Small Law Firms

Keith Lee

Keith Lee

Lawyers, as a whole, tend to be a negative bunch. Reserved, contrarian, and antagonistic. It’s just part of the job. “But it doesn’t have to be that way!” some new lawyers like to say. “I’m going to have a optimistic attitude about my career! I’m going to follow my passion!” This mindset likely comes from being told for years by an over-eager education system (and overbearing parents) that they are special snowflakes and just need to have a positive outlook on things and everything will turn out alright.

And some research studies would indicate that they may be partially right, except for one fine detail….

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Bruce Stachenfeld

Bruce Stachenfeld

Many years ago in college I was a math major. Today I remember absolutely none of it; however, I remember why I liked it. It is because, if you don’t mess up your calculations, math tells you the truth.

Today, much has been written about the concept of “making partner” for an associate. I believe there was an article (I don’t remember where) that talked about the fact that at some firms 100 first-year associates are hired and the long-term process of “making partner” is like the Hunger Games (affiliate link), where associates are winnowed out until only a very few actually make the cut at the end.

The thought that some of the most brilliant people in our country would work themselves incredibly hard in high school to get into a great college – then work themselves even harder to get into a top law school – then work themselves even harder still to land a job at a top law firm – only to play the Hunger Games against other people who are as brilliant as they are for nine years to “make partner” defies logic. Why would any super-smart person do that? It also defies logic why major law firms, which have achieved the holy grail of any industry (namely, the ability to attract the greatest talent in the world), would squander (winnow) that talent away.

I will put those questions aside for the moment (and maybe address them in later articles) and here just talk about the math of “making partner” — and how there is really no reason for either of the foregoing issues to exist….

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merger law firm mergerThese are challenging times for the nation’s 200k+ law firms. Just look at the pace of mergers. Combination announcements appear almost weekly.

In fact, 2013 was a record year for law firm mergers. And, based on the first nine months of this year, 2014 will end with a similar number of transactions. Although the mega-mergers grab the headlines, a big number of transactions are between smaller firms or smaller firms being scooped up by larger concerns seeking to gain a foothold in new markets.

Last month, The American Lawyer reported on this record merger pace citing deals closed in the hot southwest legal market. Two notables:

  • LeClairRyan’s merger with Houston’s Hays, McConn
  • Fox Rothschild’s combination with David & Goodman in Dallas

In both mergers, Roger Hayse and Andy Jillson of Hayse LLC advised Hays McConn and David & Goodman in their respective transactions and helped shepherd those two firms through to successful deals. Why are Roger and Andy front and center in this robust merger market? For one, they have walked in your shoes. Here are two guys who led and helped build a strong regional firm that included the strategy of merger. So, how should small to medium-sized firms approach a merger strategy? What are the “rules of the road” for achieving a successful merger? What are the best ways to manage the inherent risks?

Let’s hear from Roger and Andy:

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resume girlFor the first few years of my solo practice, I was a pure solo (also known as a “true solo”). This means that I had no associates nor support staff. I had a small number of clients with relatively simple matters, so I had no need for such luxuries. But later, I got a part-time assistant who handled the mail, deposited checks, and called a client from time to time. She is still with me today helping me close up my existing cases.

Solo practitioners and small partnerships seeking a lucrative practice will eventually have to hire employees, or at the very least, part-time contract workers, in order to expand. At some point, the grunt work becomes too burdensome for the solo to handle alone. The legal assistant or paralegal will handle the usual office paperwork and logistical client calls while the associate is in charge of smaller cases.

Some pure solos want the lucrative practice without the hassle and potential liability of employees. Today, I want to share some of the true solo business plans being thrown around — and why it’s hard to make them work….

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empty-pocketAt the risk of stating the obvious to this audience, the American middle class is in serious trouble. But why am I taking the time to state the obvious? Because it isn’t what we know, it’s what we do with what we know to reposition our solo/small firm practices for survival that matters most. Most solo/small firms are consumer-law driven. Since so much of the success of many a lawyer has been predicated on a stable middle class with disposable income, how a solo/small firm responds to their disappearing wealth is intimately tied to their professional success.

The middle-class share of national income has fallen and continues to fall, dropping many who were normally categorized as such into the lower middle class, even upper lower class. Middle-class wages are stagnant even though productivity time has increased dramatically, and we no longer have the world’s wealthiest middle class. I don’t even have to quote any sources on this information because you just have to Google it and you’ll get hundreds if not thousands of pages and articles on this alarming topic.

As painful as this squeeze is individually, multiply this by millions of families (your potential clients). Then aggregate this demand across all areas of the economy (obviously, the law), and you see why this will inevitably trickle down to cripple the following generations (also your potential clients).

