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A Penny Earned

Josh Reynolds’ Lawyerist piece last week spent a good bit of time rail­ing against the costs asso­ci­ated with tech­nol­ogy and cer­tainly went off the technophile reser­va­tion. Unfor­tu­nately, he came off a bit like Kenny Pow­ers bash­ing on Tech­nol­ogy. A num­ber of the post’s com­ments  took issue either with the per­ceived attack on the evo­lu­tion of tech­nol­ogy past the slate and chisel and the impli­ca­tion that one’s com­pe­tence and busi­ness acu­men is some­how proven lack­ing by the own­er­ship of a tablet or smart phone.

What (I think) Josh was try­ing to say is that you don’t need a bunch of toys to be a good lawyer. Here, he’s cor­rect. I recently wrote about just a few of the ways you can become a good lawyer. Nowhere did I men­tion smart phones or data plans.  Hell, I know attor­neys that have been suc­cess­ful for 50 years who never typed any­thing on a type­writer, let alone a com­puter, and still view a fax machine with a hefty dose of skep­ti­cism and dis­trust. Josh was also right when he asserted that you have to keep your abil­ity to sup­port your­self and your depen­dents in mind when you are mak­ing deci­sions to out­lay costs and that you should make your pur­chases with ROI in mind. In some ways, I agree with what Josh is say­ing. We have a ten­dency to focus on our own lit­tle bub­ble within our busi­ness and jus­tify expen­di­tures based on want and con­ve­nience rather than neces­sity and ROI. But, you can’t take it fur­ther than that. You have to spend money to make it. You should spend it wisely, but you have to spend it.

 

The post and com­ments that fol­lowed got me think­ing about how lawyers estab­lish eco­nomic pri­or­i­ties for their busi­ness and how these pri­or­i­ties can sub­vert what their real eco­nomic goals should be. This can be espe­cially trou­ble­some con­sid­er­ing that an attor­ney often finds him­self caught between the oppos­ing needs of his pro­fes­sion and his busi­ness. It cer­tainly doesn’t help that noth­ing about the pre­vail­ing legal edu­ca­tion sys­tem is even remotely designed to aid in the actual prac­tice of law or the busi­ness of oper­at­ing a law firm.

The legal pro­fes­sion and the busi­ness of the law are inex­tri­ca­bly inter­twined. You will never have a chance to become a good lawyer if your busi­ness fails. When mak­ing choices about your busi­ness, espe­cially as a new solo or startup of any kind, increas­ing prof­its in the short term can­not be the super­sed­ing goal of the busi­ness. Run­ning your busi­ness on profit mar­gin rather than rev­enue is tan­ta­mount to the tail wag­ging the dog. You must instead be focus­ing on increas­ing rev­enue above all else. I’m going to tell you why, but first let’s talk about how to get there.

In his post, Josh says:

I sat down with a judge two days ago, an older gen­tle­man who sur­vived a very suc­cess­ful prac­tice. Our dis­cus­sion even­tu­ally reached the new lawyers in his court­room. He asked me how they afford all the toys they carry. I told him I didn’t know. We ran through the monthly cost of the var­i­ous neces­si­ties du jour, and each of us winced in unison.”

Sound famil­iar? This is the old, “This way worked in the past so you shouldn’t do it dif­fer­ently today” argu­ment. Lawyers have been falling back on that argu­ment since, I don’t know, the dawn of time. Maybe stare deci­sis has been drilled into our brains to the point that we let the con­cept bleed over into our lives . Maybe it is because many attor­neys either begin their careers as a illib­eral bas­tards or develop that par­tic­u­lar per­son­al­ity attribute some­where along the way.

I tell you now, for the sake of your busi­ness, don’t fall into this trap.

In case you haven’t noticed,  there are way more lawyers than the mar­ket can sup­port. And it isn’t expected to get sig­nif­i­cantly bet­ter  any­time soon. Seri­ously, read those last two links if you haven’t already. The legal job mar­ket for new lawyers is the worst since NALP came into exis­tence 38 years ago. Law School Trans­parency thinks the num­ber of 2011 law school grad­u­ates with full time jobs requir­ing a law degree is close to 50%. What is a young lawyer to do?

Inno­vate. Don’t just talk about it, do it. Ignore the old lawyers that shake their heads at you. They have clients. You don’t. They can afford to be intel­lec­tu­ally lazy right now. You can’t. Think out­side the box. Fig­ure out new ways to reach the legal mar­ket and to dif­fer­en­ti­ate your­self from your com­pe­ti­tion. Cre­atively approach the man­age­ment of your firm and the tech­nol­ogy you use. I know that your invest­ment in law school resulted in all your cre­ativ­ity being beaten from your brain and was simul­ta­ne­ously devoid of the impar­ta­tion of any sub­stan­tive prac­ti­cal prepa­ra­tion for your legal career, but neces­sity is the mother of all inven­tion. Inno­vate or die

Make smart choices in the inter­nal aspects of your busi­ness. The ben­e­fit of tech­nol­ogy in busi­ness is effi­ciency; it enables you to do more work faster and cheaper. This effi­ciency is an absolute neces­sity in today’s legal ser­vices mar­ket. Use a VOIP phone sys­tem or that smart phone of yours instead of land­lines. Go paper­less and imple­ment a  prac­tice man­age­ment sys­tem to stop look­ing for stuff all the time and kick all the costs asso­ci­ated with paper files. Use a vir­tual recep­tion­ist. Rock out with your tablet out. Oper­ate from a vir­tual law firm.

