BillingBusiness PlanningClient relationsFinancial ManagementLaw Practice Management

Becoming a Cost Center: the Story of Attorney Andrew

image   by Sheila Blackford   ©2016   I get to talk with attorneys who are trying to figure out the best method of increasing business. Should they do a Facebook firm page? Should the try using Google AdWords or try advertising with Yelp! or start a blog, or twitter feed? There are more ways to spend money than to make it. What all lawyers can do is pay attention to what they are spending their money on. A good way to look at expenditures is to view how many hours of work you must spend to pay for this purchase. If you work for a salary, it is easy to calculate your rate of pay. You have your annual salary. You can calculate how your hourly rate of pay from there. If you worked 52 weeks – no time off– then divide your annual salary by 52. If you work 40 hours a week – in your dreams, right?– then divide the weekly salary by 40. What you get is your hourly rate.

This is very different when you work for yourself. You have a billable rate, but you have overhead costs, and you likely do not collect the same amount of money that you bill.  Let me introduce you to Attorney Andrew, admitted to the Oregon State Bar in 2005. Andrew has a billable rate of $200 an hour. He spends six hours working on the Client Carlton matter. He knows he really should have been able to do the work in four hours so he writes the Client Carlton bill down to four hours, $800. Client Carlton is billed $800 and pays $800. There are 10 additional clients billed during the same month totaling $8,400 and is paid only $6,600.

Attorney Andrew’s office rent is $1,200 per month. Allocating 1/12 of the Oregon State Bar annual membership dues equals $46.42; allocating 1/12 of the Professional Liability Fund annual assessment for the basic $300,000 malpractice insurance coverage and additional $50,000 claims expense allowance equals $291.67.

Attorney Andrew’s total gross income is $7,400 for the month. His proportionate expenses are $1,538.09. Attorney Andrew’s net income would be $5,561.91.Will he take the full amount as take home income? Or will he buy more paper and ink for his printer? Or should he save the money as a cushion against any future expenses.

What are Attorney Andrew’s numbers looking like? Attorney Andrew wrote down $200 on the Client Carlton time charges. What amount of time did he write down on the other client matters? If he billed $9,180 but only collected $7,400 then his collection rate for this month was 81%.  $7,400 divided by $9,180 = 81%.  COLLECTION RATE EQUALS THE AMOUNT RECEIVED DIVIDED BY THE AMOUNT BILLED.

But if his time charges entered for the entire month were 60 hours (value = $12,000) and he wrote off 14.10 hours and only billed 45.90 hours (value $9,180), then at his $200 billable rate he was only paid for 37 hours ($7,400). As a result, his realization rate is on 62%. $7,400 divided by $12,000 = 62%. REALIZATION RATE EQUALS THE AMOUNT RECEIVED DIVIDED BY THE VALUE OF TIME RECORDED. 

If you haven’t run screaming from being in front of this blog post, take a look at Attorney Andrew’s net income of $5,561.91. We realize there are other monthly overhead costs besides rent, and 1/12 of the  annual OSB bar membership dues and PLF assessment for malpractice insurance coverage. You can do your own precise calculations with all your numbers. If I told you that Attorney Andrew was somewhat prudent and only paid himself $5,000 gross salary a month, then his gross annual salary is $60,000. Based on 52 week in year, 40 hour work week, Attorney Andrew’s gross hourly rate of pay is $28.85. Considering how proud Attorney Andrew is to have a billable rate of $200 an hour, that gross hourly rate of pay is something else isn’t it?  Well, though painful, it isn’t accurate: don’t forget federal and state taxes and other withholding amounts for social security and medicare that Attorney Andrew must pay. His net pay is not $28.85. It’s less…

For the sake of our sanity, let’s just run with this $28.85 an hour gross hourly rate of pay. Attorney Andrew wants to purchase a new leather sofa long enough to nap on, delivered to his condo from Pottery Barn, he will spend $3,499. Not bad! He better like it because it will take him 121.29 hours to earn the price of that leather sofa based on his $28.85 gross hourly rate. And we won’t talk about the dream car Attorney Andrew is dreaming of buying. It is pretty cool looking for a car.  Okay, I’ll tell you what his dream car is so you can google it and share the dream: the 2016 BMW i8 with a MSRP of $140,700. If Attorney Andrew had a savings account to clean out, it would take 4,876.95 hours based on his $28.85 gross hourly rate to put that baby in his garage. I wonder what his condo cost if it has a garage. Hmm…

So the moral of this story of Attorney Andrew is multi-layered.

