Billable Hours, Money, Small Law Firms

Great Expectations (Part 2): The Billable Hour, Bane of Your Existence

After a bit of explanation last week, we’re back to live action. As you’ve likely concluded from the title, this is the second installment in a series. Last week we discussed hours spent in the office, with the lesson for future small law practitioners being this (based on your comments and emails): small law practice doesn’t necessarily mean fewer hours.

On the heels of that conversation, I thought we should delve into the reason young associates so often spend those long hours in the office becoming fatter, more pale versions of their pre-law selves. It’s likely the bane of your existence regardless of the size of your firm or the size of the city in which you find yourself…

Hooray for… the billable hour!

Recently Elie discussed the finding that size does matter when it comes to billing rates. But what about associate billing requirements?

Within Biglaw, billable hour requirements may vary widely, but the numbers are usually big. They tend to start at 1800 hours a year and go up from there. My favorite firms are the ones that, like the former employer of my Biglaw friend Brian (whom I introduced here), don’t publish an official minimum requirement. Instead, these firms rely on associate fear and the previous years’ bonus structures to establish a high floor.

In his Biglaw office, Brian would routinely spend all day working on one or two projects, turning on the clock and just letting it run for hours at a time. The connection between the hours piling up and the magnitude of the resulting bill to the client was there for him, but only in theory.

Ultimately, the client (or, to be more specific, the client’s budget) wasn’t a major factor in how much time he put into a particular assignment. He was simply required to hit a certain yearly number of billables, and every hour that ticked off was another step closer to the goal. Deadlines were based on partner requirements and not client budgets. He would never have to explain or justify the work behind the numbers to a client; the focus was solely on billing as much as he could while awake.

As for small law firm practices, I’ve received a handful of emails along these lines: “I work in [a big city] for a small law firm, we handle big cases, and we have a big billable hour requirement.” Thus, it seems that billable requirements permeate firms across the board — and, as with hours worked, are not always in direct correlation with the size of the firm.

As one moves toward the smaller end of the spectrum, however, the target for associates becomes less about “billables,” which are measured in hours, and more about “collectibles,” which are measured in dollars. Obviously, the two are related, but the stress on the latter is indicative of a fundamental difference in the lives of young Biglaw and young Small Law associates.

In a small firm environment, even young associates often must answer directly to their clients. As I recall, my first client (i.e., client that was mine and mine alone) came to me within a month or so of my being sworn in. It was a simple matter — deed preparation — but nonetheless was one of my many experiences having to explain a bill to a client and actually ask a client for money. When you’re the one explaining the bills, you’re necessarily more cognizant of the clock.

In the wake (or midst?) of this recession, most clients are, to a certain extent, reviewing their legal bills more carefully. I’d venture to say, however, that clients of Small Law practitioners are still much more critical on the whole. As one reader aptly described to me, “If I spend 0.2 rather than 0.1 on writing an email, I hear about it [from my clients].”

This experience is not foreign to me, and it’s representative of two issues for a small law attorney: (1) clients have less to spend, which, on occasion, means you can’t spend enough time on a matter to complete it to the best of your ability; and (2) it’s tough to meet billable (or collectible) requirements.

The first point raises some ethical considerations that, in conjunction with the perils of going solo as a young associate, I plan to cover in a separate post. The second point is one with which I’m intimately familiar. I had no billable requirement at my small firm, but I was expected to get to a certain collectibles threshold, around $150K-200K. I found this difficult.

In stark contrast to the billing life of Biglaw, my daily log was always full of “0.1” or “0.2” hours, because I was constantly juggling small issues for many clients. I’d say, on average, I handled somewhere between ten and fifteen different matters a day. As those of you who have similar days might attest, when you’re switching from matter to matter with great frequency, you end up losing time. Suddenly, you’ve been at the office ten hours and have only billed six, which will eventually get whittled down to four collectible hours when your client complains. Maybe I’m just a sucker for a crying client. (That happens, by the way, and it’s not pleasant.)

So, what about your billable ratio — how many hours do you bill per hour at the office (or otherwise “working”)? How about your collectible ratio? Let’s get those in the comments.

Thanks for the emails. Keep ’em coming, to Little Richard dot JD at gmail dot com, and come find me on Twitter (@LittleRichardJD).

Earlier: Great Expectations? Small Firm Practice v. Biglaw Practice (Part 1)
Prior ATL coverage of small law firms

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