The Basics of Getting Paid - Part 3; Open Accounts

Note: I started this post, but never published it to finish off the series.

The reality of any business is that you're going to have work to get paid, especially if you're billing by the hour. This is especially true if you're practicing the traditional method of billing by the hour (there's another reason flat fee pricing is so great).

The key to avoiding delinquent accounts is to bill effectively. Like your telephone sales pitch, your billing statements should succinctly and eloquently describe the services. Nobody likes to pay for a 10 minute phone call, unless the phone call had value. Clients will resent you, and will consciously avoid paying bills they feel are valueless.

One the lessons I learned early is that "drafted motion for summary judgment" doesn't nearly have the panache as, "Researched case law regarding [legal issue], using [list resources consulted]. Discovered these cases: [list cases]. Drafted argument section of motion for summary judgment based on [case name or legal theory]."

Although clients don't understand any of the legal jargon, they do understand that you did a significant amount of work. Remember, the easier you can make it on them, and the more you can justify your costs, the more likely you'll be to get paid.

The Basics of Getting Paid - Part 2; But Nobody's Hiring Me

Face it right now, especially if you're a newbie/soon to be newbie, you're not going to get Michael Jackson (I know, he's dead), Mike Tyson, or the latest A-list Hollywood star divorce. You're not even going to get the B, C, or F-list divorces. Unless you know the person, they're going to go with [Insert Local Family, Criminal, or etc. Law Super-Attorney's Name Here]. The people you're going to serve are just like you: middle-class Americans, trying to make a decent living, and are now having problems.

Sometimes though, you'll find that even these decent middle-class Americans aren't hiring you, despite the fact you've quote 100 fees today. You might get discouraged, or you might start to think your fees are too high, and consider changing your rates. Unless you're charging $250 per hour, don't think about it! More especially, don't change your fees or cave to your doubts.

The worst thing you can do is start to believe you've mispriced your rates. The truth is, you're just like the other 90% of attorneys in this world who aren't getting the clients. Remember, clients have a variety of reasons for not hiring, and most likely, price isn't one of them. Good pricing makes the potential client truly evaluate their situation (check out my post here for a frank firm to client discussion about fees).

When you're not getting hired, it's time to reevaluate your sales pitch. What are you doing/saying? Quick, you have 60 seconds to sell your divorce/family law/bankruptcy/etc. services, what will you the caller? Have you even thought about your telephone pitch?

There's a great blog post by Jay Fleischman, titled, What if the Client Set the Legal Fee? The post is a candid look at fees and services. Mr. Fleischman, makes the point that "[v]alue must be built from the very first moment you begin to market your bankruptcy practice (or, for that matter, any legal niche). You need to stand in the client’s shoes and determine what it’s worth to them to get out of debt, and exactly what you can do to build up that value to a point where it matches or (ideally) exceeds the price tag associated with your services." I wholeheartedly agree.

I looked at the reasoning behind my "failures" and found that I didn't think I was giving the client enough information about what I would be doing to help them. When speaking with potential bankruptcy clients, I found I simply told them, "I'll help you file bankruptcy under chapter 7." No wonder I wasn't turning phone calls into clients. What exactly does that mean? And why does that justify my fees? Heck, anyone can file pro se and save themselves hundreds.

So, after this brief evaluation, I revised my pitch:

I'll help you file chapter 7 bankruptcy. This will involve meeting with you in person and talking on the phone at least 3 time to discuss your paperwork and financial information. I'll also be filing out the bankruptcy petition and compiling the financial data you've given me. This usually takes 1 day, or about 8 hours. When the petition is filed, we'll continue to talk, and I'll probably call you 2 or 3 more times to discuss simple issues that arise. We'll meet for the 341 meeting, which is a simple hearing before the bankruptcy discharge. All these services will be part of your [Insert fee amount here] fee. Of course, you're free to call or email at anytime with questions. When would you like to meet?

After discussing these things, I'm able to answer any questions and resolve any concerns with the client, before recommitting to the engagement meeting. The script, or something similar, takes about 60 seconds to recite, and has a powerful effect on people's actions.

I believe when you've carefully explained what value they're getting, this helps resolve a client's anxiety about paying your fee, and trusting your service.

Unlike a tangible product, judging the quality and value of services is difficult. Clients will not hire you for the task if they don't feel you can accomplish the job and get them the "justice" they deserve.

The Basics of Getting Paid - Part 1; How Much Should I Charge?

One of the biggest problems with being on your own is the ability to generate revenue. This is difficult regardless of your career field, but more especially in costly service fields, like law. With the challenge of new generating revenue, also comes the task of collecting the money before or after services are completed. I'm going to make a series (is 2 considered a series?) of blog posts dealing with the dirty issue of making money, because, face it, this business (or any) is about making money.

This first post will deal with some of the challenges you'll face in selling your services, and setting prices for your services. The second post will deal with collection matters, including the issue of whether you sue your client. If you have questions along the way, or would like me to talk specifics, please let me know.

How much should I charge?

The question that drives fear into every new solo's heart is, "how much do you charge?" This is especially true for recent graduates who hang their shingle. I remember when my first client confronted me with the question, and how my heart sank when I had to respond.

Sure, I'd talked to others about their fees and hourly rate, but without much else, I knew little about the market for new attorneys. Some friends I knew who worked at big firms boasted about being billed out at $250 per hour, that seemed extravagant to me though, especially when I knew most of these associates had little or no practical legal skills.

As I talked, many people offered the practical advice that I should bill $100 per hour, based on the number of decades in practice. For instance, since I had practiced law less than 1 decade, my hourly rate should be $100.

Finally, I settled on a slightly higher hourly rate that I felt confident could benefit me in two ways. First, the slightly higher rate would discourage "bargain seekers" from hiring me. In my experience, client seeking bargains can never (yes, I said never) appreciate the value of your services. Moreover, the bargain seeker will consistently challenge your decisions/suggestions, and most likely will make unreasonable demands to resolve the case. You will soon regret the lower hourly rate. You will find that a client who accepts your higher rate will become your ideal client. Believe this fact too, there's plenty of other attorneys who will take these clients, don't despair.

Second, a higher rate would allow me to adjust, my fees for the "pro bono" client, while still making enough to keep the doors open. Trust me when I tell you that you'll have plenty of opportunities to give away your services. Whether you offer discounts to friends/family/good clients, through genuine pro bono services, or to your "charity" clients (mine are kids), the opportunity to help someone will be there. What's more, these clients will appreciate your "discounts" much more than the others will.

What about flat fees?

I love flat-fees (or one fee for all services). They're the heart of my practice, and are especially valuable to clients.

The problem with the flat-fee billing method is that it's extremely difficult to "value price" your services, and account for specific, and often time consuming, nuances in cases. I found early on that it's a good idea to "bill" for everything you're doing on the flat fee case (I use QuickBooks Pro to tally time, mileage, and case expenses). This helps to give you a general idea of how "difficult" a case is, and provides a good reference point for future cases.

For instance, for a "simple" or uncontested divorce I charge $1,000. I arrived at the amount because I learned early that $500 and & $750 did not adequately compensate me for the amount of time I spent dealing with issues in the case. When I finished my first "simple" divorce (which I took for $500), I ended up making $5.75 per hour. Not even minimum wage!!

Granted, because this was my first divorce case, I cost myself more time by not knowing particular shortcuts. Moreover, because I "bill" for everything (time, postage, mileage, telephone calls, hourly casework), I increased my rates.

The important thing I learned though was that I needed to have more money to make the cases worth the time, effort and costs. Remember, you're in a business, despite the idealistic mantra your professors gave you. If you're not making money, you're not going to survive.