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| Art Italo is a consultant working exclusively with attorneys in the areas of business development and strategic planning. He speaks internationally on legal marketing and strategic planning. He can be reached at [e-mail italco]. |
Setting goals for your law practice is of paramount importance to your success. You can not reasonably expect your practice will grow and become more enjoyable unless you create a plan and actively execute that plan. There are three major areas in which you should set goals for your practice:
1. Practice focus
2. Target clients
3. Annual receipts
Before you embark on goal setting, keep in mind that the Rules of Professional Conduct contain clear guidelines for the steps I suggest you take. Pay particular attention to Rule 1.1 ("Competence") and Rule 7.4 ("Communication of Fields of Practice"). Also, the SJC has stated unequivocally that a client should not have to pay for a lawyer’s time in getting up to speed in an unfamiliar area of law. See In the Matter of Fordham, 423 Mass. 481 (1996).
Focusing your practice
The current trends in the legal profession make it critical that you narrow the focus of your practice and define a limited number of key areas. The increase in competition has made clients aware they have a choice. Given that choice, they usually prefer a specialist to a generalist. Lawyers are like doctors in a sense: they are being paid to relieve and prevent pain. When people are in pain, emotional or physical, they are not likely to economize on finding a solution unless the solution is not within their means. This is why the medical profession has moved toward more specialization.
With the exception of contingency litigation, where the client’s ability to pay is not an issue, you would prefer not to have clients who don’t have the resources to pay your fee. General practitioners tend to get more of these undesirable clients than attorneys with a focused practice, because higher paying clients tend to gravitate to specialists, leaving the GPs with the rest.
The second factor that should compel you to define your practice is the willingness of other attorneys to give you referrals. Attorneys tend to avoid giving referrals to generalists because they know they will seldom get any referrals in return. When you practice in a specific area, attorneys who don’t compete with you will feel comfortable sending you referrals.
When selecting a practice focus, you are always better off choosing something you like rather than something you abhor but are currently good at. Fear of losing what you have will make you a martyr to your lifestyle. If the stress of doing a job you loathe doesn’t kill you, it will make you miserable.
When you love your work, you always do a better job. You become obsessed with it and consume it with zeal. You can also market it far more effectively because enthusiasm sells.
Many of the lawyers who hire me are veterans who hate their practices. They have drifted into an area they despise. They are now trapped because they see it as their only expertise and their only source of business.
“I’ve been doing divorce for 10 years. I would much rather be doing corporate work or estate planning, but I have no experience in those areas. No one will want to hire me. I’ll starve.” This is the typical response I get from lawyers who disdain their practices. My answer is to begin now to make the transition and make it in gradual steps. I call this “evolutionizing” your practice. In 10 years you can have 10 years of corporate experience working on matters you love, or 20 years experience working on divorces you despise. Seems like a no-brainer to me.
The person in the above example should continue to take divorce cases while she becomes more familiar with corporate and estate concepts. She should create new associations with other corporate lawyers through bar sections, find a mentor and take CLE in those areas. When describing her practice she should tell people she is now doing corporate and estate work. If a matter comes in that is beyond her current expertise, she can associate a more experienced corporate lawyer. This will give her practical experience while giving the client a good work product.
The divorce referrals will still come in from clients and existing contacts, but gradually the mix of the work will change. If she keeps pounding away at the corporate theme, eventually that work will begin crowding out the divorce work and she will begin referring divorce matters away.
I have been successful in helping many lawyers evolutionize their practices into areas they enjoy and in which they are making better incomes than they had when they were in the trap. The process generally takes about three years to complete, but it is well worth it.
Defining your target client
Defining your target clients is one of the most important elements of leveraged networking. Knowing your target client can bring you many benefits. You can be more effective in your efforts at securing a desirable client if you know what you are looking for. Targeting will also allow you to be more defined about which clients you will refer to other attorneys. This keeps your practice focused and prevents you from falling into the security trap. Finally, by being more selective, you will build a more desirable clientele, increasing revenues and making your practice more enjoyable.
In defining your target client, you should ask and answer the following questions:
• What types of clients do I currently enjoy working for?
