Every law firm is a business, and every business has three common elements: get the work (sales), do the work (production), and get paid (finance).
Where these three elements intersect for attorneys is the location of what I call "The 3-Dimensional Lawyer." When you arrive at that intersection, you'll find your practice and yourself in harmony.
In this balanced state of effective communications between lawyer and client, the client is well served and truly values the lawyer's efforts, the lawyer both enjoys the client and is challenged by the matter, and the client promptly pays the bill.
To achieve the balance, attorneys need to understand their own business operations better than they typically do. That understanding centers on the interaction among three factors: what the firm charges for service, how effectively it collects fees, and how the lawyers are compensated. The goal of that understanding should be to create an effective way of measuring, billing and collecting the value of services provided.
Ensuring any firm's business success requires an integrated approach to the issues of fees, billing, collection and compensation. The key elements include the following:
- a written engagement letter that sets forth the clients' obligations and responsibilities, including the paying of their bills;
- a budget for events, time and money, so that clients are not surprised by what is billed, but instead buy into and accept it;
- billing methods that are easy to understand and clearly listed actions taken on the client's behalf, relating the actions to the time it took to realize value and thus making the bill more meaningful to the client;
- clear delineation of value;
- frequent communication to ensure that an actual or perceived problem does not result in a client deciding not to pay a bill;
- collection processes that create a formal system to secure client payment without delay or contention; and
- a compensation system that recognizes the contribution of the individual lawyer as well as the best business interests of the firm as a whole.
Law firms mirror their clients in business terms. To the extent that firms provide the services that their clients need at a price they are willing to pay, firms will grow. Otherwise, they will be challenged to stay in business.
The goal for lawyers and law firms should be to run their practices in a more businesslike way that will improve the professionalism of the practice of law. That can be achieved by providing transparency of services, returning phone calls promptly, adhering to a budget, providing sufficient details on invoices, and providing and conveying value to the client.
Our objective as attorneys is to improve people's lives. In the course of fulfilling that objective, we should provide and account for our services in such a way that clients understand the value as well as the cost of what we do. When that happens, fees are not an issue and client complaints do not occur. When it doesn't, lawyers are at best seen as a necessary but expensive evil.