  1. Don’t get overly impressed that your billable rate is $200 an hour.
  2. Look at your collectible rate.
  3. Look at your realization rate.
  4. Before falling in love with new furniture and cars, calculate how many hours you will have to work to pay for them.
  5. Before getting more clients, look at how efficiently you are serving the clients you already have.

 

 

 

 

 

CybersecurityEmailLaw Practice ManagementTechnology

Watch and Authenticate Email Sender Before Opening an Attachment

 

image  by Sheila Blackford   ©2016

Senders of malware are tricky, but lawyers and their staff are smart enough to thwart the sender’s efforts.

Recently a colleague here at the PLF was contacted by a concerned Oregon lawyer who received an email eCourt notice that turned out to be fake and trying to deliver an attachment that was a virus.  The facts are instructive.

Lawyer had an upcoming hearing in lawyer’s local county court. Let’s say the date of the court appearance was for May 18, 2016. The reminder purported to be from the local county court providing a court reminder of the upcoming hearing. The date was accurate. The attachment was labelled “Court Notice.” Lawyer’s virus , Oregon’s 4th Judicial District scanner detected this email as being a problem so flagged it as a virus. Although the email ‘said’ it was from the county court, the domain name was completely different. Lawyer did not open that “Court Notice” which would have launched a virus. Lawyer called to share the lesson.

What is the lesson? You can never be too careful with email mail attachment and emailed hyperlinks. Spoofers pretend to be legitimate companies. But if you look close, you can catch the spoof, whether the domain name doesn’t properly match or the email message reads a bit off. It calls for paying closer attention. For example Multnomah County Circuit Court has a very nice website. http://courts.oregon.gov/Multnomah/Pages/index.aspx A specific judge at Multnomah County Circuit court would have their email address looking like this: FirstName.LastName@ojd.state.or.us. Don’t just rely on the name, look for the actual email address coming from the expected domain name.

My email may show up in your email inbox as coming from ‘Sheila M. Blackford’ but pressing on the name, you will see my actual email address domain which will be SheilaBatOSBdotPLFdotORG.  I really don’t like spam or malware in my inbox. That’s why my email address spells out the proper email punctuation in the previous sentence. There are robots that harvest email addresses from the Internet so I wanted to be careful here.

A lesson about attachments, be careful before opening any attachment. It could be malware, not what you are expecting. Hopefully your malware protection software will flag it. But it may not. Unless you are downloading a program from the internet from a verified trusted site– you should never be opening a document that ends with .exe.  CAVEAT: Be certain that you are about to download a safe program from a  legitimate website such as downloading Windows 10 from Microsoft.com.  Microsoft Word 2016 documents end with .docx  You may notice that your malware protect software provides an option to scan a document before opening it.

I will never forget my own malware experience while in law school at University of the Pacific, McGeorge School of Law. I was about 80% done with the law review article to be submitted for making law review. It was good. Past tense. When I  booted up to finish the last 20%, a virus executed and wiped everything out. Everything. Ah! I tried to reconstruct that article which took hours and hours. Sleepless in the Bay Area, my husband volunteered to drive me the 3 hours to get to law school in Sacramento on time to turn it in at the last minute. But it bore a poor resemblance to the article I had lost. I did not make the main law review journal. I did not make the second tier law review journal. I ended up as an editor on the California Initiative Review. Better than nothing but a bummer.Sad story, huh? But a malware virus could have even worse consequences for you lawyers. Seriously, think if your hard work was destroyed. AH! So be careful. You don’t need to learn lessons the hard way.

