Joshua Lenon is the lawyer in residence at the legal software firm Clio and an attorney admitted...
For more than 25 years, Janet Falk has worked as a communications professional in-house and at public...
Robert Leitner is an experienced legal executive and strategic advisor with more than 25 years of operations,...
Christopher T. Anderson has authored numerous articles and speaks on a wide range of topics, including law...
Published: | January 14, 2025 |
Podcast: | Un-Billable Hour |
Category: | Practice Management |
In this episode’s discussions around the Community Table:
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Announcer:
This is Unbillable Hours Community table with Clio, a monthly virtual round table where lawyers discuss issues their practices are facing and receive feedback from lawyer and law firm management consultant Christopher T Anderson. Join the conversation live every third Thursday at 3:00 PM Eastern. The first segment is a discussion on what law firm owners should do to start their year on the right foot.
Christopher T. Anderson:
This show’s going to be airing going on just at the very beginning of 2025. Of course, it’ll be streaming long after as people will continue to watch this show for decades to come. For those who are listening pretty close to the original lifetime or the beginning of 26 or 27, what are a couple things, couple of ideas for law firms, law firm owners to kick off their year. What should they be thinking of just one or two things that they should be thinking of to kick off their year right and get off on the right foot? Joshua, you want to take the lead on that?
Joshua Lenon:
Yeah. I honestly kind of view this in a Dickensian Christmas story kind of way. So there’s the ghost of your year past, and so you should be closing the books, right? And using that data to plan going forward. The metric that Clio publishes called lockup, which looks at how much of your anticipated annual revenue is locked up in either an unbuild or an uncollected state uses your previous year’s revenue. That’s a starting point, right? So you got to close the book so you know what number to start calculating with. Then if you look at kind of the ghost of law firm present, you should figure out have you set up your books in month one to be ready for month 12? So do I have everything I need right now so I’m ready for the rest of the year? And then for a ghost of law firm future, you should pick one experiment that you’re going to conduct throughout the year so that you can have a measured impact and it might be a bad impact, right? And you can always adjust, but you shouldn’t wait until halfway through your year to figure out how am I going to make this year better?
So instead, start early. Pick one thing, and our advice from this year’s legal trends report is that given the huge productivity gains from AI and our anticipated negative impacts from that on hourly billable revenue, you should figure out and implement flat fees where possible. So pick one activity or one type of matter and implement a flat fee. And if that’s say an extended consultation, charge a flat fee for that, or if it’s helping a client in an unbundled program, right where we’re going to do this one thing, what’s the flat fee for that? Set it and experiment with it from month one, so that way you’ve got 12 months to improve your law firm.
Christopher T. Anderson:
Fantastic. Thank you, Joshua. Rob, what should people be doing beginning of the year?
Robert Leitner:
First, I would recommend closing 2024 correctly. Similar to what Joshua was saying, make sure you file your BOI form if required.
See if you’re declaring a distribution. There’s still time making sure your bonuses are handled. Do we have any prepaid expenses we need to take care of? Did we file our Q4 estimated tax payment? Are we adjusting our salary next year in 2025? These are usually answered in concert with your CPA or other tax professional. Also, this is an excellent time to go into QuickBooks, clean it up, make sure that your format, especially the p and l, is supporting what you’re going to do in 2025. The typical example would be are we adding classes for practice areas? Did we clean up our chart of accounts? Are we deactivating or inactivating former accounts that we’re not using anymore? And just basically the organization of your general ledger. Those are some prep activities. And then also what Joshua was saying, close out 2024 with an analysis net profit marketing, ROI, legal team, ROI, average case value revenue by sku. All of these metrics, that’s what you should do. There’s nothing special about 2025. It’s a continuation, so you shouldn’t expect miracles, and you have to make sure that your leads and marketing are going to support your revenue goals. Same thing with your average case value and signups and things of that nature. So it’s really examine 2024, get the metrics, prepare your budget for 2025 and make sure it’s realistic. Make sure it passes the sanity check based upon how you close 2024.