• What are their demographics?
° If your target is individuals, what age, education, income, etc.
° If you deal with businesses, what industry, size revenues, number of employees, management style, etc.
• Are there any other intangibles that are important to me (for instance, if you are environmentally aware and you deplore people and companies who rape the planet, environmentally responsible companies would be one of your criteria).
Draw clear boundaries on the type of clients you will and will not take. It is tough saying no to an undesirable client who is waving a $1,000 retainer check at you when the rent is late, but in the long run you will thank yourself. Your time is better spent marketing for clients you want than regretting the clients you have.
Revenue goals
Most lawyers don’t set any goals regarding receipts. As a matter of fact, most of my clients (both solos and in firms alike), initially couldn’t tell me what they brought in last year within 25 percent, and their estimates of last month’s receipts are often off by more than 50 percent.
If the only time you pay attention to revenues is when they are inadequate, and you aren’t paying attention to them now, you will be paying attention to them very soon. It is the inattention that creates the problem. Heed this advice well. You must track your revenues and expenses if you hope to be successful.
In setting goals, the first thing you need is information on revenues you’ve generated over the past three years. Notice I said revenues, not billings. You can’t spend billings. If you are a solo, check your last three tax returns. If you are in a firm and you are not tracking individual revenues by attorney, stop reading this article and go set up a tracking system this minute.
For hourly lawyers, once you have a history, you need to set your goal at 25 percent above your best of the three years. If you are at your work capacity (billing as many hours as you can) you need to raise your rates or start giving more work to associates. If you have excess capacity, you need to fill that capacity.
Contingency lawyers often have wild fluctuations in income. To come up with your goal you should examine the base revenues in best of the last three years. Back out any unusually high fees and examine which year you had the most revenues without the big hits (these are your base revenues). Take the highest base revenue and multiply that number by 25 percent. Add to that any large fees you anticipate will close this year. That will be your goal.
Once you have come up with an annual goal, you need to break it down into monthly and daily goals. For hourly lawyers, you need to calculate an effective hourly rate. Take the total revenues in your best year and divide by the total number of hours you billed. That is your effective rate. This will almost always be lower than the rate you quote (sometimes much lower). Take your annual goal and divide by 12 to get your monthly goal. Divide that by your effective rate to get your monthly billing goal. Divide that by 20 to get your daily billing goal.
For example, if your base year was $100,000 and you billed 1,000 hours, your effective billing rate would be $100. If you want to bill $125,000 you must bill $10,416 per month. Dividing by your effective rate of $100 that means you have to bill about 104 hours per month (unless you increase your rate). Dividing by 20 days in the average month, you must bill 5.2 hours per day.
For contingency lawyers, you must focus on closing a certain number of cases. First, for your base year, divide the total number of normal cases by your adjusted revenues (without the big hits) to get an average fee per case. Divide your revenue goal (without the big anticipated hits) by your average fee per case. This gives you the number of cases you must close this year. Divide that by 12 and you know how many cases you must close per month.
For example, if your revenues were $100,000 and you closed 40 cases, your average fee is $2,500. To make $125,000 you must close 50 cases (125,000/2,500). Dividing by 12, that is about 4.2 cases per month or about one per week.
After you have broken your revenue goals into small daily and weekly goals, you should track your progress fanatically. Always be aware of how you are meeting your goal for the week, the month and the year. This awareness will create the impetus for you to achieve the goal. When you know you are behind, you tend to pick up the pace. If the work doesn’t seem to be enough for you to meet your goals, you will need to spend more time marketing.
People tend to stay in their comfort zones. I am always amazed at how consistent lawyers are in their billings from year to year, even though they don’t track the numbers. They just get into certain rhythms and grind out the same pace. Setting these goals and tracking them just changes the rhythms and creates a new comfort zone that is a bit higher. If you can acclimate your mind to the elevated comfort zone, you will begin to gravitate to your goal automatically.
This won’t happen by wishing it were so. To retrain your mind, you must create new habits. The only way to create habits is through relentless repetition. At first it may seem tedious, but once you adjust, you will be reaping the rewards of greater financial success.