Be safe.

 

 

 

 

BillingBusiness PlanningClient relationsGeneralLaw Practice Management

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.

 

CybersecurityFraud & EmbezzlementLaw Practice ManagementTechnology

Ransomware Alert: 7 Prevention Considerations

image   by Sheila  Blackford   ©2016   It is time to be scared about Ransomware, but not paralyzed by fear. The bad news is that there are more cases of ransomware – malware that seizes control of your data, encrypts the data, then demands a ransom to turn over the key to decrypt the data, though many are finding the ransom payment is no guarantee of the data. The good news is that there are things you can do proactively to protect your data, and that is empowering.

The FBI requested that the ABA share Private Industry Notification cybersecurity alerts with the legal community.  I want you to read this Ransomware alert then do at least one of its recommendations but I honestly hope you will be scared enough to do them all. To sign up for receiving future alerts, use this link to the ABA. https://shop.americanbar.org/eBus/MyABA/MyLists.aspx  

‘While the FBI normally recommends organizations invest in measures to prevent, detect, and remediate cyber exploitation, the key areas to focus on with ransomware are prevention, business continuity, and remediation. “

7 Prevention Considerations from the FBI:

1.  Focus on awareness and training. Since end users are targeted, employees should be made aware of the threat of ransomware, how it is delivered, and trained on information security principles and techniques.

2.  Patch the operating system, software, and firmware on devices. All endpoints should be patched as vulnerabilities are discovered. This can be made easier through a centralized patch management system.

3.  Ensure anti-virus and anti-malware solutions are set to automatically update and regular scans are conducted.

4.  Manage the use of privileged accounts. Implement the principle of least privilege. No users should be assigned administrative access unless absolutely needed. Those with a need for administrator accounts should only use them when necessary; and they should operate with standard user accounts at all other times.

5.  Implement least privilege for file, directory, and network share permissions. If a user only needs to read specific files, they should not have write access to those files, directories, or shares. Configure access controls with least privilege in mind.

6.  Disable macro scripts from office files transmitted via e-mail. Consider using Office Viewer software to open Microsoft Office files transmitted via e-mail instead of full office suite applications.

7.  Implement software restriction policies (SRP) or other controls to prevent the execution of programs in common ransomware locations, such as temporary folders supporting popular Internet browsers, or compression/decompression programs, including those located in the AppData/LocalAppData folder.

 

 

Business PlanningProfessional DevelopmentResources

The Architecture of Trees, The Architecture of Your Law Practice

image  by Sheila Blackford   ©2016   Here in Portland, Oregon we’ve been having snow and freezing rain. When warm inside, this freezing weather allows you to appreciate the architecture of trees. The stark relief of branches covered in snow and ice is beautiful, especially some of the more fragile-branched trees. The rest of the year, you might not even notice the branches because when the tree is fully leafed-out or showing off hundreds of blossoms, it’s easy to miss seeing the hidden small branches. Winter lets us know they were always there.

Can you say the same looking at your law practice or career in the legal field during a time when there may been less work to  distract you from really seeing how things are, the architecture of your law practice or career?

Any review of a situation by a trained lawyer is going to reveal areas that could benefit from making changes.  By nature we lawyers have a good eye for details and critical evaluation. Usually. Or do we? This may be a prime time to assess skills and embark upon a program of personal and professional development. Don’t pass up an opportunity to change. A couple of sites I’d propose looking at are Lynda.com and MindTools. Be prepared to be amazed!

Lynda.com, a LinkedIn Company. This site is more than software training and tutorials. But the extensive offering of training on software programs is wonderful. Wondering about switching over to using FreshBooks instead of QuickBooks? Check out “FreshBooks Essential Training.”