Christopher T. Anderson:
Cool. Thank you, Rob. Janet, quick tips for how firms should be kicking off their 2025.
Janet Falk:
Okay, let’s take a look at your holiday card list.
You sent a holiday card to how many people, and I bet that there are some people who said you holiday cards and they weren’t on your list. So now we’re going to take that universe of your list and add to it the people that contacted you. And we’re going to sort it out in two ways. So one way is people who can give you business, people who can influence, someone who can give you business and people who you want to keep in touch with for your own reasons. We’re going to call those A, they can give you business B, they can influence it, and C, you’re going to keep ’em around. Then we’re call them one, two, and three. One is they will pick up the phone when you call them. Two is, well, they might pick up the phone when you call them, and three is, well, they might not, but you want to keep a track of them anyway.
So now you go through your A one and your B one and your B two, and you forget about the Cs, and you’re going to call two people every day. You’re going to call two people every day. There’s a reason that they are on your holiday card list and there’s a reason why they sent you a holiday card. And so you want to be keeping in touch with them. And if they don’t answer the phone, it’s okay. You can say, I was thinking of you. I was remembering the great work we did together. I was thinking of you because your name came up in conversation with X. I read this article and I thought you would find it interesting and I wanted to talk about it with you. And you can leave a message and leaving a message can be more powerful than sending an email.
Christopher T. Anderson:
Cool. Thank you. Janet, I was thinking of you. You sent me a holiday card and I don’t know who you are. No, whatever. Yeah, no, I think it’s a great, great thought. Alright, mine my end of year or beginning of year, sorry, beginning of your thought, and I think Rob’s were great, Janet, yours were great, Joshua. Thank you. That was fantastic. I’m going to put a little twist on it is they talked about closing 2024, which is great. They talked about a lot of details. I’m going to go much bigger picture and just say, what are you going to accomplish in 2025? If you’re not super clear on that, get there. And if you need help, reach out and get that help because you need to answer the question, what are you trying to accomplish in 2025? It could be financial, it could be an achievement of some other kind.
You’re going to clean up your books, you’re going to get rid of some C players and replace ’em with A players. You’re going to whatever it is. And then fundamentally, why is that important to you? And then write it down and share it with someone who cares. And then relentlessly ask yourself, all right, in order to achieve that in 2025, what do I need to accomplish by March 31st and then what needs to happen by June 30th and what needs to happen by September 30th? In other words, what do I need to do Q1, Q2, Q3 in order to hit there? Because what most people will do is set a goal and then somewhere around October go like, oh shit. No chance of hitting that. But if you set the goal, make it clear as to why it’s important to you, and then establish the milestones along the way, you’ll kick yourself off to a great year.
Announcer:
In our second segment, an attorney is considering hiring a fractional COO to help her firm.
Anonymous Caller #1:
I’ve come to a conclusion that I need a temporary or some bandaid solution for a COO. I had a particularly frustrating encounter with my team, my sales team in particular on yesterday, and my right hand person kind of undermined me in the process and I was not thrilled about that. And it’s not that I’m blaming her because she doesn’t particularly know. She thinks she knows, but she doesn’t know and she doesn’t know because she hasn’t read any of the books yet that we asked her to read. And I probably could have done it better, pulled her aside and said, here’s what I want to do, here’s why I want to do it, and sort of get her on the same page. She’s a big presence. She’s a big voice. And when she speaks, people tend to take her lead even though she’s not. You know what I mean? Yeah. They just sort of take her lead and I need to restructure the interaction and what I really decided I needed, I need someone in this position who can translate and take what I’m trying to do and my message and all the reasons, and translate it out to the team and enact and execute in a way that lands that they’re enrolled and that they agree and they fricking do it.
Christopher T. Anderson:
You need an Excel.
Anonymous Caller #1:
I saw it even when you came into my sales. I told them all the things that you did in a different way, but the concepts were the same. But when you said it, well, that made so much sense to everybody. And this has kind of been a pattern. I’m saying the same thing conceptually. It’s just I guess the way I say it or how I say it, or maybe I say too much, it just doesn’t land. So I need an interpreter.
