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Entrepreneurial Lawyer Series

Law Practice Management for Solo and Small Law Firms

By December 5, 2014January 29th, 2015No Comments

At Kahuna Accounting we spend a lot of our time working with attorneys in solo practices or in small law firms. While we serve them by taking care of accounting, our real focus is on helping entrepreneurs be more equipped to run their business.

As a lawyer, there is a lot to learn about how to run a practice.

So at Kahuna – we are putting together a new blog series that will cover everything in law practice management.

We are interviewing experts who will share from experience some of the changes in the industry, and the most powerful things lawyers can do to ensure their success.

Michael Downey

The first interview in the series features Michael Downey

Michael is a Litigation partner at Armstrong Teasdale in St. Louis, whose practice focuses on advising lawyers and accountants on legal, ethics and risk management issues and defends those professionals in civil and disciplinary proceedings.

A leader in national, state, and local bar association groups relating to legal ethics and law firm practice, Mike has held many notable posts including:

– Vice Chair of the ABA Law Practice Management Section – expected to serve as chair in 2013-14
– Member of the Technology Working Group for the ABA Commission on Ethics 20/20
– Ethics columnist for Litigation magazine
– Past Chair of the Ethics & Technology Committee in the ABA Center Professional Responsibility
– Past Chair of the Illinois State Bar Association’s Standing Committee on Professional Conduct
– Past member of the Missouri Bar’s Ethics 2005 Committee
– Past member of the Missouri Bar’s Special Committee on Lawyer Advertising
– Former hearing officer for Missouri lawyer discipline cases

A frequently cited expert on legal ethics and law practice matters in publications such as the National Law Journal, ABA Journal and Thomson Reuter’s News & Insights, Mike has been quoted on the front page of the New York Times, on the WSJ Law Blog and appeared as a guest on NPR’s Talk of the Nation.

See Michael’s full bio here.

And his book on law firm practice management is here.

Micky Deming from Kahuna did an interview with Michael, and the following is a Q and A of the interview which spans topics like the current state of the legal industry, practice management, technology and finding the right clients.

Changes in the Legal Industry

Micky Deming:

When I last met you in person, you mentioned your book and you said “This was written in 2010 and it’s already very dated.” And I would like to hear you elaborate on that a little bit.

What’s changed since you wrote that, and what stands out to you that’s so much different?

Michael Downey:

I think what I’ve heard said, and I think it’s true about the legal industry, is that the legal industry has gone through 20 years of change in a very short period of time, people say 20 years of change in 2 years.

And I think there’s a lot of truth to that. Things like alternative fee arrangements have become much more mainstream.

The use of part-time and flexible time lawyers has become much more of a reality. Frankly, I think the biggest thing that happened with the book was that the book was really written for young lawyers who would be joining firms as associates.

Sort of written at the time when there was still the perception that lawyers, although they might move around, that there would be a pretty significant cadre of lawyers who would join firms and end up becoming partners either at that firm or a different firm.

And what we’re seeing is that the number of lawyers entering firms is much smaller, and that so many things that sprung up with what happens to lawyers when they enter firms, that there really isn’t a partnership track anymore at many firms.

Micky Deming:

So there’s more of a gravitation toward starting your own practice. Is that happening more because there’s a culture that wants that, or because out of necessity because those opportunities aren’t there that typically used to be there?

Michael Downey:

I think a lot of its lost opportunities. We started to hear the stories of clients were really resisting paying the billing rates of starting attorneys, and firms were really having trouble predicting what their future would be and their overall expectations as to increase work were changing.

And then there were the issues with people were less likely to be made partner, but a lot of the larger firms realized the value of keeping senior people with expertise, even if they didn’t make partner.

To be a partner typically involves having the characteristics that are needed for leadership of a law firm, which is usually the ability to participate in management and the ability to bring in business, in addition to being able to do legal work.

And so law firms started to realize that if they wanted the expertise, they often wanted people who had the expertise, but couldn’t do the management and couldn’t make their own rain.

Micky Deming:

Yeah, that’s kind of what I keep hearing too, that people are doing this out of necessity and it’s kind of a fascinating trend.

Michael Downey:

And you may know, it’s been a very tough market for jobs in the legal market, and particularly when you balance that against the amount of loans that most law school graduates have.

Micky Deming:

It’s a bad combination – many of our clients have spent time in a big firm and then transitioned into starting their own.

The recommendation I’ve heard – is that you should stay in your big firm for 5-10 years and learn everything you can before you make that kind of commitment, and most people don’t have that option.

Michael Downey:

That’s ideal, and the biggest difference is if you’re able to bring over part of your client base when you get started.

Law Practice Management

Micky Deming:

Right, so let’s get into Practice Management.

At the ABA you were the Chair of the Law Practice Division, which is kind of a broad definition. When you look at these lawyers who start their own firm, what does practice management mean to them, and what is it that that really means and understand about it?

Michael Downey:

Sure, and just to clarify, I was the chair of what became the Law Practice Division, and I was actually the key person of transition, where as I became chair, it changed its name from the Law Practice Management section to the Law Practice Division.

The Law Practice Division basically has 4 focuses. It’s really designed to try to help lawyers run their own firm, but within running their own firm, there’s usually 4 areas, what we sometimes call our concentrations:

It’s 1. how do they market their practice, 2. how do they manage their practice, 3. how do they handle the financial aspects of their practice, and 4. how do they use technology to serve their clients? And so it’s Marketing, Management, Finance and Technology.

And so really what the Law Practice Division is all about is providing resources to lawyers to do those four things better.

Micky Deming:

Interesting, so that leads right into where I was going next. That is a lot. Those four things are a lot for one person to think about, when they’re also being an attorney on top of that.

