The summer issue of the Managing Partner Advocate is now in the mail.  This issue is focused on ways to combat the effects of a contracting economy.  Highlights include retaining talent, managing associates, planning for the unexpected, measuring marketing activity and measuring timekeeper profitability.  There is also a guide to minimizing facilities costs written by guest author Luke Raimondo, an attorney and commercial real estate broker, and a guide on how much debt a law firm should carry.

The summer issue provides excellent guidance for law firms to help improve profitability even as the GDP struggles to grow.  If you are a subscriber to the site, you may download the summer issue by clicking here.  You may also have the advocate mailed to you at no cost by clicking here and requesting a subscription.

It is with great regret that I am leaving LexisNexis and will no longer be associated with the Managing Partner Advocate and More Partner Income.  I took over the blog from Tom Collins in January of this year, a mere 6 months ago.  In that time I have moved the site to a new host, completely re-built the blog and have enjoyed record numbers of readers, building on the solid foundation Tom Collins built over the past 3 years.  I sincerely appreciate all of you who have read this blog and utilized it as a resource to help your firm.

This is my last post as editor of this blog.  I have enjoyed my brief time hosting More Partner Income and hope that you have found value in the posts I have written. 

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More Partner Income will be the guest "blawg" on BlawgReview next week.  If you would like to submit a blog to be reviewed, please refer to the submission guidelines that can be found here.

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The following is the first in a series of posts on compensation written by Ron Paquette, an analyst with Redwood Analytics, now part of LexisNexis.  Ron is a new contributor to the blog who we hope will write regularly.

Most law firms want to evaluate client and matter profitability. When deploying profitability models, one of the most common questions Redwood receives has to do with determining the cost of partner time on billable work. Since most matters in the legal industry today are billed on an hourly rate, the most effective means of allocating costs is on an hourly cost basis. There are two components to costs, direct and indirect (overhead) – the focus of this discussion is on the direct component, e.g. partner compensation. And since most firms set billable hours expectations for their partners, the question becomes:  How much of a partner’s compensation should the firm consider when calculating this “hourly cost rate” allocated to each billable hour he/she works?

• Billable hours;
• Originations;
• Matter & client management;
• Attorney management & development;  and
• Their status as a co-owner of the firm.  

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The April 2008 Scientific American contains an article titled Why Things Cost $19.95:  What Are The Psychological "Rules" Of Bartering? (hat tip: Matthew Homann, in his blog the [non]billable hour).  The article explains the effects that initial pricing has on a potential buyer based on a series of tests.  The results found:

people appear to create mental measuring sticks that run in increments away from any opening bid, and the size of the increments depends on the opening bid. That is, if we see a $20 toaster, we might wonder whether it is worth $19 or $18 or $21; we are thinking in round numbers. But if the starting point is $19.95, the mental measuring stick would look different. We might still think it is wrongly priced, but in our minds we are thinking about nickels and dimes instead of dollars, so a fair comeback might be $19.75 or $19.50.

 The authors of the tests then looked at five years of real estate sales in Florida to see the difference between the list price of real estate and the actual sales price.

They found that sellers who listed their homes more precisely—say $494,500 as opposed to $500,000—consistently got closer to their asking price. Put another way, buyers were less likely to negotiate the price down as far when they encountered a precise asking price. Furthermore, houses listed in round numbers lost more value if they sat on the market for a couple of months. So, bottom line: one way to deal with a buyer’s market may be to pick an exact list price to begin with.

Homann, in his post on the subject, took it a step further:  Why not charge $297 per hour rather than $300 per hour?  Then if a client wanted to negotiate, ostensibly the negotiations would be in single dollars rather than tens of dollars.

In the case of firms who are competing with other firms for business, this tactic may work well to secure a deal. 

It may not work as well when clients are asking for a discount.  Many times when it comes to discounting rates, clients look at percentage discounts of the whole bill rather than dollar discounts.   Therefore taking a few dollars off the charge per hour may end up costing you a lot more than anticipated.  Where it may work better is in flat fee or value-bill situations, where you are adjusting only the final price of the service.

So, if you have priced a certain task at $1,500, try advertising a price of $1,497.96.  On top of making the client look at penny increments, it also makes it look like you have calculated the exact value of the service.  Before making wholesale changes to your pricing, try on a specific area that may have a higher average of discounts (or lost potential clients due to pricing) than other areas.  Track whether the change in pricing has an effect.  If so, please feel free to post your results here.

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The Spring 2008 Managing Partner Advocate is in the mail.  Highlights include an interview with a managing partner from a Louisiana firm and an article from a tax attorney on the tax implications of a withdrawing member of the firm.  Like our past issues, the Spring '08 Advocate is full of articles focused on increasing income as well.

The Managing Partner Advocate is a complimentary publication for Juris (and soon PCLaw) clients, but is available for free to anyone requesting a subscription.  To be placed on our mailing list, please click here to send an email request.

Registered users to this blog may also download the Advocate from this site.  To download, please visit the downloads page by clicking here.  If you haven't already registered, it is free and gives you access to downloadable files and now the Managing Partner Advocate. 