Learning topics under each general topic are exhaustive, see the example just for 3D Animation. Yes, those numbers in parentheses are how many tutorials are available. Think how your courtroom presentations and websites might be improved! And if not, maybe there is a whole new career waiting, a talented new you to be unleashed!

3D + Animation.

Topics:

Animation (74)
BIM (1)
Character Animation (60)
Compositing (16)
Creative Spark (2)
Documentaries (13)
Game Design (24)
Game Development (10)
Lighting (27)
Materials (58)
Modeling (82)
Particles + Dynamics (15)
Post Production (2)
Previsualization (6)
Projects (19)
Rendering (70)
Rigging (21)
Textures (61)
Visual Effects (73)

3-D Animation Software:

123D Catch (1)
3ds Max (51)
ActionScript (1)
Adobe (66)
After Effects (20)
Alias (1)
Allegorithmic (4)
Amorphium Pro (1)
Animate (2)
Apple (1)
AutoCAD (2)
Autodesk (137)
Avid (1)
Backburner (1)
Blender (12)
Bongo (1)
Carrara (1)
Chaos Group (7)
CINEMA 4D (43)
Dassault (1)
Digital Anarchy (1)
e-on Software (3)                                                                                                    Edge Animate (4)
eFrontier (1)
EI Technology Group (1)
Eovia (1)
epic (1)
Final Cut Pro (1)
Fireworks (1)
Flash (1)
Flash Professional (13)
Harmony (2)
Houdini (2)
Hype (1)
Illustrator (2)
Imagineer Systems (1)
Insydium (1)
Jawset (1)
jQuery (1)
LightWave (1)
Makerbot (1)
MARI (1)

How about something more useful?

Business Courses and Training.

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Analytics (3)
Business Intelligence (30)
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Career Development (72)
Charts + Graphs (20)
Cloud Computing (1)
Collaboration (45)
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Computer Skills (Windows) (46)
Creative Spark (2)
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Business Software Tutorials:

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Others well covered areas are Audio & Music; CAD, Design, Developer, Education & eLearning, IT, Marketing, Photography, Video, and Web. And maybe just looking at all these courses and trainings brings on a double chocolate chip cookie slump. How could you afford this? Easy! Basic Membership is $24.99 charged monthly or Annual billing rate $239.88 drops the monthly rate down to $19.99. There are also plans for you to sign up a group so that you can share the professional development in your firm. Rates and plans here.

MindTools. 

I really like MindTool. Be prepared to spend a lot of time here especially if you have expanded to the role of boss. You need to become the very best boss because staff turn-over is costly.

How costly? What is your billable rate? How long does it take to run an employment ad, review job applications, schedule interviews, conduct interviews, bring back a smaller pool of candidates for additional interviews, and thoroughly check references. And then all the time invested in training staff.  This adds up quickly!

You cannot afford to do hiring and staff development poorly or be a pitifully unskilled boss who can’t hang onto good people. Ouch! Not wanting to be harsh, but I want you to take the right attitude toward this neglected area of law firm success.

There is always room for improvement  and MindTools is a website where you can begin.  And let me say there are excellent self-assessment tests throughout the site so that you can hone in on what skills you need to develop further the fastest. Take a look at the skill areas. Yes, 330 ways to become a better team  builder and manager.

Skill Areas:

Leadership Skills (129)
Team Management (330)
Strategy Tools (207)
Problem Solving (54)
Decision Making (71)
Project Management (82)
Time Management (99)
Stress Management (72)
Communication Skills (194)
Creativity Tools (46)
Learning Skills (53)
Career Skills (262)

Membership is for you alone – Standard Membership$19/month or Premium Membership $27/month. Check out Join on the MindTools Home Page.  If you are in a bigger firm likely you’ll want to contact MindTools to learn about Corporate or Group Membership. You will definitely want to explore all the resources available to you, for example the MindTools store and there usually are membership specials so that you only have to pay $1 for the first month. A really good deal. What are you waiting for? 2016 just may become your very best year!

Happy New Year!