The 5 Big Mistakes Most Lawyers Make

Lawyers are a fairly homogenous group.

We spend years in school, and ultimately, all get a similar education.

We have many shared experiences. We studied together to pass the same exam. We’re governed by the same or similar regulators. We’re used to living under lots of rules.

We’re part of one big – I won’t say “happy” – family.

We even have our own hashtag: #lawyerlife.

Naturally, that closeness gives us a similar outlook on life. Sure, we disagree on many issues, but we have a lot in common. We’re more alike than we are different.

Our tight culture leads many of us down the same path. We value the same things, build similar lives, work in the same way… and make the same mistakes.

Here’s my list of the top five mistakes most of us make, over and over.

Can we change? Nah.

But we can at least make ourselves aware of the mistakes we make.

Mistake #1: We charge too little

I get paid big bucks consulting for law firms.

After listening to their story, the first thing I do is tell them to raise their prices. I’m paid thousands of dollars to say, “Raise your prices.” It’s awesome because it always works and I’m the hero.

Month one: I say, “Raise your prices.” So they raise their prices.

Month two: They say, “It went great. Our revenue is up and our clients are still happy. You’re a genius.”

“I know,” I reply, as I process the credit card for my consulting fee.

Of course, there are limits to how much we can charge, but most of us are nowhere near those limits. We almost always charge dramatically less than the value our clients receive.

I know, I know. You get a ton of “How much does it cost?” inquiries, so you worry about alienating those folks. Trust me: They're not really asking about the price.

Why do we charge too little?

Three reasons:

  1. We’re driven by desperation and fear of losing the prospect.
  2. We don’t value our contribution sufficiently (we actually aren’t as egomaniacal as we sometimes seem).
  3. We’re bad at marketing. Our big market differentiator is that we’re cheaper than the other guy.

There are many reasons to charge more.

First, the client who actually hires you (as distinguished from the price-shopping callers) expected to pay more.

Second, price communicates value. That’s especially true when the consumer is in unfamiliar territory. Would you feel more comfortable buying the $11 hotel room or the $200 room if you hadn’t seen either?

Third, clients who pay more will value your service more, treat you better, refer more friends, and believe you did a better job.

Keep yourself up-to-date with the local market. Know the price ranges. Talk to lawyers, ask clients, and keep tabs on what the market is doing.

Then raise your prices. Send me a check when it works.

Mistake #2: We hire too soon

We love to hire employees.

Why? Because we're so busy doing the work we didn't charge enough for.

But that’s not the only reason.

Maybe we like having someone to talk to. Maybe we’re lonely. Maybe we think having a team makes us seem professional.

The hiring urge is powerful.

So when should you hire your first employee? Hold off. Move slowly; do it later. I've written before with specific guidance.

Hiring too soon, coupled with charging too little, can screw up a firm forever. It's difficult to reset the business. A high headcount coupled with low revenues is a mess.

Some lawyers measure themselves by headcount. They like to see the number of warm bodies in their office go up. I'm guessing it's an ego manifestation reinforced by our “how many lawyers do you have?” culture. Whatever it is, it's a mistake.

Other lawyers measure themselves by profit. They like to see the balance in their bank account go up. I'm guessing it's common sense (or kids who want to go to college). It's smart.

Here's what a headcount lawyer would do:

He opens a solo practice and gets a good start. He hits $300,000 in annual revenue per employee (a healthy figure).

The “hire someone” urge kicks in and he hires an associate. He drops to $150,000 in revenue per employee (less healthy).

Now he has some free time, but not as much as he hoped because the employee is high maintenance. Now he has to learn about management and push his income up with some marketing.

He gets his revenue up to $400,000 ($200,000 per employee), but now he increases his headcount by hiring a paralegal. Why? Because he can afford it.

Now he’s down to $133,000 in revenue per employee.

The headcount lawyer gets busy and pumps up his marketing. He explodes to $600,000 in revenue, so he “needs” to hire a second associate (running total: $150,000 per employee).

Now he’s on fire and cranks his revenue up to $900,000. He hires a third associate, a bookkeeper, a receptionist, and an intake person to handle prospective clients.

On one hand that sounds like a dream come true, doesn’t it? It seems like he’s growing fast.

But on the other hand, he has a team of eight, but he’s only bringing in $112,000 per employee.

He built a business with a $112,000-per-employee culture.

The headcount firm owner markets the business like crazy, manages challenging employees for hours every week, struggles to keep up with clients (especially upset clients handled by the associates), and deals with a lot of stress.