But much more impor­tantly, inno­vate in the way you deal with the exter­nal forces on your busi­ness. Spend your money on mar­ket­ing above all else and adver­tise in cre­ative and cost effec­tive ways. Stand out from every­one else. Iden­tify and dom­i­nate a niche legal need in your com­mu­nity. Mar­ket your­self cre­atively. Be cool. Cre­ate a mobile app (Lee Rosen got one for $50!) Cap­ture earned media .  Give speeches. Call refer­ral sources. Cre­ate a wiz­bang web­site  in 30 min­utes for  less than $300  and drive traf­fic to it and your busi­ness through word of mouth or by teach­ing your­self  SEO and how to run a PPC cam­paign. Inno­va­tion in how you get busi­ness is the most impor­tant thing you can do. These con­cepts are sim­ple and you don’t have to rein­vent the wheel, but odds are that not many of the guys with tons of busi­ness in town are as hun­gry as you are and as will­ing to work to grow.

Why is inno­va­tion in deal­ing with the exter­nal forces on your busi­ness so impor­tant? Because the mar­ket is sat­u­rated with lawyers and there aren’t enough clients to go around. Because all those old com­pla­cent guys in town have been run­ning the same tired advert­ing tout­ing their expe­ri­ence and aggres­sive­ness for years and have and con­tinue to get a good por­tion of their clients because no one has come along with a good strat­egy to take them away. Because those guys have been prac­tic­ing longer and are bet­ter than you at being a lawyer and that sit­u­a­tion won’t improve itself with­out you get­ting new cases to work on and learn from. You have to take busi­ness away from these guys in order to eat.

Above all else, inno­vate because you need clients or you don’t actu­ally have a law firm. Because with­out clients pay­ing you money every­thing else is aca­d­e­mic. You have to have income before you worry about any­thing else, includ­ing costs. Use inno­va­tion to increase rev­enue. Rev­enue is what mat­ters. It is the goal.

This pri­or­i­ti­za­tion of rev­enue over costs becomes really clear by tak­ing both approaches as far as they can go. Let’s say you cut all costs asso­ci­ated with your busi­ness to zero. If you have zero costs you will have zero rev­enue. You can quote me on that. If you think you can make good money with lit­tle or no invest­ment, these guys have some­thing they would like to talk to you about. Now, take max­i­miz­ing rev­enue to its ulti­mate zenith, which would the­o­ret­i­cally be rev­enue equal to all the money on earth. Think you can live with costs under that sce­nario? To para­phrase Bill Clin­ton: it’s eco­nom­ics, stupid.

Bor­ders and Barnes & Noble were hap­pily on cruise con­trol rak­ing in prof­its until Ama­zon invested a bunch of cash into the Kin­dle and later the Kin­dle Fire and snatched the rug out from under them. Remem­ber those stores that used to sell phys­i­cal copies of music and movies? Apple doomed them to extinction.

Ama­zon and Apple and all the other suc­cess­ful com­pa­nies that have dom­i­nated their indus­try didn’t do it by cut­ting costs. They did it through inno­va­tion and by tak­ing on debt and sell­ing equity and increas­ing costs and over­head. They didn’t spend money hap­haz­ardly and with­out a care­ful plan, but they did increase costs in the short term for the long term gain. If you are smart and lever­age costs cor­rectly, profit will come.

One final exam­ple: In 1930, a Dupont sci­en­tist cre­ated a syn­thetic rub­ber that the com­pany named Neo­prene. Despite being in the midst of The Great Depres­sion and suf­fer­ing through a dras­tic drop off in sales, Dupont sub­stan­tially increased R&D spend­ing to develop the prod­uct. Neo­prene was intro­duced com­mer­cially in 1937 and by 1939 every auto­mo­bile and air­plane pro­duced in the US had neo­prene in its com­po­nents. At about the same time, another Dupont sci­en­tist dis­cov­ered Nylon and Dupont also invested heav­ily in it as well, bring­ing it to mar­ket in 1938. A few short years later, WWII broke out and Dupont’s busi­ness exploded even fur­ther prac­ti­cally overnight.

Don’t try to max­i­mize profit by min­i­miz­ing costs. Be smart with how you spend your money, but focus on max­i­miz­ing rev­enue even if it means increas­ing costs. If tech­nol­ogy allows you to increase your rev­enue pull the trig­ger on that new iPad. Josh was right that you don’t need high tech gad­gets to be a good lawyer. But don’t let the argu­ment go so far that you throw the baby out with the bath water. Costs are nec­es­sary. Rev­enue is the goal.

 

 

 

 


About

Andrew is the Man­ag­ing Attor­ney at The Net­tle­man Law Firm in Wilm­ing­ton, NC. He prac­tices pri­mar­ily in the areas of Crim­i­nal Defense, Employ­ment Law and Debt Defense. You can often find him lurk­ing around law firm prac­tice man­age­ment blogs and forums.