PART I Think Revenue 1. CHAPTER 1 Develop a Revenue Mind-set 3. Why Cost Approaches Fail 3 How to Make a Big Difference 5 Revenue, Revenue, Revenue 6
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1 Preface Acknowledgments About the Author xiii xv xvii PART I Think Revenue 1 CHAPTER 1 Develop a Revenue Mind-set 3 Why Cost Approaches Fail 3 How to Make a Big Difference 5 Revenue, Revenue, Revenue 6 CHAPTER 2 Understand the Financial Indicators 7 Profit/Expense Ratio 7 Revenue per Lawyer 9 Profit per Partner 9 Billing Realization Rate 9 Aged Work-in-Process 10 Billing Turnover Rate 10 Collection Realization Rate 11 Aged Accounts Receivable 11 Collection Turnover Rate 12 iii
2 iv CONTENTS Billable Hours by Timekeeper 13 Billings 13 Cash 14 Leverage 14 Volume or Price 14 Establishing the Baseline 15 CHAPTER 3 Establish Revenue Capacity 17 Lawyers and Paralegals 17 CHAPTER 4 Track Results 21 Billing Realization 22 Collection Realization 23 Hours 23 Billing and Collection Turnover Rates 23 Setting the Goals 24 CHAPTER 5 Look for Revenue 27 Billable Hours 27 Realization Rates 28 Turnover Rates 28 Compounding the Results 29 PART II Undiscovered Secret for Achieving Better Revenue 31 CHAPTER 6 Heighten the Significance of Client Intake 33 Client Intake 34 The Intake Process: Step-by-Step 35 Step 1: Know Which Clients the Firm Wants 36 Step 2: Get It Right at the Initial Client Meeting 37 Step 3: Obtain a Fee Agreement and Fee Deposit 40 Step 4: The Reality Check 42 Step 5: Confirm Client Expectations 43
3 v CHAPTER 7 Manage Client Expectations 45 Managing Client Expectations 45 The Invisible Wedge 47 Looking at the Numbers 47 CHAPTER 8 Keep Clients Grateful 49 Step 1: Adopt a Client-Centered Approach to the Practice of Law 49 Step 2: Set Standards for Client Communications 50 Step 3: Use the Billing Process to Communicate Value 52 Step 4: Manage the Client s Expectations of Cost 54 Step 5: Recovery Issues 56 CHAPTER 9 Find the Magic: Payments by Return Mail 59 The Consumer Client 59 The Business Client 60 Client Communications As a Tool 61 An Art, Not a Science 61 CHAPTER 10 Let Your Clients Do the Marketing 63 Time, Money, and Energy 63 Rule 1: Protect Existing Client Relationships 64 Rule 2: Make It Easy for Existing Clients to Deliver More of Their Business 64 Rule 3: Distinguish Your Firm from the Others 64 Rule 4: Make Existing Clients Proud to Refer Clients to You 65 Unintended But Helpful Consequences 65 PART III Leverage in the Law Firm 67 CHAPTER 11 Leverage Expertise 69 The Cobb Value Curve 69 Become the Go-To Lawyer 71
4 vi CONTENTS CHAPTER 12 Offer Value-Based Fee Arrangements 73 Step 1: Know the Rules 74 Step 2: Learn Some History 74 Step 3: Understand the Components to a Fair Fee 75 Step 4: Consider the Three Basic Alternative Billing Methods 75 The Fixed-Fee Method 75 Contingency Method 76 Retainer Fee 77 Step 5: Consider Variations of the Basic Methods 78 Blended Hourly Rates 78 Hourly Rate with Minimum and Maximum Charge 79 Budgeted Hourly Fees 79 Segmented Fixed Fee 79 The Defense Contingency 79 Step 6: Consider Combination Fee Methods 80 Combination Flat Fee and Contingency 80 Combination Discounted Hourly Rate and Contingency 80 Combination Hourly Fee and Flat Fee 81 Step 7: Find Opportunities to Move Away from Hourly Billing 82 Identify Repetitious Document Preparation 82 Understand the Cost of Providing the Service 82 Identify Small Projects That Can Be Handled for a Fixed Fee 83 Practice Mapping Out a Case Plan at the Outset 83 Step 8: Offer Clients a Choice of Billing Methods 83 CHAPTER 13 Leverage the Firm s Technology 85 Step 1: Make Sure the Firm s Technology Is on Sound Footing 87 Step 2: Look at the Firm s Document Production Practices 88 Step 3: Find Areas to Deliver Standard Service Packages 88 Step 4: Look for Other Areas to Develop and Offer Value-Based Fee Methods 89 CHAPTER 14 Grow the Paralegal Role 91 Step 1: Hiring Real Paralegals 92 Step 2: Evaluate the Current Paralegals 93 Step 3: Evaluate the Work 94 Step 4: Price the Paralegal Services 94 Step 5: Set Production Goals for the Paralegals 95
