Your Complete Guide to Effective Small Law Firm Management

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how to manage a small law firm

If you’re wondering how to manage a small law firm effectively, you’re not alone. Managing a small law firm poses unique challenges to legal professionals compared to Big Law, where admin staff perform many of the day-to-day tasks. In most smaller law firms, those admin tasks fall on the shoulders of the attorneys and paralegals. This takes time away from billable and direct client work to be the “chief, cook, and bottle washer.”

Managing a small law firm also looks very different at the end of 2020 when compared to earlier this year. There are unique challenges to managing virtually every aspect of the law firm, from staff delegation and oversight to changing your law office’s processes and client relationships.

Regardless of where you’re located, no one can deny the impact of the events of 2020 on the flow of their business. Your law firm must be extremely nimble and adaptable to change and keep up with the latest industry trends and developments—to make sure your legal practice does not fall behind.

In this blog post, we’ll cover how to manage a small law firm effectively, by focusing on key aspects of your law firm: staff, client experience, financials, technology, and brand. We’ll also include tips on how to manage a small law firm team to set you and your team up for success in the new year.

Rethink your pricing and payment models

stacks of coins

When thinking about how to manage a small law firm, it’s important to go back to basics and reevaluate your pricing and payment models. As the 2020 Legal Trends Report found that clients care about affordability. In particular, 78% of consumers say that lawyers should adopt pricing and/or payment models that will make legal services more affordable. But lawyers should look at the issue of affordability across multiple dimensions. “Affordable” is more than just about the overall price. It’s about the value your clients perceive they have received for the price they have paid. How many times have you happily paid extra for something knowing you were getting excellent customer service? At the same time, how often have you paid less and been less than pleased with the results?

For example, for many years my optometrist was also my supplier of contact lenses. While I knew I could get them cheaper at the big-box stores, I also knew I always got excellent service and valued my relationship with the optometrist. Over the years, he helped me in various ways that had value but no price. When the optometrist retired and I went to see a new one in a bigger company, there was no comparison to the customer service–I couldn’t even get someone to call me back to place an order! Off to the big-box store I went, having lost the incentive to continue with the new firm.

Go beyond reducing prices or offering discounts for your legal services

Reducing prices or offering discounts is a short term solution. In addition, there is often a race to the bottom that is very hard to compete with, especially against larger firms with more resources and profit margin to work with. It can also condition your clients to always expect or ask for a discount. Think about it: Would you ever go into Bed Bath and Beyond without a 20% off coupon? This strategy can easily backfire and devalue your work—in the eyes of your clients.

To quote Seth Godin, a well-known author, speaker, pricing and marketing expert, as well as a recent keynote speaker at the 2020 Clio Conference: “The reason it seems that price is all your customers care about is that you haven’t given them anything else to care about.” In addition, his blog article about the Tyranny of Lowest Price speaks very clearly about the costs of lowering prices. “The problem with the race to the bottom is that you might win. Even worse, you might come in second.”

Consider offering alternative methods of billing and payment

Payment plans, fixed fee billing structures, subscription-based services, and  unbundled legal services benefit not only your law firm, but also your clients:

  • Payment plans provide flexibility: As the 2020 Legal Trends Report shows, 72% of consumers would prefer to pay their legal fees via a payment plan. For example, a client who cannot afford to pay a $5,000 fee may hesitate to contract with your firm. But they would likely find it far easier to agree to a payment of $1,000 per month for 5 months or even $500 per month for 10 months. This is a win-win for both your firm and the client.
  • Fixed fee billing provides predictability: Creating fixed fee billing structures will allow your client to understand and budget for the cost of the legal services without the fear of the terrifying “unknown” cost.
  • Subscription-based services make legal fees more flexible and transparent: These are a great recurring revenue option for the firm and can also give you peace of mind that your client can contact you without “watching the clock”. This is also an opportunity for the client to reach out before little problems become much bigger ones. Your client views you as part of the team in providing solutions, not just an expensive cost.
  • Unbundled legal services increase affordability, flexibility, and transparency:  Providing a client with just the legal services they need while limiting the scope allows your client to have more control over the case and potentially save them money. When combined with the flexibility of a payment plan and the predictability of fixed fees, unbundled services give many consumers the ability to pursue legal problems that they would otherwise not be able to afford.