But the story is much bigger than this and has another very important side….

double red triangle arrows Continue reading “Squeezing The Middle Class For Legal Fees Is Like Trying to Get Blood From A Turnip (Part 1)”

Key to successI just read Shannon’s article from last week about solo practice (and the comments, which got pretty weird pretty fast). It was a familiar story. I have been a solo for a little over three years now. There certainly are lawyers who make more money than I make, but for most of the last three years, I have been so busy that I refer away most of the cases that come my way. I have watched a lot of my lawyer friends who have different personalities and different skills meet the legal market with varied success. Here’s what I have learned as a solo, as someone who has worked in a firm, and as an employer:

Understand That No One Owes You Anything

I went to a top-ranked university for undergrad. I got into the highest-ranked law school in my area so that I could keep my part-time job at a 200-lawyer law firm. I felt poised to make good money as a lawyer. After law school, I went to work for a small but successful business litigation firm. It was successful because my boss understood that the practice of law is still a business. When I passed the bar, I came into the office Monday morning and had a talk with my boss about how much more money he was going to have to pay me now. His response was that he was not going to pay me anything more at all because my value to him had not changed. I quit a few weeks later and opened up my own practice, using that talk as one of the foundations of my practice.

Let me explain….

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thumbs-upWe are living in a feedback culture. Traveled lately? Uber wants to know how your ride to the airport was. Your airline? An emailed survey is waiting for you on arrival at your destination. Checking out of your hotel? Have a goodbye survey on the house. Had a meal? Make sure you take the opportunity to complain (on Google, Yelp, etc.) about the server who accidentally brushed your shoulder while pouring your overpriced Malbec. Or rave about the innovative creme brulee and brioche hybrid that is the heir apparent to the cronut as a worthy “queue them up” for hours artery-clogger. It’s easy. Just a few clicks, and the world will be enlightened with your opinion. And your service provider can “improve the experience” for the legions of satisfied customers to follow.

In fact, service providers in multiple industries are quite busy turning your technological toys into “review generation machines” — because they can. Purchase an item online, and be prepared to answer questions about the item, the purchasing experience, and even the process of returning “crappier in real life than it looked on my Retina Display iMac/iPhone/iPad” item as well. While you are at it, maybe you have some thoughts on the packaging too. If so, the good folks who supply online retailers with corrugated cartons of all shapes and sizes would sure appreciate hearing about it.

There is no doubt that technology has fostered this “connectivity” between consumer and service provider in a quite mind-boggling way. And that those service providers are not shy about exploiting it. Many times, we do not even realize just how much our thinking has changed on this issue….

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Professor Hans von Puppet

Professor Hans von Puppet

My number one rule of lawyer advertising is to always avoid “old guy in suit in front of books,” but there are limits. And that limit falls somewhere beyond a dark Metallica tribute and somewhere around putting an ersatz Muppet in front of a camera to shill for a law firm.

Yes, this is a puppet. Promoting a law firm. Specifically, Professor Hans von Puppet.

What the holy hell?

I had to watch it a few times to convince myself I wasn’t having an acid trip. Or watching some high-concept sitcom.

With all the hubbub over cigarette companies advertising to kids, where was the outrage over a law firm making lawyering look fun?

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John Roberts Chief Justice John Roberts* Does Chief Justice Roberts care enough about avoiding the appearance of partisanship that he’ll sink challenges to Obamacare? [Huffington Post]

* Wow. In 1938, they arrested a woman for wearing pants to court. [LA Times]

* LSAT takers were down AGAIN. It’s now down more than 40 percent since 2009. Maybe someday soon it really will be a good time to “Apply to Law School Now!” [Excess of Democracy]

* Don’t go to jail in Alabama. Just a general rule. [Mother Jones]

* Interesting. LexisNexis is partnering with Microsoft to create a cloud-based system for small law firms. [PR Web]

* The remains of famed athlete Jim Thorpe will remain in the Pennsylvania town where he was buried, ruled Judge Richard Caputo. His family wanted the remains returned to his birthplace. Even in death this guy is getting jerked around. [Associated Press via ABC News]

* Speaking of sports, Oklahoma State is suing New Mexico State alleging that its mascot looks “confusingly similar” to OSU’s mascot. There are only so many ways to depict a cowboy. Compare and contrast. [The Chronicle of Higher Education]

* Man Okie State is litigious all of a sudden. Oklahoma State is suing the University of Texas for poaching the former Cowboys Offensive Line coach to be the Longhorns’ Offensive Coordinator. I can see the deposition now. Imagined transcript after the jump…. [ESPN]

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resume girlA few weeks ago, I asked for stories from former solo practitioners who have closed up shop and their reasons why. I received a fair number of responses. Some did well, moving on to BigGov, better larger law firms, or decent non-legal jobs, and some even started profitable businesses.

Others dug themselves into a deeper hole. Some got further into debt. Others made no money for years. And others became estranged from family and friends.

From time to time, I want to feature these stories as case studies for people considering going into solo practice.

For today’s inaugural feature, I will profile a lawyer who became a solo practitioner because he had no other options. Things seemed to be going well until something went wrong….

double red triangle arrows Continue reading “A Solo Practitioner’s Cautionary Tale”

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