5 vii Step 6: Provide Paralegals with Adequate Support 95 Contract Paralegals 96 A Word About Associates 96 PART IV Transitional Issues 97 CHAPTER 15 So, What About Hours and Rates? 99 Billable Hours 99 Step 1: Determine Appropriate Billable Hour Expectations 101 Step 2: Make Lawyers and Paralegals Accountable 102 Step 3: Adopt Clear Time Recording Policies 102 Step 4: Evaluate the Secretarial Support Available to the Lawyers and Paralegals 103 Step 5: Look at Administrative Support 104 Rates 104 Consider Variable Rates 105 CHAPTER 16 Using the Band-Aid 107 Step 1: Adopt a Law Firm Collection Policy 108 Step 2: Make the Collection Policy and Procedure a Priority 110 Step 3: Other Approaches 110 PART V Now... Make it Work 111 CHAPTER 17 Create Meaningful Financial Reports 113 Software Systems 114 Selecting Software 114 Setting Up the Financial Reports 115 CHAPTER 18 Utilize Partner Compensation as a Management Tool 121 Formula or Subjective 122 Promoting the Firm As an Institution 122 Three Common Compensation Issues 123
6 viii CONTENTS CHAPTER 19 Enlist Practice Group Leaders 125 Productivity 125 Revenue Accountability 126 Integration with Firm Management 126 Initiating the Change 128 CHAPTER 20 Empower Leadership 131 CHAPTER 21 Embrace Change 133 The Uniqueness of Lawyers and Law Firms 133 Management Techniques 134 The Rewards 137 CHAPTER 22 Take the First Step 139 CHAPTER 23 Final Thoughts 141 APPENDICES APPENDIX A-1 Profit and Loss Statement 143 APPENDIX A-2 Billable Hours 144 APPENDIX A-3 Billing and Billing Realization 145 APPENDIX A-4 Cash and Collection Realization 146 APPENDIX A-5 Origination Credit 147
7 ix APPENDIX A-6 Aged Work-in-Process 148 APPENDIX A-7 Aged Receivables 149 APPENDIX A-8 Firm Pipeline Report 150 APPENDIX A-9 Balance Sheet 151 APPENDIX B Financial Indicators Worksheet 152 APPENDIX C Revenue Capacity Worksheet 154 APPENDIX D The Scorecard 155 APPENDIX E Client Intake Policies and Procedures 156 Part I: The Firm s Areas of Practice 156 Part II: Initial Client Meeting 156 Part III: Fee Agreements and Fee Deposits 157 Part IV: The Reality Check 157 Part V: Confirming the Plans 157 APPENDIX F Sample Client-Centered Service Policy 158 Part I: General Principles 158 Part II: Telephone Communications 158 Part III: Correspondence 159 Part IV: Communications Through the Billing Process 159 Part V: Managing Client Expectations 159 Part VI: Recovery 160
8 x CONTENTS APPENDIX G Rule 1.5 of the ABA Model Rules of Professional Conduct 161 APPENDIX H-1 Law Firm Plan for Implementing Value-Based Billing: Document Preparation 165 APPENDIX H-2 Law Firm Plan for Implementing Value-Based Billing: The Fixed Fee for Small Case 167 APPENDIX H-3 Law Firm Plan for Implementing Value-Based Billing: Transactional Matter 170 APPENDIX I Sample Billable Hour Policy 172 APPENDIX J Sample Time Recording Policy 173 APPENDIX K Sample Paralegal Hiring Policy 174 APPENDIX L Paralegal Billing Guidelines 175 APPENDIX M Paralegal Profitability Worksheet 177 APPENDIX N Variable Hourly Rate Worksheet 179 APPENDIX O Sample Law Firm Collection Policy 180
9 xi APPENDIX P Monthly Summary of Financial Indicators 181 APPENDIX Q Monthly Summary of Financial Data 183 APPENDIX R Planning Worksheet 184 Resources 187 Index 189 About the CD 201
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