Is Profit Professional?

Published October 23, 2007

All lawyers today need to be fully sensitive to the financial needs and operation of their firm. The issue is one of business competency. The lawyer who has it understands the operation of the firm as a business (budget, collections, profit, loss), the firm’s billing structure, how each attorney determines firm profitability, and the importance of clients and their own businesses. Years ago I registered the phrase, “The Business of Law®,” because it is such an important truth that summarizes my consulting work—and because so many lawyers seemed to lack an understanding of the concept.

Running a law firm in a businesslike way improves the professionalism of the practice of law. The purpose is not simply to get more money for the lawyer; it also benefits the client. A profitable law practice is much more likely to avoid such ethical problems as dipping into client trust accounts, either as direct fraud or as a stopgap “loan.” Moreover, a law firm run as a business will also approach client service more efficiently—returning phone calls promptly, creating and adhering to a budget, providing sufficient details on clients’ invoices, etc. You can’t truly be a professional service business until you understand The Business of Law®.

You also can’t fulfill a broader social purpose of serving the public unless you have the profitability to devote time to pro bono work. I recently commented on a new book with the overwrought title Lawyers Gone Bad, which contended that lawyers have abandoned helping the poor and middle class in their pursuit of profits. In fact, the largest firms know (just as the largest corporations do) that profitability supports the provision of programs and services that benefit people who cannot otherwise afford them.

This is true even for sole practitioners. Not long ago I had the opportunity, through the American Bar Association’s “Life Audit” program, to help a solo practitioner in Washington, DC. This lawyer had built a successful practice in just three years, but the practice was not nearly as profitable as it should be. We found that the lawyer was outsourcing too much work on a contract basis, in order to devote more time than was practical to non-billable community service projects and activities. I advised the lawyer to shift her business development and community service focus to activities where she would interact with businesspeople who would be potential sources of new business or referrals. She could do good while also doing well at the same time.

The moral: To be professional does not mean to be impoverished. Lawyers must do well financially before they can work for the good of the community.

Categorized in:

Audience type: Administrators, Associates, Large Law Firms, Small Law Firms, Sole Practitioners