
the fact that they will bill dozens, maybe hundreds of hours doing the
substantive legal work while the Rainmaker enjoys an equal slice of the profits
from that client’s fee.
All because the Rainmaker knew how to get the client in the door, identify
their priority problem or opportunity, propose a course of action and reach
agreement as to the value of the services.
So the Rainmaker gets paid
about the same amount to help the client identify and figure out a logical plan
of action to solve their problems and maximize their opportunities, which the
clients appreciate; And the house pet has to spend countless hours executing
the Rainmaker’s plan.
But they both share about
equally from that client’s fee. And which one do you think the client
appreciates more and will call the next time they themselves or one of their
friends, family members or clients have a problem or an opportunity?
(Rhetorical question)
Matt Homman over at The [non] Billable Hour turned me onto this article about Yale’s business school experimenting with a new MBA curriculum:
The heart of the new first-year curriculum is a series of eight
multidisciplinary courses, called Organizational Perspectives, that are
structured around the organizational roles a manager must engage,
motivate, and lead in order to solve problems — or make progress. These
roles are both internal to the organization — the Innovator, the
Operations Engine, the Employee, and Sourcing and Managing Funds (or
CFO) — and external to the organization — the Investor, the Customer,
the Competitor, and State and Society.
I think this is a great idea for law schools to consider. . . teach a curriculm based around the real-world experience of lawyers. In Canada students must spend a couple of weeks "articling" in a variety of different practice areas.
So, if you were Dean of your Alma Mater, what would YOU put on the curriculm? This is not a rhetorical question. I don’t want to color your opinions with my own. . . I’ll explain why later, but I’d appreciate any thoughts or suggestions from readers of this blog.
