Some people have told me that 2020 was a strange year to start my own law firm, and I tell them that I wished I’d done it sooner. Or, at the very least, while there was some Paycheck Protection Program money available…
Law Firm Financial Planning during COVID. This Nashville Business Journal story, The 20 Nashville law firms with the largest PPP loans, reported that local law firms received more than $48.8 million in COVID related loans.
I’ll steer clear of the optics of the city’s largest and most prestigious firms getting such large payouts. I mean, c’mon, it’s free-ish money and complicated paperwork. That’s sort of a lawyer’s super bowl, right?
All kidding aside, I am confident that all these law firms also instituted financial austerity measures, hiring freezes, and other cost-saving measures to account for the new economic reality and, further, many plan to return most, if not all, of the funds.
And it isn’t just Nashville firms dealing with all this. These are questions law firms all over the country are getting.
To the critics, I guess I’d remind them that law firms are businesses too, with actual employees and vendors and landlords. The fact that these are “big” law firms doesn’t mean that they don’t need financial assistance any less than a small or solo shop.
But, yes, it’s a very fine line to walk, especially with the @washingtonpost tweeting about how “More Americans are shoplifting food as aid runs out during the pandemic.” Hopefully, these biggest borrowers maxed out the program because they needed the cash to survive, not just because they could get it.
So, what happens next? The American Bar Association reports that cost-cutting measures drastically mitigated the impact of COVID on law firms’ profits. In short, it hasn’t been as bad for some firms or the smart financial decisions made in early 2021 are paying off.
And, per today’s news, Boies Schiller Flexner (the big New York firm that received $10MM in PPP funds) announced it was offering a $20,0000 “welcome” bonus for new associates.
Similarly, in today’s Nashville Post, I’m seeing that one of our local big firms at the top of the PPP list announced a bevy of new lawyer hires. So, maybe things are turning around, and the next story will be about how firms are paying it back.
Law Firm Financing Planning, Part 2. If law firms are looking for non-government-loan financial planning tips for 2021, I’d recommend listening to this Lawyerist podcast from April 2020, called 4 Keys to a Profitable Law Firm (with Greg Crabtree).
It discusses all kinds of marketing, financial, and structural things that a law firm (or, really, any business) should be thinking about in these uncertain times.
Plus, it has the best line about about lawyer hourly billing I’ve ever heard.
“I either charge for my ignorance, or I give away my expertise.”
Greg Crabtree
So, are billable hours really that bad? I’m not against hourly billing, because there’s no better way to account for all the unpredictability that goes into practicing law. I think the practice gets a bad reputation because so many lawyers simply bill the wrong way.
A good lawyer works efficiently, is accountable to the client about the value that the services should provide (every billable hour should matter), and provides an honest anticipated budget.
Clients get upset with hourly billing when, after a quick phone call to confirm some facts, they get a bill for “0.75” of an hour “to discuss matter.” That had better be a really good 45 minutes (or, you know, an actual 45 minute call).
Legal Fee Budgeting. But, any talk about hourly rates and estimated budgets reminds me of something I recently saw on twitter:
I’ve had a version of this conversation many, many times with clients. Hourly rates shouldn’t matter as much as they do; what really matters is “how much will all of this probably cost?”
Note: Clients, it’s fine to ask for a budget when hiring a lawyer.
When hourly billing goes bad.
This cartoon is a bit much, but there’s some truth to the message. Too often, law firms consider billing by the hour only from the firm’s or the billing lawyer’s financial or time-keeping perspective. Have I satisfied my monthly minimum hours? Is there work that I can do on a file to gets my hours up?
Hourly billing goes wrong when there’s no accountability. As a lawyer, always ask yourself: What value did the client get from this work? Was this work necessary? In this economy, there’s a chance that the clients are probably doing the same.
Is the work being done to advance client’s interests, or the law firm’s bottom line?
The Power of Twitter. Ok, this is the last twitter reference, but it’s worth sharing.
Within days of this tweet and photo, Davidson County changed its courthouse policies. I’ll save my thoughts on the resulting changes for a later post, but I appreciate the message and the impact that his lawyer had with a single tweet.
2020 has been a tough year.
Creditors Rights 101 