Christopher T. Anderson:
Rob, I’d like to throw this one to you. You’ve actually managed a lot more people in that kind of role than I have.
Anonymous Caller #1:
And what’s an XO again? What’s an xo?
Christopher T. Anderson:
Yeah, xo, executive officer. It’s a term from either the Navy or Star Trek, depending on what you know. Yeah,
Anonymous Caller #1:
I don’t know either, but thanks.
Christopher T. Anderson:
But Rob, what are your thoughts here?
Robert Leitner:
I’m smiling because threw in the Star Trek reference. Well, I first would want to know, is this a situation where we need to restructure what we already have or work with what we already have? Or is it where we need an additional resource? Because the situation you described, we need to describe a business need really describe you reacting to a situation that occurred and then we talked about it. So do we really need a COO type of person or is this a reaction to performance issues or lack of satisfaction with who you currently have? That’s what I pose first.
Anonymous Caller #1:
Sure. I believe I need, the person I’m speaking of is, it’s like an administration angle. They’re not C level by any stretch of the imagination, and they need to be taught how to grow into that role, but they’re not anywhere close to that. So yes, I still need that role because I’m doing it a quarter of the time when I have time. And that role needs to be filled.
Robert Leitner:
And
Anonymous Caller #1:
Even if it’s a part-time, and it’s more than I have
Robert Leitner:
One way forward is to quantify the role. So for example, I believe you that you’re saying you think you need this role and you may be right, you may be wrong. I’d want to see seven to 10 bullet points of the roles and responsibilities for this position. And I would start there. Then once you’re satisfied that the need does exist, you could go to step two and obviously start recruiting. But I’d want to know what will this person’s role be in the current scheme, the chain of command responsibilities, what will fall on his or her plate? What will be delegated from you to this person? What possibly will go to the other administrative person you have and kind of take it from there? Keep in mind this will not be a billable resource, so you will be adding an expense. Now they could make up for that in terms of efficiency and scalability and training and making the organization as a whole a lot better. One final point, if you’re looking for someone like a COO, there are many different levels. So you’d want to also incorporate this into the budget. This is a big hire. This is not, I need another junior. And the fact that you’re concerned that the current admin person doesn’t speak your language. Got it. That’s very common. But the COO would be your right hand woman or man.
So it has to be a really good culture fit. And frankly, you guys have to communicate well. So this is the type of thing where you’d probably want to have quite a few meetings during the interview process, maybe go out for lunch and really take a deep dive because skills wise, we can certainly find someone to fit the bill. That’s the easy part. Finding a person who matches with the culture and who speaks your language and who that you feel close enough with to communicate with and that you communicate with effectively. That’s the harder part that we’d have to make sure is in place first.
Anonymous Caller #1:
Okay. That’s all fair. And I like your suggestion about doing seven bullet points and understanding how the chain of command and the lines of communication are going to be and where they fit in and what I need them to do. And so I’m going to work on that.
Robert Leitner:
It’s good exercise. Let’s assume they’re already
Anonymous Caller #1:
Trained. What are they doing? What are they doing? Yes, exactly.
Christopher T. Anderson:
Yeah, I actually think that was fantastic. I think that’s exactly how you should be thinking about this. The concept of an XO is great concept. Executive officer is typically somebody who is capable of filling your shoes when necessary. They’re not a senior, they don’t have all the experience. They might not be positioned to make the really tough call when it comes unless they have to. But the challenge of it is that in organizations like Star Trek or the Navy in the military where there are executive officers, those executive officers have gone through the exact same training regimen as their commander. They speak the same language, they’ve gone to all the same academies or training schools, depending on what service you’re in, they have many of the same experiences. They’ve had command experiences themselves, et cetera, et cetera. So that you’re getting someone who even though you may not have worked with them before, they have so much of the same experience you do. That’s going to be very, very difficult to find here.
