Wednesday, October 31, 2007

How can lawyers leverage their time?

Most lawyers earn a living by setting their hourly rate and then charging for the number of hours (or fractions thereof) that they work. The biggest challenge for lawyers, particularly solo practitioners, is how to leverage their time. No matter how much a lawyer increases his or her hourly rate, the lawyer can never earn more than the amount of time he or she puts in. For example, if a solo practitioner doesn’t show up for work tomorrow, that lawyer won’t make any money. And even if the lawyer does show up for work tomorrow, he or she will only earn the amount of money based on multiplying the number of hours worked by their fixed billing rate.

So, how can lawyers leverage their time?

Not by increasing their hourly rate. Even if you charge $1000 per hour, you can only get paid for the number of hours that you work. And if the competition in your geographical area is only charging $200 per hour, raising your rate will only earn you more free time, not more money. So what opportunities does a lawyer have to leverage their time and make more money without having to work harder? I would suggest that there are four things lawyers can leverage: (1) other people’s time, (2) knowledge (information), (3) technology, and (4) packaged services.

In building the law firm of the future, I have started thinking about how to leverage these four things. I will describe my thoughts in more detail later. In what ways do you leverage your time? Care to share any examples?


Art said...

I've always been stunned by the lack of leverage in the legal profession. As a computer geek, I was struck by how similar most legal documents are to programs. Different clauses are like subroutines.

Why not develop a set of standard contract (or other doc) templates with a selection of alternate clauses, etc. and charge a fixed fee to produce a document? That fee would be less than what it would cost to create from scratch on an hourly basis, but more than the hours you spend assembling it.

Also, automating many procedures (that you can charge a flat fee for) can get you leverage - Erik Heels does a lot of this and can probably talk to this point far better than I.

One other way to leverage time as an individual is in a teaching/training setting. It's a way to charge many people for the same time (in a talk or class).

Hourly rates are good for very custom work, but there's so much (whether lawyers can admit it or not) in the legal space that could be templated and scaled.

V-lawyer said...


Excellent suggestions. I agree 100% with your comments. The challenge is actually putting them into practice. Historically, lawyers have not been trained or incented to develop templates or to share their work (even with other members of their firm). However, in the future, lawyers will need to develop thes skills and will be forced by competition to provide more value to the client.

Right now is a transition point for the legal profession. Those lawyers who see it will benefit, as will their clients.


Anonymous said...

What I find most interesting, consulting many new lawyers fresh from law school, is the mindset of billable hour. Just yesterday I had to disabuse a new lawyer who was so excited about getting their first client; they made the casual statement, "It didn't take me but two hours so I charged them $xxx figuring that worked out to $xx per hour." I responded, you are selling a value to the client, not your time. If you get caught up in the time for money model at the start, you will never extricate yourself from it." (he got clients before we had ever discussed pricing!) And the concept of not selling value brings you right back to, "what happens if you've sold all your time?"

Susan Cartier Liebel

"You were born an original; don't die a copy." John Mason

Build A Solo Practice, LLC
Newly Minted or Well Seasoned,
Teaching You How to Create and Grow Your Legal Practice

Andrew Svitek said...

Not sure if this goes beyond your concept of leverage, but I'd suggest you can expand the size of the market that you can serve. This can be done in various ways: by lowering rates, expanding territory, or increasing market share within your existing territory (by intensifying your presence).

The biggest enemy of a lawyer's efficiency (but the reason most of us find law so interesting) is variety.

I think the greatest "leverage" can be achieved when you go from forming 10 LLCs per year to 100 LLCs to 1,000 LLCs. You get your workflow down to a science, you can find out your best pricing structure, etc.

I suppose the other means of leverage would be to get 1 client who sends you all of your workload. Then you're spending 100% of your time doing work and no time marketing. Obviously, a business will only do this if it knows it can have some of your profit margin.

Finally, geography is another factor. For instance our firm has started to market our service for submitting 501(c)(3) tax exempt status applications to a national audience. Trademark applications are another service that can be provided on a national basis, as it's based on federal law. These clients do not expect your time to provide "client service" which means more leverage.

Another example of leverage is for us to try to capture more business in Oregon, since our systems are based on Oregon law. For this reason I think having 2 lawyers as we do in two offices -- Portland and Bend -- is better than doing what the big firms do, which is to concrete everyone in a big city. If we hire a 3rd lawyer, I'd like that lawyer to provide coverage in another metro area. A type of leverage -- same systems, more room to market.

V-lawyer said...


Your comments about leveraging time are right on point. I agree that increasing volume will help drive efficiencies. However, it is a bit of a chicken-and-egg problem. If you don't focus on a specific area, you can't drive the volume. Our goal, like yours, is to package more legal services and attract increasing volume. Big clients are nice to have (and what big law firms look for), but they tend to require "customized" services, which may not encourage law firms to work more efficiently.

Your thoughts about trademarks and non-profits make a lot of sense, if you can develop a national practice. Will you be marketing on-line?

The concept of having multiple offices is interesting. I'm wondering whether building a team and culture at the early stage is better than covering more territory. My approach is to build a core team in one office first and then expand more by hiring virtual lawyers. Perhaps, having a broader geographic presence doew open new business opportunities.