Learn more about the best practices for law firm billing, pricing your law firm, running a subscription-based legal practice, and offering unbundled legal services

Hire the right staff with the right roles to improve productivity

Best books for lawyers on productivity and time management

In a smaller law firm, one team member can make an oversized impact on your firm. Surprisingly, small firms often make the mistake of hiring receptionists and staff with poor people skills. In my 20 years of consulting with law firms, it is unfortunately not unusual to have staff answer the phone in a less-than-friendly manner and ask someone to call back rather than take a message. These are not only your office gatekeepers but should be known as “Director of First Impressions.”  Having staff who not only share your firm’s vision but also are on board with making it into a daily reality is crucial to your firm’s success.

Delegating administrative and non-billable work is also key to making the best of the most limited resource you have—time. When attorneys and paralegals can focus on client work with fewer distractions and interruptions, they can be more effective, productive, and profitable.

Another way to improve productivity is to have your staff specialize in specific tasks and areas of work. It is common in smaller law firms for a single staff member to be the office manager, billing coordinator, paralegal, and occasional receptionist. This is understandable, given the smaller headcount. However, outside bookkeepers, receptionists (or virtual receptionists), and team members who are experts at specific tasks can often perform their work more efficiently and sometimes at a lower cost.

With a more productive team at your law firm, you can save time and ultimately—money.

Focus on relentlessly improving the client experience

Meet clients where they want you to be—online

law firm home office

As the 2020 Legal Trends Report shows, clients want to be able to interact with their lawyers online. With the rapid changes to the legal, economic, and healthcare landscape in 2020, the entire client experience is moving online—to a cloud-based environment. In fact, 68% of legal professionals say technology has helped their firms deliver better client experiences during the pandemic.

Clients interact with law firms and lawyers online through multiple touchpoints—through an initial review of a clear and engaging website, easy client intake process, e-signing documents, or online access to a client portal with key information related to their case. When a client can access the information they need with ease and minimal friction, they will have a more positive experience.

Reduce friction in payment options by offering payment methods that clients want

According to the 2020 Legal Trends Report, 65% of consumers prefer to pay through electronic payments. Offering your clients more digital ways to pay for legal services also helps decrease friction for clients by making it easier for them to pay. When your firm sends out invoices, is there a clear and easy way to pay? Both firms small and large have inadvertently added friction to payment processes, then wonder why their cash flow is inconsistent.

Quick case studies about law firms streamlining their payment process

Following are examples of two law firms I’ve worked with recently regarding streamlining their payment process:

Firm A mailed out invoices, along with a paper credit card authorization form which needed to be filled out and sent back (or called in). This caused days (if not weeks) of delay for payments.

Firm B did offer credit card payment in person or via phone. Yet they did not offer a link to their credit card processor on their emailed invoices or a way to pay via their website. At billing time, they “braced for impact” for the flood of calls of people wanting to pay their invoice via credit card. Inevitably, there was a delay since clients could not call after hours or on a weekend (if bills were sent on a Friday afternoon). In addition, staff had to take time away from client work to handle an administrative task that could have been handled without intervention, and at the client’s convenience.

For both these firms, automating this process would have a direct and immediate positive impact on their cash flow.

Learn more about delivering a client-centered legal experience

Improve and streamline your law firm’s billing process

Image of legal billing software

To start improving your law firm’s billing process, here are some questions to ask:

  1. Is your billing process spelled out clearly at the beginning of the client engagement?
  2. Does your firm provide easily understood invoices at reasonable intervals?
  3. Have expectations been set appropriately?

Ideally, clients should never be surprised by the billing process or the amount of their invoice. Lack of attention to these items can result in uncollectible work and unhappy clients—both of which can be devastating in a small firm.

Too often, law firms will take a retainer and not produce an invoice until the retainer has been used up. The results in their client receiving a shock because they were unaware of the cost of the legal services that had been provided thus far. While working with an attorney recently, they mentioned that the client was going to be upset at the size of the bill. Whether it was due to the length of time since their last invoice or the amount of work completed, if you feel that a client will be shocked at the bill, be sure to communicate along the way to improve the client experience.

Learn more about using evergreen retainers at your law firm. 