One of the things you mentioned on your own was that the administrative person that you’re talking about hasn’t yet read all the books that you’ve given her. Well, that’s part of the problem. And so as part of the interview process, have you read traction? Are you familiar with whatever other books that you would want them to have read if for no other reason that it gives you shorthand and vocabulary to share with one another, and you know that they are on board with those concepts because some people aren’t. And I’m not saying that those are people who follow different management methodologies are worse necessarily at the job. It’s just you talk in a different language and you will always talk a different language. You need someone to deliver the message in a consistent, reliable way. And one of the cool things about someone in an XO role is kind of like what you experienced on Monday.
They can say the same thing as you, but because it’s not you and everybody knows that they’re translating, there’s no room to push back because gotten the message, they’ve accepted the message, and now they’re promulgating the message. The message cannot change. Now this is the message, and that gives a certain power because it’s too hard to renegotiate. And people can’t say, oh, they’re going to change their mind tomorrow. Or, oh, this doesn’t make sense, or it’s just another crazy idea, or whatever people might say. It’s just like, this is the xo. The XO serves as sort of someone who’s vetted the message for you. So now you have to accept it.
Anonymous Caller #1:
So is there an island of XOs in law firm world of a place I could go live on for a week and find them? How do I find this person? Or again, even if it’s a fractional of something,
Christopher T. Anderson:
Rob the island of perfectly matched toys, the island of COOs
Anonymous Caller #1:
Exos, we’re going to call ’em Exos.
Robert Leitner:
So that’s an interesting question. I think the best way to go about it would be to speak with people like Christopher and others who are in the industry and they know people and they can help place. You want a good recommendation of someone who’s been there and done it. There isn’t an exact place to look. I would speak with other successful law firm owners and people who are in the law firm coaching business and have been there and done that and have seen a lot of this type of position and know what it takes to match that type of person with you. But there won’t be a quick and easy island to go visit and pick someone. But you certainly have resources at your disposal for people who know and deal in this sandbox,
Christopher T. Anderson:
This is one of those roles. Rob has really helped several people hire this role. I’ve helped several people hire this role, and the miss rate is higher than most roles.
Anonymous Caller #1:
I know that better than anyone,
Christopher T. Anderson:
But it’s just so the fact that you’ve gone through it, just don’t think yourself is too special. This is a tough role to fill. Once it’s filled, it’s amazing. But I have yet to find the Zen master at matching this role that they get it right even 50% of the time, but it’s going to be better than random. And vetting that is just available by going out to things like the Professional Legal Administrators Association or something like that. So yeah, I mean, I think putting together your bullet list is great step and then engaging if you want to engage the service that we’ve offered other firms to put this kind of person in place, or we could also recommend other people who can do it for you.
Anonymous Caller #1:
That’s good.
Announcer:
For our last segment, an attorney is experiencing AR issues with one of her firm’s associates.
Anonymous Caller #2:
I have an associate who’s been with me a little over two years. He’s a good lawyer, but he is, we have some significant AR issues and we’ve talked about it, we’ve coached about it. The communication with clients is not getting better and the AR is getting significantly worse. And it is time for his annual review. And I anticipate he’s going to ask for a raise. My response is, you gave away a raise in all the free trials one. How do I say that more diplomatically? Because that is the final answer.
Christopher T. Anderson:
And by free trials you mean basically he has done these trials and then you never collected the fees on them,
Anonymous Caller #2:
Right? Because he won’t follow our policies.
Christopher T. Anderson:
Getting a retainer before trial, is that your policy?
Anonymous Caller #2:
Right.
Christopher T. Anderson:
Okay.
Anonymous Caller #2:
Or he’ll request the replenishment in an amount that is nowhere significant, near significant enough to cover what he knows is going to be the work that he’s going to bill. For instance, one he just did. He knew it was going to be a two day trial. By the time it was all said and done, the client was nine grand in a hole because he only requested 7,500 or something stupid.
Christopher T. Anderson:
In order to scale and have a repeatably successful business, I rely on people to do very few things well. So lawyers that work in the business, I don’t anticipate that they’re all good at collecting retainers and replenishments and that kind of thing. Some are great at it, bless ’em. I love them. No even asking for it. Even just dealing with it, I just remove it. It is not on their plate. Now. So for instance, here’s what I’m talking about. We call it sales operations, but the people who support, who help with all the onboarding and get stuff done are also responsible for replenishments and trial fees and that sort of thing. Certainly if a client is late or reluctant to pay, they will let the legal team know, Hey, Amos Smith has not paid his trial fee is being reluctant about the replenishment has only paid half the replenishment, has only paid half the trial fee.
