Category: Practice Start-Up

Supply and Demand

Supply and demand.  Buyer’s vs Seller’s market.  These fundamental economic concepts are learned early. Where’s the legal industry now?  Where is it headed?  We know that we headed into a Buyer’s market long before the economic downturn.  As we entered the new century, we encountered increasing numbers of client RFPs which boldly laid out the new terms of engagement.  We endured beauty contests.  We submitted to electronic billing and auditing.  We modified billing systems to produce what clients wanted.  We timidly stepped into the uncertain waters of alternative billing.  Adapt or starve.  That simple.

There is no doubt that there is a current imbalance between supply and demand.  We’ve been reading articles about the big lie that law schools have told to prospective students about the percentages of graduates obtaining jobs which require a legal degree.  Scandalous scoundrels.  A few singled out under the bright light of scrutiny to pay for this misstep. 

Let’s take a look at the statistics presented in a Washington Post article entitled “Will law school students have jobs after they graduate?”

In 2011, more than 44,000 students graduated from the 200-odd U.S. law schools accredited by the American Bar Association. Nine months after graduation, only a bit more than half had found full-time jobs as lawyers.

The U.S. Bureau of Labor Statistics forecasts 73,600 new lawyer jobs from 2010 to 2020. But just three years into that decade, about 132,757 new lawyers have hit the job market.

While not every new JD seeks employment as a lawyer, it is safe to say that planning to work as an attorney is not rare among law students. But perhaps it should be. Data from the National Association of Legal Career Professionals indicate that since 2010, about 75,000 new law grads have found full-time jobs as lawyers.

So, in theory, all of the BLS-forecasted job openings through 2020 have already been filled, and 59,157 new lawyers are still looking for “real” law jobs.

Yes, of course some of the JD graduates this year and in the years to come will find high-paying, partner-track jobs at big firms and elsewhere. But the scale of the imbalance over a decade gives some indication of just how tough it is — and will be — as armies of newly minted JDs rise every year. By 2020, about 300,000 additional grads will join those 59,157 in a hunt for jobs that, statistically, are not to be found.

Those are pretty grim numbers.  And they’re mostly believable.  An ABA Journal Law News Now article entitled “Law School by the Numbers: 300K Additional Law Grads by 2020; 73K New Jobs Forecast for Decade” reported on the Washington Post article.  They noted that

Mark Medice, national program director for a Thomson Reuters unit that tracks jobs and pay at large law firms. . . believes a new legal education model may be needed that emphasizes specific skills such as discovery, regulatory matters and litigation support. The cost would be relatively cheap and the focus would be on jobs that are available.

Yikes!  What a terrible idea.  Well, not terrible from the perspective that one would likely get a job.  But it would be a greatly downgraded job.  And a cubby-hole career-wise.  This would likely hasten the further commoditizing of legal services.  Commoditizing = devaluation from my perspective.

What I don’t know is whether the statistics take into account the massive number of baby boomers who are set to retire over the coming two decades.  I have to just “assume” that is the case.  But even if not, that mathematical correction would not be enough to swing the pendulum back into a Seller’s market.  So what are tomorrow’s grads to do?

  1. Put every single molecule of energy into graduating at the highest possible ranking.  Although it is not a determinant of career success in the long run, most law firms see class ranking as an factor in candidate desirability.  Remember, you have to actually have a job as a lawyer to demonstrate how skilled a lawyer you can be.
  2. Pick your focus carefully, and early.  Too many graduates have no idea what type of law they want to practice.  They accept jobs which often cubby-hole them.  Too often they become trapped  in practice areas which may forever doom them to higher hours and lower wages.  Serendipity is not an acceptable career strategy, in my book.
  3. Prepare to hang out your own shingle.  Don’t be dissuaded by condescending or pessimistic professors, partners at large firms where you intern, or overly concerned judges where you may be fortunate enough to clerk, that going out on your own without spending time in someone else’s firm first is a formula for malpractice.  Just be sure that you connect with other more experienced solo and small firm attorneys through your bar association.  The Pennsylvania Bar Association has both a Young Lawyer’s Division, and the Solo & Small Firm Section.  Belonging and participating in both should be an essential part of your career.
  4. Nurture the business side of your practice.  The legal industry is unique in that it is both a profession and  a business.  You can’t have one without the other.  So avail yourself of the law practice management resources available through the Pennsylvania Bar Association (or whatever your state bar is), as well as the resources of the American Bar Association
  5. If you’re determined to work for another firm you can greatly increase your success in finding a job by focusing on smaller firms in smaller towns.  Find the law firms online, and send your resume to every firm.  Sometimes you just have to be in the right place at the right time.  Contact the executive director at the local bar and find out if they have a job bank, a way to circulate your resume or advertise your availability, or know of any openings.  Remember that small-town firms usually provide more opportunities for direct client contact, rainmaking, and variety of assignments.  The pay is lower, but after a few years you can — notice I didn’t say will — have the skills necessary to locate a more desirable situation, or open your own practice in the location you desire.  And there’s a distinct possibility you may learn you actually like small-town practice and life.
  6. Learn to market.  For a small percentage of lucky individuals, it is natural.  For the vast majority it is learned.  Just as you learn to become a skilled lawyer by practicing your trade, you learn to become a successful rainmaker by practicing your marketing skills.  It gets easier, and you get better, over time.  Networking.   Teaching. Publishing.  Leadership.  Community Service.  All of these are still successful methods.  Except now you can — and should — leverage yourself with social media tools as well. 
  7. Find your value proposition.  Somehow you have to find a way to differentiate yourself from the mass of other attorneys trying to attract attention in a crowded marketplace.  How will your voice be heard?  If it is somehow different, it will be.  Focus on responsiveness, creative pricing strategies — note I didn’t say cheap, which is different — which are based on leveraging your intellectual property to the max and running a highly efficient operation, and helping the client focus on value provided instead of hours x cost. 