Have a clear understanding of your law firm’s financials

When thinking about how to manage a small law firm, it’s essential to have a clear understanding of your law firm’s financials. Law schools are notorious for training lawyers who know the law but not how to manage their law firm—especially their law firm’s finances. While you do not need to be an accountant, understanding key metrics is important to making decisions for the firm.

  • Work In Progress (WIP): How many hours/work has your firm captured but not yet billed? While not always a collectible amount, this gives you an idea of the potential upcoming billings. If your firm has hourly arrangements, it is also very important to know how “old” the time is (i.e. Aging). Once the time is more than 60 days old, it can be harder to invoice.
  • Accounts receivable (A/R): Work that has been billed but not yet collected. Again, the Aging of the Accounts receivable will be critical to the collections process. Once an invoice is over 60 days old, the chances of collecting in full drop steeply.
  • Collectible: Knowing how many hours your firm has captured, billed, and collected at any one time will help you to understand your actual realization rate.
  • Trust accounts: Do you know the trust balance for all of your client matters? Are the accounts reconciled according to your State Bar Rules?

Reviewing the above periodically (at least monthly) will help you understand and address issues before they become critical. This lets you address issues and bill clients whose work has been completed and review outstanding A/R to identify accounts that might need more aggressive collections.

Run your small law firm virtually with cloud-based legal practice management software

With the increased shift towards working remotely, cloud-based legal practice management software has seen explosive growth in the last several years.  This allows firms to operate and serve clients in our current world, even in a pandemic or natural disaster. Technology adoption can influence law firm performance dramatically—including improving resilience during times of crises. As the 2020 Legal Trends Report found, firms who were already working with cloud-based systems typically had a much easier transition from the traditional office to work from home environments—when compared to those using older on-premise software. Firms using on-premise software often had to scramble to find ways to remotely connect to their offices to perform their daily tasks.

With cloud-based legal technology, it’s often easier to:

  • Automate tasks like billing, document creation, and payments
  • Schedule consultations and accept payments online
  • Manage contacts and email lists
  • Automate essential aspects of client retention and communication

Building a virtual law firm also benefits your existing clients and helps you serve new clients remotely. These are clients who may otherwise be unable to access legal services.

Grow your client base with cloud-based client intake tools

Legal client intake tools like Clio Grow can help you create a reliable and streamlined intake process easily. Client intake tools can help take your client from intake to engagement, along with specific follow-up tasks to make sure each inquiry has the proper timing and amount of follow up. These tools also allow you to market your services to an already interested audience.

Learn more about how to improve your law firm’s client intake process and automate your client intake process

Develop a strong personal and law firm brand

Developing a strong law firm brand is also essential to the “how to manage a small law firm” question. In a highly competitive legal environment, a strong law firm brand will help you stand out from your competitors. What can you do to differentiate your firm from others who provide similar legal services?  

According to Katy Goshtabi, an attorney and brand consultant, a Personal Brand is a process of:

  • Unearthing your unique and relevant attributes
  • Communicating these attributes consistently to your audience
  • Managing how your audience perceives this brand

Learn how to develop a strong law firm brand.  

How to manage a small law firm team

In addition to the above points, managing a small law firm team has its unique challenges. Here are key ways to manage a small law firm team effectively:

Create procedures for everything

For many attorneys who leave a larger firm to start their own practice, they are immediately overwhelmed by the sheer amount of “trivial” work that they had no idea how to complete. This includes everything from e-filing court documents to handling the various licensing and bar requirements. In one conversation with a client recently, he shared how amazed he was to learn about the work that entire departments did (i.e. billing, HR, admin) that he had no idea about until he started his own firm.

Create a system for anything that you do more than once. It is easier to delegate and repeat when the process is defined and easily followed. As Mike Michalowicz writes in his book, Fix this Next, Make the Vital Change That Will Level Up Your Business, “When you bring order to your business, you give it autonomy, because the company is no longer dependent on any individual (including you). It has balance, strength, and fluidity. You are no longer carrying the business on your back, which means your company can continue without you – for a few days, or weeks, or years or a lifetime.”

Without a clearly defined process, you and your staff can easily miss steps. As Atul Gawande, MD, MPH, a surgeon, writer, and public health researcher writes in Checklist Manifesto: How to Get Things Right, “Checklists seem to protect against such failures. They remind us of the minimum necessary steps and make them explicit. They not only offer the possibility of verification but also instill a kind of discipline of higher performance.” Procedures are also important for cross-training your staff and onboarding new staff. Examples of procedures include routine tasks like billing, payments, document management, client services, marketing, etc.