Would you please, next time you talk to him, let him know this is about to be a problem. And that process starts well ahead of time based on a trial being set. And then we hope that the attorney does have that conversation. But if they don’t, that’s okay. We just read rubber band the file, then we put stop work orders on it, and the attorney’s not allowed to work on the case. And that attorney’s docket might be decreasing, which may be reducing that attorney’s compensation, which they then take notice and usually get on board. And quite honestly, this policy has helped to convert a lot of attorneys on my team from having trouble talking about money with being quite willing to, and just really understanding they’re not paying, I’m not working because they like to get paid. Now listen, client communications, it’s one of the main rules, right?
Is rule 4.2, I believe, of the model rules. And so to say, a lawyer’s not good at communicating with their clients. We all know them. We all know those lawyers, and sometimes we put them in the back room and they just turn the handle a lot and they’ve, you’ve got supervising attorneys, managing the work, going out to the client, the work coming in, and this person just sitting in the back doing stuff in your business with family law business, there’s not room for that, not at the scale that we’re at. So that’s more of a concern. But balancing that person with a strong paralegal I found sometimes is everything for billing. I hate to say it, but it’s really just take it out of his hands, just take it away.
Anonymous Caller #2:
But how do we handle the fact that underestimates what we need?
Christopher T. Anderson:
Do you not know it was a two day trial?
Anonymous Caller #2:
No, he knew,
Christopher T. Anderson:
Right? So the billing person, all the billing person gets told is, I’ve got a two day trial coming up. That’s it. That’s all they need to know. Billing person knows what to charge. That is a $15,000 retainer, trial retainer, whatever your number is. And it goes out 45, 60 days before trial with a deadline of 40 days before trial for payment or withdrawal is filed.
And that gets people’s attention most of the time. But trying to fix that behavior and make someone also a good estimator and a good even requester of funds, it’s not a core associate duty. And it’s not how I measure, at least not how I measure my associates because I like them to be excellent lawyers and excellent client relations and leave the back office stuff to us kind of mentality about it. Just like that’s what we market and sell. And Bill, you do the lawyer stuff. And I’ll tell you, I did an experiment, this is a few years ago now, but I did an experiment about hiring a full-time person to do this work. After I ran the numbers, my hypothesis was that it would more than pay for itself. And it’s been way more than true.
Anonymous Caller #2:
Yeah, we have a full-time billing department. So
Christopher T. Anderson:
Yeah, it’s their job.
And I do them little things. They, I have a little incentive payment for them because we used to lose, I don’t even remember what the number was, but let’s just say let’s, 20% of costs, just like 20% of costs over the course of a year weren’t recovered. I don’t know what the real number was. And so I gave them a taste of any improvement over that number for everything better than that because there’s no prohibition against cost recovery sharing. And so I gave them some of that and I get them all. And the way I did, it’s like if you recover costs in 30 days over that number, you get, let’s say five, 6%. We’ll do the math easy of what you’ve recovered. If it takes you 60 days, you get 4%. If it’s 90 days, you get 2%. After that, you don’t get anything.
And man, they got on it in the first couple of months when they were chunking through some stuff. I was like, whoa, I’m paying some big bonuses here. The bonuses leveled off. But so what? That 96% was good. 94% was going to me of money that we previously weren’t recovering. It was a no brainer. So yeah, I like to get my billing team a lot more involved in replenishments, in cost recovery, in trial fees, because they’ll be on the spot as soon as the trial gets set. Somehow the SOP in your system is trial, gets set, date gets put in, and then we run the clock from there. And of course we make it clear for some reason you settle. Good for you. You get this back.
Announcer:
Thank you for listening. This has been Unbillable Hours. Community Table with Clio on the Legal Talk Network.
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