And here’s the worst part…

The lawyer is now taking home about the same amount of money as when he was grossing $300,000 all by himself.

You won't see a significant increase in personal income when you build a law firm with revenue of $112,000 per employee. The math just doesn't work.

It's next to impossible to turn that business around. The culture sticks. There are forces at work that make it very difficult to get back up to $300,000 in revenue per employee.

And it all started for that headcount lawyer by hiring before he was ready. He baked that low revenue expectation into the culture of his firm by expecting too little, charging too little, failing to collect, accepting clients out of desperation, and failing to adequately test the business model.

Don’t hire too early.

Mistake #3: We stop marketing when we’re busy

Marketing never ends. It's like emptying the office trash cans. It needs to happen every single day.

Most lawyers treat marketing more like rehab than rubbish collection. They only do it when they feel the hangover of insufficient income.

When our bank account gets low (or worse – empty), we start to stress. Our heart rate rises. We get sweaty and anxious.

We pay someone lots of money to fix the problem. We pay an SEO firm, buy leads, or contract a new website.

After our panic, when the problem is finally fixed, we settle back into the busy daily routine of helping clients, and eventually the cycle repeats itself.

A better approach is to (1) nurture existing clients so they stick around and refer their friends, (2) build and maintain our network so we have a steady flow of referrals, and (3) steadily maintain our online presence, speaking schedule, media outreach, club memberships, bar association activities, etc.

When you're too busy to market your practice, it's time to raise your fees (see number one above). Raising prices will deter a few clients, free up some time, and allow you to keep marketing.

Spend one day a week marketing and you'll keep the phone ringing. The calls will get better over time. The fees will increase and the clients will pay their bills. To be truly effective, marketing needs to be as automatic as taking out the trash.

Mistake #4: We under-communicate with employees

For the most part, we manage our employees by osmosis.

We hope they understand what we want as we rush past them on the way to a meeting. We assume those mobile phone conversations from the car are sufficient.

We end up with enough communication to manage the current tasks, but insufficient communication to manage the business.

The bottom line is that we don't know their goals and they don't know ours. Yes, we know they need to leave early on Tuesday and they know we need the brief filed by Friday.

But we don't know where they're going with their lives and they don't know where we're going with our business. The only way we can share our goals, collaborate on the plans for achieving them, and organize daily objectives is to communicate.

Communication is essential if we are going to act in a coordinated, aligned way to achieve our vision for the future.

Haphazard communication results in haphazard movement toward the objective. Mostly we arrive at unintended destinations and we rarely travel together.

We need a master plan – a vision – that we can share.

Then we need to communicate it in an organized, orderly, systematic manner. We need to speak daily. We need to discuss the plan, the underlying rationale, and our mission.

That’s only going to happen when we devote time and attention to achieving alignment. It only happens when we make it as routine as that morning cup of coffee.

Mistake #5. We ignore technology

Get on the train. Join the rest of the world. Spend some energy keeping up, and use technology to serve your clients.

Most lawyers are technology laggards. We hurt our bottom line. We hurt our client's chances. We make ourselves miserable.

You can learn anything in a day. Yes, anything. Isn't it time to learn this stuff?

My firm adopted a practice management system in the early nineties and went paperless about the same time. That was twenty years ago. Those decisions have powered us economically for the two decades since.

Back when we invested in practice management, document imaging, and document creation technology, the transition was hard. We struggled with broken, buggy technology.

Today it's easy.

You just subscribe to a practice management system and tag along as they develop it for you in the cloud. All you need is a web browser and an internet connection. The technology is improving all the time.

We see more artificial intelligence integrated into our system with each quarterly release (we're on Salesforce). All we have to do is pay the monthly fee. It really is easy.

We're no longer in a world where you have to buy software. Hardware is cheap. The only impediment to becoming a technology expert is finding the time required to focus on deciding which problems you want to solve and then trying different technology solutions until you hit on something effective.

Becoming current with technology no longer requires big bucks, lots of education, or a complicated selection process. In today's world, technology is abundant, affordable, and effective.

Now you can skip these mistakes

Even though many of us have made these mistakes, they certainly aren’t essential for growth.

Feel free to skip any or all of them. I'm sure you'll find plenty of other opportunities to learn from the best teacher – mistakes – along the way.

Raise your prices, be cautious about premature hiring, keep marketing, over-communicate with your team, and implement the latest technology. Those are the things to do. That's how you avoid these particular screw-ups.

I've made most of these mistakes and it has been painful. Hopefully you'll find a better path.

We may have a lot in common as lawyers, but we're not required to make the same mistakes.

 

Start typing and press Enter to search