August 2006

1. If You Hang Your Shingle, Will They Come?
2. The Cost of a Broken Business Model
3. Internet Marketing 101: A Blog Is Not a Web Site
4. The Latest News from LawBiz® Management Company

Articles

1. If You Hang Your Shingle, Will They Come?

   According to the American Bar Foundation, nearly half of the one million lawyers in the United States are solo practitioners, while another twenty percent-plus are in firms of 10 lawyers or fewer. It seems reasonable to say, despite all the publicity about consolidation and the rise of megafirms, that the majority of lawyers stand a good chance of opening their own law firm, or starting one in partnership with just a few other lawyers, during their professional careers.

   Having taught Entrepreneurship at the college level (UCLA and USC) for many years, my experience there leads me to suggest that it takes five years to get a new business - including a new law practice - off the ground and be stable enough that it will continue. That doesn't begin to address profitability, only stability and survival.

   If you've turned the corner in a new practice and are making a profit, you're probably doing as well as or better than most in solo or small firm practice. A few recent statistics demonstrate that fact. In California, according to the State Bar, one quarter of all lawyers earn $50,000 a year or less. Earlier this year, USA today quoted a professor at Loyola University Law School as saying, "The average (American) lawyer is working at a small firm making $60,000 to $100,000 a year." There is a price to pay for the independence and free spirit of solo or small firm practice. Money is likely not the driving force to open your own practice, but it is obviously a vital factor in whether the practice survives.

   That being the case, how can you manage the inevitable (and often steep) time curve that it takes to build up the business? The best business development strategies are common sense ones:

   • Pick up the phone and call friends, family, business associates, past clients. Tell them that you have some spare time and would be happy to help them with any problems.
   • Chat with the sales folk that will invariably pop in unannounced at your office, as well as with other people in your office building. Always have a written summary of your services and a business card handy for them. You'll be surprised how fast they can spread word about you.
   • Communicate with your law school friends. If not to just discuss what's going on, then to discuss cases, clients, war stories. Other lawyers are often excellent referral sources.
   • Check the local bar referral services, which advertise with a broader reach than you have.
   • Check the local legal news for solos who are retiring. Offer to assist them with the transition (check with your local bar rules, first.). Rules of Professional Conduct often require retiring lawyers to refer their clients to new counsel - why not to you?

2. The Cost of a Broken Business Model

   As autumn approaches, the new associate classes arrive at law firms large and not-so-large. Recently there has been a spate of articles, in The Wall Street Journal and other publications, suggesting that associates at major law firms are highly dissatisfied with their lot in life. The associates are cynical, with a prevalent attitude of, "This is a dysfunctional system, and it's not my fault." Large firms are trying to combat this by superficial fixes that can give them a better score in the various associate satisfaction surveys. But the real problem goes much deeper.

   The current business model of these firms "eats 'em up and spits 'em out." This "culling process" gets cheap labor (yes, even despite what seem to be high salaries for the young talent) for five, six or seven years. Then, if they don't make partner, they're asked to leave to make way for the next group of young "unwashed" law school graduates. This is not the way Corporate America chooses to do business. Until law firms understand that there can be a better model of running a law firm, associates' satisfaction with their workplace will remain unfulfilled.

   One might argue that the associates know what they're letting themselves in for when they join a large firm. I'm sure many new law school graduates participate in the charade with hopes of becoming one of the small group that earns top dollar. Some may even be aware of the large psychological and social cost (such as the sacrifice of marriages and family time) to get there. But most human beings are optimists (until they conclude otherwise), and I suspect most young associates believe the sacrifices are worth it because they will be among the select few - right up until the moment that they are shown the door, or decide to leave.

   Ironically, this broken business model also has substantial costs to the firms - including those where partner profitability averages $1 million and more per year. Managing partners of large firms have told me that their firms incur a loss of $200,000 to $400,000 for each lawyer that leaves the firm. This figure includes the cost of recruiting, training, and client service disruption. USA Today on July 25th surveyed a wide cross-section of employers and quantified the cost of a lost employee this way:

   • 15% say the cost is equal to an employee's annual salary
   • 42% say the cost is 2 times the employee's annual salary
   • 26% say the cost is 3 times
   • 6% say the cost is 4 times
   • 11% say the cost is 5 times!!!!!!