Today’s grads think it’s tough?  The road ahead for future grads will be tougher.  Don’t wallow in self-pity.  Don’t be passive or weak in your efforts to get your career going.  Most people are, even while thinking they’re not.  Finding a job is a full-time job.   Get active about creating your future. 

If law school is ahead of you, put thought into where you want to be when you graduate.  Take courses, even undergraduate courses, appropriately.  And for goodness sake, don’t go to law school just because it seems like a good idea.  I see too many graduates who land a job only to learn, after all that time and effort and expense, that they really don’t like being a lawyer at all.  Don’t choose law school because you don’t have a better plan.  Choose law school because you’re passionate about becoming a member of the profession, with an open eye toward all that entails in a world of supply and demand.

 

Why Your Firm Needs a Written Partnership / Shareholder Agreement

We know the adage about the shoemaker’s children running barefoot.  In the law firm the equivalent is a firm built on a handshake and nod, without the benefit of a written agreement.  The result?  Just as dangerous as those shoemaker’s children running around barefoot on a bed of broken glass and rusty nails.  Aw comeon, you’re thinking, we’ve operated that way for years and it’s working just fine.  Hey, good for you.  The problem is what happens when you’re not getting along just fine.

The time to agree about things is when everyone is feeling agreeable.  When times are good.  That’s when people are most likely to be reasonable.  And that’s when you should nail down details that will be vital should things devolve into something less agreeable.  Let’s be honest, we are seeing a decided uptick in law firm dissolutions, defections, implosions, explosions, and outright financial failures.  Without a written agreement which spells out some critical actions, you will likely end up in court, or at least in the newspapers.

For example, read this recent article from the ABA Journal Law News Now entitled “Suit Claims Former Partners of Dissolved Law Firm Won’t Leave.”  I admit I laughed out loud when attorney Ronald Minkoff, a partner at Frankfurt Kurnit Klein & Selz who represents lawyers in partnership disputes, was quoted as saying that it is “unusual in this day and age” not to have a partnership agreement.  Ok, remember back in law school when you were told to look to your left, and to your right, and realize that by the end of 3 years only one of you would be remaining and passing the bar?  Same exercise, only this time it’s less than one of you will have a written agreement with your business partners.

You may be wondering what the big deal is . . . we’ll just go our own way, right?  Nope.  In all likelihood it will be getting nasty fairly quickly.  You may find yourself in the headlines.  You will certainly lose tons of time and energy which could be better used transitioning your clients to a new practice with you.  It will cost you legal fees in addition to emotional trauma.  And you may wind up with disciplinary issues and/or malpractice claims to boot.  Need examples of the issues which crop up the most?

Malpractice insurance coverage after the lights go out. 

Many of you immediately recognize we’re talking about “the tail” or what is otherwise known as an Extended Reporting Period Endorsement.  Malpractice insurance policies for lawyers are almost exclusively written on a “claims-made” basis.  This means that if you don’t report a claim within your policy period, or an act, error, or omission which you know about which may reasonably give rise to a claim in the future, you will have no coverage if a claim arises after the policy period expires.  For many lawyers, it is a rude awakening to find out that their new law firm home may have a policy which excludes prior acts coverage.  If you wind up on your own, you may not be able to afford a policy with full prior acts coverage.  The best policy for all concerned is to require the dissolving firm to purchase the tail, in order to protect everyone going forward.  However, absent a written requirement, I can assure you that it rarely happens, as those departing refuse to pay their fair portion of the premium.

Retention and disposition of remaining client files.

This is a complex and problematic area.  Just because a law firm closes doesn’t mean the firm is relieved of its obligation under Rule 1.15 [Safekeeping Client Property].  In fact, those obligations continue and can — and have in the past — impacted even former partners of a dissolved firm with disciplinary action if ignored. 

A few years ago I read about a dissolving New York firm which could not get the partners to agree to pay for a storage facility for all the closed client files.  The debate became heated.  No one wanted to pay to store files for former partners, let alone their own former clients.  Eventually, the few partners who stayed behind, responsible for winding things down, became sufficiently disgusted and literally threw away all the files. Ultimately, all partners who had left files behind, even those who had departed before the closing of the firm was announced, were disciplined for failure to properly safeguard client property. 