We have begun taking submissions for the 2008 Law Firm Economic Survey.  If your firm is interested in participating, please contact Brian by clicking here. 

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In the coming weeks, there will be some new contributors added to the blog.  I met with several members of the Redwood Analytics team in Virginia today and am happy to announce that their expertise will be added to More Partner Income.

Redwood Analytics is a new acquisition to LexisNexis.  They focus on benchmarking and business intelligence tools for law firms.  They also have a staff of consultants who work with law firms to measure performance as well as provide granular analysis on both matter and attorney metrics.

The addition of Redwood's expertise to the blog will provide unique insight gained from experience in working with law firms in the large law segment that demand high levels of analysis related to the business aspects of their practice. 

Redwood also hosts a Think Tank, made up of law firm leaders.  From Redwood's website: 

[Redwood's Think Tank] is comprised of forward thinking industry leaders assembled to study and formulate cogent solutions to significant law firm management issues. Individuals are invited to join the Think Tank based on their demonstrated ability both to think strategically and to take action to promote change.

For more information on Redwood Analytics and the products and services they provide, please visit www.redwoodanalytics.com.

We have begun taking submissions for the 2008 Law Firm Economic Survey.  If your firm is interested in participating, please contact Brian by clicking here.

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I was reading a paper reporting on David Maister’s ideas for improving a law firm’s client services.  The opening salvo read “The first step is to care about your clients”. 

You can follow checklist after checklist, but if you do not have a culture of caring about your clients, you can never touch the benefits that fall to those law firms that achieve excellence in the eyes of their clients. 

Tom Peters made it clear in A Passion for Excellence.  You don’t determine what excellence is or when or if you achieve it.  Excellence must be earned through the eyes of those who judge you, and the most important judge of all is the customer—the law firm’s clients.  Peters and his co-author Nancy Austin gave us the model for excellence in that 1985 book.

Achieving excellence in the eyes of your clients takes people who care about their clients, and once you achieve it, you can only hold onto it through constant innovation.  All of that takes leadership.  It takes an organization with a common set of beliefs—a culture in pursuit of excellence. 

Your customers judge you based on more than your legal skills.  They judge you by how they are treated by every single member of the law firm who touches them directly or indirectly. You are judged by the quality of every act and every output of every member of your law firm that reaches your clients.

I was always struck by Peter Drucker’s explanation that the only sound strategy is the pursuit of excellence; anything else is merely competent, and that leads to marginal.

PS: David Maister's web site and his separate blog are important information sources for managing partners.

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

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Larry Bodine’s Professional Services Marketing Blog is well worth checking daily. In a recent post, he asks, "Is Your Firm’s Profit Margin 40%?” Then he points out that if it isn’t, it could be, based on his experience working with law firms.

Larry was one the folks who teamed up with Juris, Inc. to encourage midsized law firms to participate in the Juris Law Firm Economic Survey conducted earlier this year. The results are in and Larry Bodine and participants should receive copies of the 55-page survey results and analysis within the next two weeks. The report will be available to others after September 30 for $375.

Firms in the top 25 percent measured by per-partner income had an average margin greater than 40 percent. They didn’t get there by cutting costs or by having a higher than average realization. In fact, their cost per head is higher than the remaining 75 percent of firms. How can they spend more and still outpace other firms in terms of margin? They do it by concentrating on revenues rather than expenses. They generate more fee dollars per head through higher effective rates and better utilization of their legal team.

The Juris Law Firm Economic Survey of midsized U.S. law firms for 2005 identifies 10 important factors that influence law firm financial performance and partner earnings. For more information about the survey or to purchase the 55-page click on the image below.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
 

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Law firms depend on customers and that takes lawyers who can attract them. Some people have an ability to do it better than others. From this day forward, let a paperclip remind you that looking for that ability is an important part of managing the recruiting process.

Law Practice Management’s post Trade a Paper Clip for a House tells the story of the blog one red paperclip. “What 26-year-old Kyle MacDonald announced on his one red paperclip blog was his intention to trade up his one red paperclip until eventually he winds up with a house. Implausible? Ridiculous? Impossible? Well, he seems well on his way.”

The Law Practice Management blog relates the story to convey a message: When hiring, look for candidates who have the personality and fire in their belly that will bring new business to the law firm.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
 

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www.morepartnerincome.com celebrated its one-year anniversary this month.  The first post was March 16, 2005.  The number of page views has grown every month from its beginning to last month’s volume of 45,000 views –and it is still climbing.   This month’s volume is on track to exceed 50,000 views serving over 15,000 distinct hosts.

It has been my pleasure to share with readers the collective experience of the Juris® professional services team.  I have always been a little disappointed by the volume of reader comments attached to each post, but from the readership volume and the private e-mails I have received from law firm managing partners located across in the United States and abroad, readers have found the information helpful.  

Comments to posts are always welcome.  You are also welcome to suggest a subject or issue you would like to see addressed on the blog.   E-mail morepartnerincome@juris.com.  If I use your suggestion I will send you a money green morepartnerincome.com hat for your next partner outing.  

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

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