Economics of Law Practice

image   by Sheila Blackford   ©2016   Another law school year is drawing to a close. 3Ls are looking anxiously in the career center for lists of law firm recruiters and scheduled interviews.  “What is their billable hour requirement?”  1,800 hours? 2,100 hours? 

Wait a minute.  How many hours do you have to work in order to bill that many hours? A typical work week is 40 hours a week. 52 weeks in a year. 40 x 52 = 2,080 hours. What about vacation time? Holidays off? How can you have New Year’s Day, Marin Luther King Jr. Day, Presidents Day, Memorial Day, Independence Day, Labor Day, Veteran’s Day, Thanksgiving Day, and Christmas or Winter Holiday. And what about two weeks off to go skiing or camping, or to Disneyland with the kids?

New associates churn the hours and come back late at night to get more billable hours clocked for the month.  “Have I met the quota? Have I hit the bonus level?”

Wait a minute. Billables are measured in hours. The pressure to bill hours in six-minute increments leads to logging six minutes but speeding to actually spend four minutes which starts to add up. For example, 60 minutes in an hour, 480 minutes in eight hours billed but in actual time of four minutes worked for six minutes billed would be 40 minutes or 320 minutes worked to generate 480 minutes billed. I know it sounds far-fetched, because we’d usually work on a client matter for 30 minutes and Bill .5 hours. I’m talking about those quick little client tasks, calling and leaving a voice mail message, reading a court notice, spending a quick email.

Senior partners call associates in and tell them their collectible rate is abysmal and their billables again needed to be written down significantly. “Improvement is mandatory or your future at this firm is unlikely.” 

Wait a minute. Collectibles are measured in dollars. The senior partner isn’t reluctant to alienate a client with a bill that looks inflated. So hours are written down to match client budgets or the senior lawyer’s awareness of how longish reasonable to spend on preparing a client letter versus a pleading. And then that $1,000 bill goes to the client who may pick up the phone to announce he isn’t paying a dime above $950. So another $50 is written off. The client pays the $950. The associate is dismayed to learn that his six hours billed turned into four hours collected. When he stops to consider he skipped lunch and spent ten hours in the office, things are looking grim. Let’s look at these numbers as ratios.  The lawyer worked ten hours, billed for six hours, and collected for four hours. 10:6 billable ratio means he works 1.67 hours for every hour billed. 10:4 collectible ratio means he works 2.5 hours for every hour collected.

Some firms pay the associate a salary and pay a bonus for meeting bonus objectives. What is the bonus based on? The associate isn’t home free. The salary is based on meeting the billable rate. So if you’re not meeting that billable rate, you will likely not last long. It has been said that it takes three years for a law firm to begin making money on an associate. That may be true, but looking up the bar number of the associates at a firm that typically hires three newly admitted lawyers a year, may reveal that maybe one of the three is around for year two. It looks like more firms are quick to cut their losses on an unpromising associate.

Some small firms may try to get a little too clever with compensation programs and run afoul of wage and hour claims by trying to dock a salary in a month following low billable hour achievement. Or trying to play fast and loose with categorizing the associate an independent contractor instead of an salaried employee.

There are federal and state indicia of employment status of a contractor versus an employee. Law firm employers need to be careful and consult with an employment lawyer if any questions. Associates need to be careful and ask questions about expectations about billables and collectibles. And if they have questions, they too may want to consult an employment lawyer.


The Gift of Time


image    by Sheila Blackford   ©2015   The 2015 holiday season is in full swing. This time of year, many lawyers question if they should leave their law firm and go solo or start up their own multi-attorney firm or just hang it up and retire or switch careers. These are all things that are best to think about. I just question whether this might not be the best time to be making such life changing decisions. It’s a bit like deciding whether to get a divorce. Good to consider but with the stress of the holidays and busy pace of visiting family and friends, this may not be the time when you can do your best thinking. Can you give yourself the gift of time?  Why, you ask? To give yourself time to consult with a good lawyer: yourself.

Take the time to think things through.

  • Can you see where this decision leads?
  • Do you need to sit down with a financial advisor to crunch numbers?
  • What about covering health insurance for you and any family members?
  • What practical considerations are needed in place to help you in the first six-month transition period?
  • Do you have the stomach for flying solo or weathering difficult relationship issues involving sharing control and maintaining trust?
  • If employees will be involved, do you have all the human resources areas taken care of before you create a BOLI complaint or lawsuit?
  • Do you need to sit down with a CPA and your tax returns and financial projections to determine your right choice of entity?
  • Should you and your prospective law partners do Myers Briggs, Strengthfinders, or some other psychological testing to determine if you really will bring compatibility and balance to the planning table?

Know your resources.

Oregon State Bar Economic Survey.

Oregon Attorney Assistance Program Attorney Counselors. For assistance with career planning and counseling.  503-226-1057  or 1-800-321-6227

  1. Shari Gregory, LCSW, JD on Ext. 14.
  2. Kyra Hazilla, JD, MSW on Ext. 13.
  3. Mike Long, JD, MSW, CEAP on Ext. 11.
  4. Douglas Querin, JD,LPC, CADCI on Ext.  12.
  5. Bryan Welch, JD counseling intern on Ext. 19.

Oregon State Bar General Counsel’s Office for assistance with ethics questions arising in the practice of  law. 503-620-0222 or 1-800-452-8260

  1. Helen Hierschbiel, General Counsel on Ext. 361. Will become Executive Director of OSB January 2016.
  2. Amber Hollister, Deputy General Counsel on Ext. 312. Will become General Counsel of OSB January 2016.