On top of these issues, firms must be concerned about discovery and possible accusations of spoliation if client records are dealt with inconsistently.  When it is left to individual attorneys to determine what gets saved and what gets destroyed at a given interval, every inconsistency becomes suspect under the bright glare of litigation discovery.

Future liabilities and audits.

When a firm winds down, unpaid liabilities can rear their ugly head.  While not every nuance can be anticipated, you want to make sure that any departed partners remain liable for their share of any back taxes, penalties and interest, defaulted loan payments, unpaid vendor bills, or whatever later arises from a period in which they were a member of the firm.  Gone should never mean off the hook for these obligations.  Look to your partnership or shareholder agreement to make this obligation clear.

These represent just three examples off the top of my head of what can — and frequently does — rear its ugly head in the absence of a written partnership agreement, when a firm dissolves.  If I didn’t have a backlog of work calling my name right now, I’d delve even into how a firm’s ability to nimbly realign and implement change in response to an evolving marketplace can be seriously hampered when there is no partnership agreement spelling out how decisions get made.  If you’re relying on 100% consensus to accomplish everything, you better hope you never disagree.  Because when you do (notice I didn’t say if) you will be thwarted by decision paralysis.

If you’re not convinced, search Google News for past headlines regarding law firm dissolutions and the thorny and ugly issues which emerged. You will find a common theme in most — the lack of a written agreement between members of the firm.  Don’t let your future follow a similar path.

For Young Lawyers and Attorneys Opening Their First Law Office

The April issue of Law Practice Today focuses on topics of importance to young lawyers and attorneys opening their first law office.  These articles and more are available at no cost to you on the LPM website.

Keys to a Successful Legal Career Starting In Year One

To be successful in life and as an attorney we must plan for the future, develop important relationships, and treat people the way we would want to be treated.  The first three articles in Law Practice Today help show us the way.  First, Ray Morgovan explains how to bring a focus (and success) to your legal practice by creating a personal mission statement outlining your goals in Now, More Than Ever.  Liz Grana and Dudley McCarter discuss the benefits for mentors and mentees of building that relationship in Crafting a Relationship A Mentor and Mentee’s Perspective and Harry Styron discusses the tried and true wisdom necessary for starting a small town practice in Small Town Lawyering.  This article is well worth reading because it is equally applicable to establishing a firm in any environment. 

Software Tools for Business Success:

We are pleased to see the podcast, The Digital Edge: Lawyers and Technology Podcast Series, which discuss the recently published book, The Lawyers Guide to Practice Management System Software, Second Edition, presented by Jim Calloway and John Simek.  As we all know, a good practice management system which is well utilized is the backbone of any professional office.

Young lawyers and new startups will also find some excellent tech to reviews in the April edition.  First, in Tech Tools Review, Bryan Sims reviews Nitro PDF professional 5.5, as an alternative to Adobe Acrobat.  Here, you can find out why Ryan likes as an alternative, except for its lack of OCR functionality.  In addition, Bryan Sims reviews UltraMon 3.0, a utility that helps increase the efficiency gains from using multiple monitors. 

Financial Success

We all know that we don’t get paid unless we bill.  Reid Trautz and Dan Pinnington set forth nine tips for capturing more of your billable time to increase your cash flow in Technology and TimeKeeping can Help You Capture More Time.

Looking to the ABA’s best publications, we have an excerpt from Flying Solo: A Survival  Guide for the Solo and Small Firm Lawyer, 4th Ed., where Carol A. Seelig discusses Can You Afford to be a Solo? 

Managing Yourself

Success as both an associate at a firm or as a attorney dealing with your own clients requires you to learn to say “No”.  Joshua Hornick give us Saying “No” – The Three Steps to Doing it Well, and factors in determining if you should say “No.”

Managing Your Firm

Firm associates, and even partners, cannot continue to improve as attorneys, and may not be aware of weakness without receiving constructive feedback.   Find out how to give constructive feedback in the article It’s About the Feedback.

Ed Poll reminds firm managers in Think Before You Leap into De-Equitization that de-equitization of law firm partners is not a magic bullet for firm finances and list important factors that must be considered by the firm management before it begins the de-equitization move. 

Marketing for a Better Tomorrow

Peter Roberts, in Marketing Focus: Client Referrals, lays out a plan of action to increase the quality of clients you represent, the quality of the communications you have with your clients, and to thereby ensure that your client feels well represented so that they will become your number one referral resource. 

The article Marketing and Client Development Activities, by Kathleen Brady, shows every attorney that they can successfully market by using the skill at which most attorneys excel, communicating with a little empathy.  

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Why Solo Practices Fail

There are many reasons why a solo practice can fail. Some are unique as to the particular facts and circumstances which converge on the hapless attorney. But many are foreseeable. What is foreseeable is avoidable.

In an article recently posted to the web site of Freedman Consulting, Inc. entitled “Why Solo Practices Fail” the author examines six factors which can spell the demise of the firm before the doors even open.

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