And so, from what you’ve seen in that, is one of those four or is there a component of one of those four that you see attorneys neglecting that matters more? Does anything stand out?

Michael Downey:

I think that the key thing, if you start out with the three that are not the sexy ones: marketing, management, finance. Different lawyers neglect each of those three.

Some lawyers are really good at marketing but they can’t manage their practice; they’re really good at marketing and managing, but they don’t handle the financial end of things, and the tough thing is it really is a three-legged stool.

And the weird thing is about technology, in addition to being the sexy thing, yeah everybody wants to talk about technology today, but technology is really something that helps you do the other three things better.

If you want to market your practice, you can use technology to market your practice. If you want to manage your practice, there are things that you can use technology to make managing your practice work much better, things like remote working.

And then of course with finance, as you and I just discussed, there are a lot of tools now that allow the lawyers to handle their finance in ways that never would have been conceivable.
To have a lawyer in St. Louis to have his financial operations being run out of Bloomington, Illinois, with Kahuna – without even thinking about it..We can only do that because we have technology.

Micky Deming:

Yeah, you just hit on exactly where I was going with my next question, because technology, I feel like that happens all the time, where you focus on the technology and not what you actually want to get out of it.

With that in mind, I was going to ask, do you see too much emphasis on technology?

Michael: And I think it’s the sexy thing, but for a lot of lawyers there’s too little emphasis on technology. You know there are an awful lot of law firms that are doing things the way they’ve always done them.

And, sometimes the answer is “Boy, if you looked to technology a little bit you could do things, some of these things that are taking a lot of time and effort could really be done very easily.”

Having a Plan

Micky Deming:

With so many plates to spin, how do you balance the need to take a big picture or high-level view of everything you’re doing in your operations with the need for day-to-day finding clients, serving clients and just keeping things going? How do you make time to see the big picture?

Michael Downey:

Well, I think there a couple of keys to that. One of them is having a plan; I think the lawyers who really do a good job of planning, can even be things like planning your day. I find that some lawyers now say that “I only check my emails twice a day, and that allows me to get things done.”

Some people can’t do that, you have to find what fits in your practice. Being able to figure out what’s an opportunity and what’s not an opportunity. Being willing to turn away work that doesn’t fit with what you do, which is really hard for a lot of lawyers.

The tough reality is if a lawyer is going to try to teach himself to do every potential matter that walks in the door, they’re going to spend all of their time learning stuff and not getting anything done.

And I think frankly, part of it also really, this is why I found Kahuna attractive. I really think for a lot of firms it’s a question of what I like to call “right-sourcing.” You know, what do we need to internally, what can we do externally, what does the lawyer need to do, and what can other people do?

Micky Deming:

Because you just can’t do it all, that’s not even an option.

Michael Downey:

As you may be aware, 48% of all lawyers and private practitioners are sole practitioners. And an awful lot of lawyers, even those that are not sole practitioners, the reality is that they act as sole practitioners. You know, they may pay the rent with somebody else and somebody else picked the paint colors and carpet, but they’re still running their own practice.

Time Management

Micky Deming:

Yeah, I think you hit it on right where I wanted to go, and I knew it would come back to time management, because there’s just not enough time, so I guess the last thing is do you see anything that, more than anything else, you see lawyers wasting time on or where lawyers poorly invest their time compared to others?

Michael: Again, I think it varies a lot from lawyer to lawyer. But I think there are some key components of things where, you know, some of them its micromanaging the back office operations.

For some of them, it’s that they spend an awful amount of time chasing down every marketing opportunity, whether or not it will yield anything. You know, for some of them I think it’s an inability to figure out what they want to do with regards to legal work.

Micky: And do you think that’s just a comfort thing, like “I’m going to gravitate to where I’m comfortable?” Or do you think it’s not having a plan, like “I’m gravitating towards whatever is in front of me?”

Michael Downey:

I think it’s an absence of a plan and I think it’s also a presence of fear. “I’m not sure what I’m going to do tomorrow for billable work.” And so if you ask me to handle this matter, I’m going to say yes because it gives me something to do.

And if somebody else asks me to do something completely different tomorrow I’m going to say yes. But the problem is, I’m taking in all these things I can never really get done.

Micky Deming:

Yeah, I’ve seen that too, and it’s beyond just lawyers, but the fear driving a lot of what happens…

Michael Downey:

And the tough thing is, you know, people don’t know. If I say I’m only going to do X, will I have enough to do?

Micky Deming:

That’s a fine balance. Do you have a rule of thumb on where to draw the line on clients? “I really need work, but also this may not be a good fit.” Where do you draw that line?

Michael Downey:

Well, first of all, I have an article I’m sending you that’s gone through several variations on name, and I can give you the why, which is kind of humorous.

But it’s called “The Secret to Happiness: A Law Firm Building a Portable Book of Business,” and it talks a lot about building a niche practice, which I do think is one of the keys.

I think it’s really important for lawyers to figure out what they’re going to do and not do, substantively. There’s things like not dabbling, and frankly, we’ve kind of touched upon it, but avoid the bad clients.

You know, avoid the clients who are going to create a lot of headaches and avoid the clients who you’re going to end up doing a lot of legal work for, and you’re going to expect to get paid and they’re not going to expect to pay you.

I’m sure you’ve seen this, but I know I’ve worked with firms before where literally, I mean I’ve talked to them, they have hundreds of thousands of dollars in Accounts Receivable for clients.

I think there are clients where you say “I’m going to represent this person even if I don’t get paid.” I think that’s fine and good and I think that’s part of the profession. But I think there are also people who, you know, represent people expecting to get paid and simply never get to that point where they’re going to.

See more from Michael at his blog.

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