Oregon State Bar Client Assistance Office for assistance with initial screening of ethics complaints about lawyer conduct. 503-620-0222 or 1-800-452-8260

PLF Attorney Practice Management Advisors for assistance with the business of practicing law, including closing a law practice, departing from a  law firm, retiring or selling a law practice, or opening a new law practice.  503-639-6911 or 1-800-452-1639

  1. Sheila Blackford, JD on Ext. 421.
  2. Hong Dao,  JD on Ext. 412.
  3. Jennifer Meisberger, JD on Ext. 411.
  4. Beverly Michaelis, JD on Ext. 415.

PLF Claims Attorneys for assistance with handling situations where there is a concern of a potential malpractice claim. The receptionist will connect you to an available claims attorney.  503-639-6911 or 1-800-452-1639

PLF Practice Aids and Forms


Tips for Making Your Law Practice Less Stressful

JEL23652-Blackford, Sheila P3 (2)   by Sheila Blackford   ©2010   April is Stress Awareness Month. I’ve been visiting lots of lawyers and gathering tips to help you make your law practice less stressful. Here is my first tip.

Tip 1. Going Paper-less is a great way to have a less stressful law practice. There is something inherently stressful about an overly abundant In Box. You know you’re in deep paper when your In Box is full of papers and magazines waiting to be looked at someday; your desktop has stacks of papers and files with post-it notes with coffee stains; and your chair is the spot where new mail or letters awaiting signature is placed to catch your attention. Lawyers especially are drowning in paper. A plethora of paper is a recipe for overload and disorganization which can lead to getting off track in running your practice and lead to bar ethics complaints for neglecting client matters and malpractice claims for overlooking deadlines.

Can you do paperless without creating an electronic nightmare? Yes. You don’t need to re-invent the wheel. ABA Law Practice TODAY has had some great articles on going paperless. I especially like the ones Canadian paperless diva Donna Neff has shared, especially about her document naming protocols. I got to be a co-speaker with Donna at the Upper Law Society’s Solo & Small Firm Conference last year on going paperless and I can vouch that Donna knows what she’s talking about and truly lives the good life as a paperless attorney. The September 2009 issue of Law Practice TODAY is devoted to the Paperless topic. Read The Document Naming System in Our Paperless Office by Donna Neff and Natalie Sanna here.

Although having a document management program like Worldox is great, you can adopt strict document naming protocols such as Donna discusses and get organized using your basic Windows folder tree system. You just need to be disciplined. But be realistic. It may be too much to ask of you if you’ve got more than one person responsible for creating documents. How many different ways do you name a document when saving a new client letter? You might really need a document management program that takes charge of what documents are named: there is no room for creating multiple names for saving the same type of document. I looked at Worldox again at the recent ABA TECHSHOW in Chicago. It certainly seems to live up to its reputation that no Worldox user regrets implimenting it.

If you need another reason for convincing yourself that going paperless is way to combat stress and get a better night’s sleep, read Jim Calloway’s article in the paperless issue, The Paperless Office as a Risk Management Enterprise here. Jim point out that going paperless is the only foolproof disaster recovery plan. Boxes of paper files stored in the basement of your office can become a soggy mess if your basement floods due to a storm. With so many lawyers needing to plan ahead for the winding down of their law practice, going paperless will certainly streamline organization and it is much easier to store an additional hard drive containing closed electronic client files rather than 100+ banker boxes containing closed paper client files. Downsizing during retirement should be a problem for the paperless lawyer.

CAVEAT: you can make a mess of your electronic client files if you haven’t been storing files – folders and documents– in an organized fashion. If you need more help thant sn just reading the document naming protocol article I mentioned above, you may need to get a good document searching tool. I recommend looking at Copernic Desktop Search Professional which will allow you to find the proverbial needle in the haystack on your desktop or on your server. We have all had the unfortunate experience of dropping a document into the wrong file or just forgetting its name. A document search tool is the solution to this aggravating problem. If you are an ABA member, you can purchase the program for a 50% discount which I was happy to find out on the ABA Legal Technology Resource Center page. Check their Tech EZ page for discount information.

Stay tuned for more tips to help make your law practice less stressful in April!

Happy Blue Moon New Year

Alula P1000078
Balance time in the office with time enjoying the outdoors.

  by Sheila Blackford   ©2009    Happy New Year. It’s a Blue Moon today. This is the second full moon December 2nd. The last Blue Moon was May 2007; the last Blue Moon on New Year’s was 19 years ago. The next will be New Year’s 2029. So consider this an auspicious start to a new year and a new decade. Personally it’s my 17th wedding anniversary. May we all be successful, healthy, and happy.

Happy Holidays for More of Us


JEL23652-Blackford, Sheila P3 (2)  by Sheila Blackford   ©2009   Sometimes it is easy to get so caught up with work and all that is on our plate that we can lose perspective, forgetting for a moment that many Oregonians do not have anything on their plate.

The Oregon Food Bank can and does make a difference. Though we may see collection barrels for the Oregon Food Bank, the greatest need is for cash donations. $10 may not go far at the Mall, but at the Oregon Food Bank, it will enable the collection and distribution of food to feed a family for three to five days. I’m asking for this great present for Christmas! What a great way to honor special clients, employees, colleagues, friends, and family this holiday season. Click here to donate to the Oregon Food Bank over a secure connection. Happy Holidays for more of us.