My Porsche mechanic loves talking with Porsche owners. On one occasion, he said to me in exasperation: "I love working with my hands on the cars, getting my hands greasy, and that's how I make money. I need to give up the front office and find somebody to handle administrative matters. Those functions make the business work, but my doing them doesn't make me money."

Does this sound familiar? Are you spending too much time doing administrative functions in your law practice? Could you hire somebody to perform these tasks in your operation? Do you make more money performing legal work or do you make money photocopying, answering the phone and handling other administrative tasks?

Peter Drucker, the management guru, suggested that management should do what it does best and delegate all other activities. The same is true for lawyers. Only you can practice law. Many others can run an office.

I am in and around New York City this week. If you'd like to get together, please call me at 310.721.1515.

Do you need to value/price/market your firm? See our 4 CD special below. You can also list your law firm for sale with us.

lawbiz.com

Fixing the Problem of Fixed Costs

Some costs are fixed in any business, including the business of law. There is no getting around that. You have no choice about paying for certain things, such as technology, banking, continuing education, etc.

However, some of these "fixed" costs are fixed and don't have to be. For example, you need to keep up to date on technology, in particular so that you won't be guilty of malpractice, but you don't have to spend more than you need to.

This is particularly true of payroll expenses. Last year, I wrote about the issue of too much pay for too many lawyers. The article discussed a blog by Bruce MacEwen, which noted that firms are charging prices that are too low simply because they need clients for the too many lawyers they have hired for too much money; and a book on law firm economics called Declining Prospects, by corporate attorney Michael Trotter, which showed what happened to firms that added large numbers of lawyers several decades previously.

A 2014 washingtonpost.com article by Jena McGregor called "Bonuses are making up a bigger and bigger percentage of companies' payrolls" discusses one way for companies to get around the problem of fixed payroll costs: give bonuses instead of raises. Bonuses are a larger percentage of payroll than in the past, and companies say that this will continue, according to a survey by Aon Hewitt, a consulting firm, cited in the article. Ken Abosch, head of Aon Hewitt's compensation practice, reasoned that bonuses allow companies to reward employees without making a long-term financial commitment that would be detrimental if the economy worsened.

In these tough economic times, it is important for law firms to pay attention to effective ideas for keeping down costs and, thus, raising opportunities for financial success.

IN THIS ISSUE:

Fixing the Problem of Fixed Costs

Law Firm for Sale (4 CD Set) - 40% OFF!

Video: Controlling Clients' Legal Costs

Video: Controlling Clients' Legal Costs

CLIENTS SAY: