How to Increase Your Law Practice Cash Flow By Helping Your Clients Choose Their Own Fees

One of the biggest reasons most lawyers struggle with the business end of law practice is because of the old, outdated, clients hate it and so do lawyers, practice of billing time on an hourly basis, often in six minute increments.

When I was working for large law firm, there was really no choice but to bill time. The managing partners had no way to track effectiveness of associates without it. And, frankly, it’s one of the reasons I left to start my own law practice.

As a corporate tax and estate planning associate, billing time just didn’t seem to work well. Clients weren’t communicating with us as often as they should because they knew they’d get a bill in the mail weeks later for the $67.50 email they sent and I would more often than not choose not to bill time for work performed because, honestly, I felt bad doing it when I was answering a quick question for a nonprofit or personal client.

When I hung my own shingle and started my law practice, I knew that I’d have to make the switch from hourly billing to something else, but I wasn’t sure how to do it or what the something else would be.

I found myself losing money because I wasn’t billing for the quick calls, the requests for referrals to other lawyers and the myriad of other little things that would come up that felt like billing would take more time and cost more than just writing off the time.

I was losing money, fast. And I could see it wasn’t sustainable.

So I made the shift to billing for my estate and business planning services on a flat fee basis. I looked at what other lawyers were doing based on their listserve posts and discussions and created my own flat fees.

But there was a problem… client’s weren’t signing up as often as I felt they should and I knew it all had to do with the fees.

I wasn’t explaining them properly. I almost considered switching back to the hourly model, which all clients could understand and, it seemed, almost expected.

Then, I engaged a client for a $5,500 trust package. Success! Except then it wasn’t…

Within 2 weeks they had called me back to cancel the planning. They had found another lawyer who would provide EXACTLY what I was providing for just $2,500. And while they said they would be happy to pay me $1,000 more for the additional service and relationship I provided, they couldn’t justify more than double.

I was devastated. I knew I was offering more than the lawyer who was charging just $2,500 for EXACTLY the same thing, but I didn’t know how to articulate that more.

So I let them out of our agreement. As I did so, I made a request. I said to the client, “okay, I understand what you are saying and I have a request. Would you please get back in touch with me after the planning with this other lawyer and share your experience with me?” He said yes and, frankly, I never expected to hear from him again.

But hear from him I did. And it was better than I could have ever hoped for. In fact, what he shared with me became the basis for a complete redesign of the way I charged for my legal services, explained them to clients and was most likely the #1 single thing most responsible for my being able to go on to build a million dollar a year plus law practice.

This client came back to me with a point by point analysis of my process and the other lawyer’s process and what I was able to see is that the plan the lawyer was delivering for $2,500 was not EXACTLY like the one I had quoted a $5,500 fee for.

In fact, for the plan that lawyer was delivering to his clients, I would have charged only $3,500, which was the exact amount the clients said they would have paid for my enhanced service and relationship offering.

In fact, I was including two additional items in my $5,500 plan that I could now let my clients choose whether to include or not and they could, in effect, choose their own fee!

Today, those $1,000 questions are the foundation of the fee quoting system I developed and have now taught to hundreds of lawyers who are using these questions to engage more clients and receive higher fees by clients who are happy to pay them.

While I cannot explain the $1,000 questions in full here, I can describe the starting place for making the shift from hourly services to packages your clients are happy to pay for.

First, identify three levels of outcomes or value you provide to your clients.

For example, in the estate planning practice, our Personal Family Lawyer members have a basic plan for families who don’t have assets that would go through probate, a mid-level plan for families with assets that would go through probate and a high level plan for families who want their lawyer to handle not only all the planning and documentation, but the transfer of their assets as well.

In the business planning practice, our Family Business Lawyers may have three packages focused on clients just starting up their business and need all the deliverables associated with a new startup, a package that is for the business owner who has been at it for some time and needs ongoing strategic support and finally a high-end package for the business owner who is ready to consider selling the business and wants to prep it for sale.

In a divorce practice, you may use stages, such as pre-divorce consultation and planning, filing of the complaint and all pre-litigation matters, mediation or collaboration of marital settlement agreement and then a whole separate set of packages if litigation is necessary.

Second, assign a value to these outcomes.

The value is not about the hours you will put into the outcome, but instead about the value of the outcome to the client.

For example, a startup client in the business side of a law practice may require far more hours than the strategic support for the ongoing business owner needs, but the start up client has less available assets and your package would be priced less with the intention that the start up work is just the beginning of a life-long relationship with the client that will net your law practice quite a lot of income over time – if you can support the business to get off the ground.

A client family with less assets at stake in the event of a death or disability would naturally want to pay less than a family who has assets that would go through probate or even be subject to estate tax.

Price your packages accordingly.

Third, create a fee schedule that lays these packages out clearly

I invested $10,000 to work with a consultant to design my packages and fee quoting system. Then I invested another $2,500 to visually represent the packages in a fee schedule.

That $12,500 was the best investment I ever made in my law practice because it took me from struggling to engage clients and command fees I knew I deserved to engaging just about every single client who came into my office and at higher fees than I ever had before.

The best part is my clients were happy to pay the fees because they were choosing the fee themselves. And, thanks to the $1,000 questions, in many cases, they were choosing to pay me $1,000-$2,000 more than they would have if I had just quoted a fee without the questions.

Are you ready to make this kind of shift in your practice? If so, why? If not, why not? What’s stopping you?

Beyond Marketing – How Lawyers Can Close More Sales and Get More Clients

The “M”-word (marketing) is now part of law firm culture, albeit usually still spoken by attorneys in hushed tones. The business development or “BizDev” concept is creeping slowly into the vocabulary as well.

Business development is often seen as an answer to the deficiencies inherent in the 1990s style of professional services marketing that is currently popular among law firms. The diagnosis: As good as that support is, we are not generating specific engagements from the extensive marketing efforts.

Because “business development” means all things to all people, the concept has created a lot of confusion as firms look to expand their client bases, grow per-client revenue, cross-market more practice areas, and take a larger piece of a pie that many in-house legal departments are trying to shrink.

A recent Legal Marketing Association survey shows that 55 percent of respondent firms have a firm-wide marketing plan and 87 percent have a marketing budget. Both of these components represent some type of strategic marketing plan, even if it is only updated annually through the budget process.

However, with the pressures on our marketing professionals to produce collateral materials, update Web sites, plan and staff seminars and conferences, provide public relations to and with the media, etc., all too often “The Plan” (spoken with great reverence) sits on a shelf or is shown annually at a partners’ retreat or practice group meeting.

If an enlightened leadership wants to update the M plan, or (perish the thought) develop a real business development strategy, the details required and length of time it takes to refurbish the document or create a new one tend to cost lots of staff and partner dollars. Yet it still sits on a shelf. Stratagems abound but few provide visible, measurable results.

Keeping the End in Mind

Before tackling a business development approach relevant in a typical law firm context, let’s clarify the differences between marketing and business development.

Marketing supports the possible. Business development targets, pursues, and closes client targets. A traditional law firm marketing department is designed to assist in keeping its firm’s image and reputation in the corporate eye, provide support for outreach and RFP responses, conduct intelligence-gathering, create media profiles, etc.

The really good firms are fortunate to have some of their staff with longer-range marketeer capabilities; that is, taking a view of the desired end result, landing new work, and incorporating these goals in their support.

The newly emerging interest in business development, if properly implemented and managed, should focus on and take advantage of client targets that are already on the minds and on the lists (written or otherwise) of the firm’s professionals and partners. Financial and management consulting firms remain salutary models for law firms, as historically they have been much more focused on specific deliverables and closings. They take to heart the axiom, “Always keep the end in mind.”

Potential Obstacles to Closing a Sale

Let’s examine a few familiar problems and suggest the fundamental related solutions that lead to measurable results in business development.

  1. Problem: Our firm has no pipeline! Response: Manage your speakers, greeters, authors, communicators, trainers, marketers, etc. Result: Properly assigned, with concretely defined roles, the firm’s staff will become a kind of conveyor belt, with all their designated tasks funneling toward the actual sales moment. The pipeline thereby remains engineered to support the one final moment-the closing-that justifies its existence in the first place.
  2. Problem: I just lost my largest client! Response: Setbacks should catalyze action, not cause paralysis. The firm should monitor and evaluate all such occasions where clients fall by the wayside to ensure that the lawyers responsible jump back into the BD fray with a new three-month action plan. Result: A crisis should spell opportunity. Losses should pump the collective adrenaline. If that kind of response becomes ingrained in the firm’s culture, odds are that the bottom line will actually improve at a reasonable point in time after every loss.
  3. Problem: Our office has terrific attorneys but our revenue is flat. Response: Organize and attack. Indoctrinate the lawyers in a basic BD truism: Clients and prospects don’t care about how great the attorneys are. They assume that to be the case. They care about what those great attorneys can do for them. Result: The effect of such an enhanced client service mentality will not only unearth new prospects but also develop new business from existing clients.
  4. Problem: We missed the major new litigation! Response: Don’t dwell on any one matter or even on any whole genus of legal business. Look to the pipeline to deliver a stream of alternative possibilities, some of which may not yet be on your radar screen. Result: You’ll need to start making decisions about which kind of business to go after and which to let some other law firm go after. That’s a wonderful problem to have!
  5. Problem: Our practice group has no business development budget. Response: Of course it does. You’re already spending money on business development at one or more ends of the spectrum. You simply need to collect that data and find out what you’re already spending. That’s your budget. Result: Getting a hold on your current actual spending will allow you to focus resources where they will clearly do the most good.
  6. Problem: What do we do with our up-and-comers? Response: A true pipeline includes ideas for deploying junior partners and associates. Take them to sales meetings. Encourage them to get their names out there via articles and speeches. With younger lawyers, the key is to encourage business development without undue pressure. Whatever they bring in is gravy, and you’re making a great investment in the future as well. Result: Some firms are creating a true sales culture, from top to bottom. You can too.
  7. Problem: Our firm is heading toward the 1,000-lawyer mark, yet it needs a complete marketing overhaul. Response: The bigger you are, the more you need to focus. Begin with a few promising practice groups and use their successes as a model. Result: Practice groups in London will begin envying practice groups in New York, or vice versa. It’s a dynamic that requires some political sensitivity on the part of management, but it’s another great problem to have.

None of the new emphasis on sales and business development should minimize the ongoing commitment of resources to marketing. Law firms need their marketing departments to keep the media informed, encourage the relationship building process, build the brand, keep their research methods current, conduct client service surveys, create new ads, sponsor events and conferences, and all the rest of it.

Best Practices for Business Development

But measurable success, the fruits of sales and business development, requires its own separate set of best practices, including:

  • Designate partner-leaders for each client target that the lawyers have been keeping in the back of their minds.
  • Establish and manage timelines for each step toward the final closing.
  • Provide success reports to firm management.
  • Provide greater strategy debates before investing in responses to RFPs or in making new initial contacts.
  • Constantly review the failed business development efforts in formal postmortem meetings. Codify the steps that led to successful new business acquisition.
  • Populate the business development program with targeting and pursuit efforts by specific practice groups, sub-groups, offices, individuals, one step at a time, at first, and finally, wherever there are lawyers who really want to be engaged.
  • Assure that business development training sessions are practical, not academic.
  • Keep the firm ahead of economic and industry trends and build this knowledge into every client contact.
  • Make decisions on under-performing activities by either abandoning them or improving your approach in each case.

Where are you going with all this effort? For the 55 percent of firms with strategic marketing plans and the 87 percent with marketing budgets, “Ready, Aim, Fire” is no longer enough.

The new mantra should be FIRE, AIM, FIRE, READY, FIRE, FIRE, FIRE. The best way to hit a target is by taking a shot. If you miss, you learn. Then fire again.

Next Steps

The next steps take us into the kind of rarefied business development culture that, to date, few law firms have achieved. At that point, we are looking at a whole different set of best practices, drawing on the marketing pipeline to support sales at the next level of business development. For example:

  • Using overlooked assets.
  • Identifying under-valued relationships.
  • Scoping out collaborative efforts with partner organizations outside the firm, especially multi-disciplinary service offerings with non-law providers.
  • New services, such as crisis management and avoidance.
  • Leveraging advertising and other brand-building marketing to directly or indirectly support the sales process.
  • Client co-branding, including in-house legal staff members.
  • Knowledge management at increasingly comprehensive and sophisticated levels.

Once the nexus between marketing and business development is effectively created, the agenda becomes limitless in scope and possibility. That’s yet again a great problem to have!

International Contracts

Culture and Contracts for International Lawyers

Lawyers working in international law oftentimes interpret, review, and advise their clients on contracts written by other international lawyers in foreign countries. Considering the great possibility for legal, linguistic, and cultural misinterpretations, it is important for international lawyers to become familiar with the types of contractual clauses that they see in such diverse contexts.

In understanding the commonly used clauses in contracts drafted by lawyers in other countries, international lawyers will be better prepared to explain to their clients the consequences and implications of contract language written according to the laws and customs of other countries. International lawyers may do work with clients and their legal representatives across the world. However, the purpose of this article is to help guide those lawyers practicing outside of the U.S. toward understanding the common clauses used in contracts written by U.S. lawyers.

Common situation

The international-contract scenario is easy to identify. It begins with a party in Mexico, for example, who contracts with another party in Germany. Or it starts with a Spanish company wishing to employ a French agent to work in Spain. While the parties negotiate the contract terms, one party’s lawyer may, in the end, write most of the contract due to the difference in the bargaining positions of the parties. The party whose lawyer drafts most of the contract has the advantage of including certain clauses with legal concepts that may be unknown to lawyers not practicing in that country. To avoid this situation of allowing unfavorable contract terms into a business deal, international lawyers should become familiar with – to the extent time and circumstances permit – the country’s laws and customs where the other contracting party resides.

An understanding of the typical contractual clauses used in the U.S. legal system is beneficial to those international lawyers whose clients contract with parties represented by U.S. lawyers. Because the U.S. legal system is based on the common law (judge-made law), typical contractual clauses encompass legal concepts of well-developed case law of which international lawyers may not be aware. The following paragraph and examples provide the basic background about the standard terms and conditions clauses normally included in many contracts drafted by U.S. lawyers.

Standard terms and conditions

A contract contains the standard contractual clauses and performance deliverables to which both parties agree. While the performance deliverables section of a contract provides the parties with general ideas of expectations, the standard terms and conditions section of a contract is just as important. Signing the contract binds a party to the common contractual clauses as much as it does to the performance deliverables clauses. In summary, the standard terms and conditions section may contain just as many or more calls to action as the performance expectations. Therefore, while a French agent contracted to do work in Spain may be more aware of his or her duties to carry out performance, the standard terms and conditions that also bind the agent are critical to the agent’s understanding of how to perform. This is because standard terms and conditions clauses in U.S. contracts generally lay the legal framework for how to interpret the contract, which law applies, dispute resolution options, etc.

The clauses contained in the standard terms and conditions section consist primarily of those clauses the parties include to protect themselves in case of breach of contract or potential litigation over contract terms or circumstances. A breach of contract may result, for example, from a breakdown in the parties’ relationship or a misunderstanding about performance or enforceable promises. To assist international lawyers with identifying and understanding common contract clauses to prevent a breach of contract for their clients, listed below are some of the typical contract clauses normally contained in a standard terms and conditions section of contracts. This list is not exhaustive, but it does contain some of the more commonly included contract clauses in the U.S. legal system.

Commonly called: Merger/entire agreement/complete agreement clause

Effect: This clause indicates to the reader that the parties have no agreement other than the agreement containing the merger clause. A merger clause pronounces an agreement’s completeness and restricts other prior agreements from consideration when determining the contract’s terms. The function of the merger clause is to keep out any “side conversations” when determining the parties’ intent captured in the contract at issue. The effect of this clause is that one agreement only governs the parties’ relationship.

Example: “This agreement represents the parties’ entire agreement.”

Commonly called: Modification clause

Effect: This clause generally requests that two contracting parties memorialize their modification in a writing that both sign. Important to the modification clause and its effect is the general rule that contract modifications typically require new consideration. Consideration is a common-law concept that refers to a bargained-for exchange. However, some types of contracts may not require new consideration for modification, so it is important to check (1) the type of contract and (2) the laws in the jurisdiction governing the contract. While the consideration issue may be more complex, a modification clause simply requests that amendments to the contract be in a signed writing. This writing requirement of the clause encourages the parties to negotiate any modifications before reducing their changes to writing and obtain a similar and clear understanding of what will be modified before any change occurs. However, oral modifications – despite what a contract says – may be effective depending on the U.S. jurisdiction.

Example: “The parties may modify the contract only by an agreement in writing signed by both parties.”

Commonly called: Employee or independent contractor clause

Effect: In a contract for services, this clause identifies whether one of the parties will be considered an employee or independent contractor. The greatest difference is that employers are responsible for certain financial and liability matters for employees, where those who hire independent contractors are not responsible for the same matters. In summary, an employee means more employer control but also more employer liability.

Example: “Mr. X will act only as an independent contractor for the ABC corporation. Mr. X is NOT considered an employee of the ABC corporation for the purpose of this contract for services.”

Commonly called:Confidentiality clause

Effect: A confidentiality clause or agreement defines what confidential information is, who must keep it private, and what the consequences of disclosure are. Confidentiality clauses may have exceptions relating to publicly known information or where the other contracting party consents to the disclosure of otherwise confidential information.

Example: “Mr. X, independent contractor, will not disclose confidential information obtained through Mr. X’s scope of services for ABC corporation.”

Commonly called: Conflict of interest clause

Effect: A conflict of interest clause restricts a contracting party from engaging in relationships, transactions, or circumstances external to the contract at issue. The purpose of the clause is to prevent a conflict of interest from arising between the contracting parties. A conflict of interest issue may arise due to a party’s personal situation or position.

Example: “Contractor has disclosed any interest that presents or may present a conflict of interest. Contractor will disclose any actual, apparent, or potential conflict of interest that arises throughout the term of the parties’ contractual relationship.”

Commonly called: Choice of law clause

Effect: A choice of law clause identifies where the contracting parties prefer to litigate issues arising from the contract. Usually, the party who drafts the contract chooses the applicable law. Other jurisdictional issues may become relevant in the future if litigation arises.

Example: “The laws of the State of Delaware will govern this contract.”

Commonly called: Dispute resolution clause (commonly involving arbitration and waiver of jury trial)

Effect: These clauses tell the reader whether either party has waived some type of dispute resolution option. A contracting party may want the other party to opt out of certain dispute resolution options in light of likely costs and inconveniences.

Example: “ABC corporation agrees to resolve all matters arising from this contract through arbitration.”

Commonly called: Severance clause

Effect: This clause refers to the situation where a court determines that part of the contract is illegal or unenforceable. The clause states that in this case, the validity of the remaining portions of the contract is unaffected.

Example: “If any of the provisions of this agreement contravene or are invalid under state or federal laws, this finding will not invalidate the whole agreement.”

Commonly called: Indemnification clause

Effect: This clause states that one contracting party will indemnify (reimburse) the other for failure to meet a contractual obligation or other illegal or damage-causing action.

Example: “ABC corporation shall indemnify, defend, and hold DEF corporation harmless from any and all liabilities, damages, penalties, claims and expenses (including defense and settlement costs) resulting from any breach of this agreement.”

Conclusion

This article clarifies some of the most common clauses found in the standard terms and conditions section of a contract drafted by a U.S. lawyer. While the explanations and examples of the clauses are generally consistent across a wide variety of U.S. contracts, these clauses vary depending on the U.S. jurisdiction in which the drafting lawyer is licensed or the interests of the party drafting the clause. As a result, international lawyers should carefully read and assess the standard terms and conditions of the contracts that guide their clients’ contractual obligations. Even if U.S. law does not govern the contract at issue, understanding and recognizing common U.S. contract clauses will allow international lawyers to better help clients to perform on contracts in a way that does not offend U.S. cultural notions of compliance and fairness.

In understanding contractual clauses common to any particular legal system, both international lawyers and clients will be more prepared to fulfill contractual obligations and maintain healthy international business interests and relations.

Melanie Glover & Marina Bugallal