Learn more tips on how to get organized as a lawyer.

Streamline your processes

Once you have documented your procedures, it’s time to examine your processes (both manual and technology) to avoid duplicating your efforts. It is important to capitalize on technology that will enable you to spend less time on routine tasks and repetitive manual tasks. The more often (or places) you need to enter the same information, the more likely you will have mistakes. By automating wherever possible, your firm will be more efficient and therefore profitable.

Leverage the technology available

document automation systems

Review potential integrations between software programs to expand functionality and reduce extra work. One of my clients realized that the time it took to add contact information in both his case management system as well as his VOIP phone system was wasted and introduced not only extra lag time but also possible errors. We enabled a link between the two programs and it had an immediate impact on his functionality. In Clio, you can use the Vonage integration for a similar function. Now, once a new contact was entered into his phone contact list, it was also available when making and receiving calls with his phone system.

Invest in training your team

One of the most overlooked components of working with a team to implement new strategies, processes, and technology is training. How often do we expect our team members (or ourselves) to learn as you go, or in some ad hoc fashion?

Think of training as an asset, not an expense. This is an investment in not only being productive, but also preventing costly mistakes. I’m often called in to address issues that occurred because staff did not understand how to implement software, so they made common mistakes. “You can hire me to teach someone to do it right, or you can hire me to fix it.” The latter is much more time consuming and expensive, as we must not only isolate and resolve the problems, we also must properly retrain staff.

The good news is that there are more resources than ever available for training. There are as many formats available as there are learning styles, including videos, one on one or group training, mentorship, conferences, articles and manuals, e-books, etc.

Provide training for your staff so they can be more efficient, and effectively use the technology and processes that you have. Make sure that staff is cross-trained if needed, and ideally have all staff attend relevant training.

As Richard Branson said, “Train people well enough so they can leave, treat them well enough so they don’t want to.”

Most importantly, be involved in the training process, or at the very least do not interrupt it! Giving your team space and time to learn is crucial.  I can’t tell you how often during a training session a staff person is interrupted to address other work, which breaks their focus and clearly shows the priorities of the “now” are less than the knowledge for the future.

Learn more about training for lawyers

Hire Expert(s)

Best books for lawyers on business

Whether the expert is an accountant, business coach/consultant, or legal technology consultant, hiring an expert is an investment in your firm’s success, and can often help you identify areas for improvement. Just as your clients depend on your firm to be specialists in your field with years of knowledge and expertise, these key players can help save you time (and money) and help elevate your firm.

Set team members up for success in their legal careers

Your team is the backbone of your firm. Without them, you could not support your clients, so it is important to support the team as well. Prioritize your staff’s mental health and wellness, in addition to their professional success. The longevity of your staff’s tenure will speak well to your management style and the workplace environment you create.

One of the firm administrators I worked with recently shared a story of her boss. Years ago, after her family suffered a personal tragedy, the attorney went above and beyond to support her and her family in a difficult time. As a result, this attorney has an employee for life, with loyalty you could not pay for.

At the same time, helping your staff grow professionally in their careers helps both the team members as well as your firm. As a small law firm, you more easily have the advantage of building a strong team that is close-knit and works well together. Invest in your people, to ensure your firm will thrive in the future.

Devote time to personal and professional development

Spending time on developing yourself personally and professionally will help you feel more fulfilled as a leader in your small law firm and business. This can take on many forms, whether it is participating in various professional communities, peer groups, attending conferences or webinars, or increasing your personal and professional skill sets.

With smaller firms, connecting and networking with others outside your office is also vital. Other professionals can be great referral sources, as well as provide complimentary or different areas of expertise. Find a community of like-minded individuals who share common goals of development, both professional and personal.

You’re ready to start managing your small law firm effectively

Small firm management is simultaneously challenging and advantageous. However, focusing on the big picture and the critical details will help fuel your growth. I hope this blog post will provide you with key steps to start managing your small law firm effectively. If you are interested in reading further about how to manage a small law firm, I’ve included more resources below.

Helpful resources for managing a small firm

Categorized in: Business

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