   For law firms, such a cost burden means it only makes practical business sense to treat associates with the same care with which they're hired. Provide associates with extensive education to improve their skills and involve them in the financial and organizational life of the firm. It's the best long-run human resources policy - and profitability strategy.

3. Internet Marketing 101: A Blog is Not a Web Site

   What, ultimately, is the difference between the marketing activities of large and small firm lawyers? To be effective, irrespective of the size of the law firm or the firm's marketing activities as a whole, each lawyer must establish the expertise necessary to entice a prospect to become a client. This is done using many tools, some with more credibility than others. Having a presence on the Internet, in the form of a web site and/or a blog, is the tool that carries the most clout in leveling the marketing playing field between the large and small firms, and even solos.

   Note that you can have either or both separate blogs and web sites. It's counterproductive to try to combine them into one because they are two different marketing vehicles. A web site is your online portfolio of marketing materials, describing what you can do and giving examples of how you do it. A blog is a means of face-to-face conversation with a client or prospect when you can't meet face-to-face, which means it should be informal, conversational, and meaningful.

   Longtime readers of this Ezine are likely aware that I have a separate web site (www.lawbiz.com) and blog (www.lawbizblog.com). The purpose of both is to present information about my coaching and consulting practice in a way that search engines can find and display for those who seek these types of services. The search engines prefer sites with multiple links, and having separate blog and web sites helps. You never know how people find you, but whatever their search process, you've now given them an opportunity to learn more about you. Both sites have distinctly different purposes. In my case, the blog is my writing tool … this is where I place my thoughts on The Business of Law® and my podcasts. My web site is more an electronic brochure which also is the home of my published article archive, client success stories, biography, and other basic information. This material is not prominent on my blog.

   Remember that both web sites and blogs should be living embodiments of your practice, with frequent updates. This is especially true of blogs, because the competition for attention is so fierce. Search engines give the highest ranking to those blogs with frequent posts, and given that (according to the ABA) there are 70,000 new blogs created and 1.2 million new blog items posted every day, frequent posting is almost a necessity. The ABA estimates that 6% of lawyers now have blogs, and that 57% of all lawyers read at least one blog daily, so - assuming you are targeting the type of client who regularly uses the Internet - this is a huge available market.

   A word to the wise, as mentioned previously in this publication: blogging has a cost. If we assume that making frequent posts and answering responses to them takes just two hours a week, that equates to $20,000 of potentially billable time in a 50-workweek year for an attorney who charges $200 an hour. That cost can be worth it, if it makes your expertise just as readily available as that of a megafirm. But, as we've said before, undertake it with your eyes open.

4. The Latest News from LawBiz^® Management Company

   In the past several issues of this publication, we've given you highlights based on our development of a new Special Report, The Lawyer-Banker Relationship. Our premise in the Report is the truly businesslike law firm will recognize that a key to responsible management is establishing a strong banking relationship. Importantly, banks are looking for profitable new niches so law firms and banks are natural allies in today's competitive world. Our Special Report highlights many aspects of how that alliance can work to your advantage.

   The Lawyer-Banker Relationship will be available on September 1, 2006, but readers of this Ezine who order before that date will receive a 20% discount off the $29.00 price. Click here for more details.

   Howard Putnam, former CEO of Southwest Airlines and author of Winds of Turbulence, introduces the Special Report by writing: "When you have the right relationship, a good banker will be creative in helping you become aware of opportunities to grow your business in ways you didn't know existed. The practical steps that Ed Poll provides in this little volume cover everything from how to choose a bank that's right for you, to how to improve your credit score and how to negotiate the best commercial loan to meet your needs." We think you'll agree, and hope you take advantage of this special offer.

   Our new Special Report is just the latest in a series of innovative tools to help you and your firm with The Business of Law^®. In addition to the podcasts and webinars that we've recently told you about, our latest innovation will be an Internet radio channel: www.lawbizchannel.com. We hope to be live in the next few weeks, and in next month's Ezine I'll give you more details about this latest effort to cross-link our resources for your competitive advantage.