Expanding Your Practice - A Dollars and Sense Analysis

by Diane M. Ellis, MBA, CEAP Director
Lawyer Assistance Programs, State Bar of Arizona

Many lawyers think it would be a dream come true to have so many potential clients that they can choose only the cases they really want. Those lawyers, however, have probably never had to say "no" to a client whose present and future business could be fabulously lucrative if there were only enough hours in the day to meet the new client's needs without compromising commitments to existing clients or risking ethical violations.

"No" is not a concept that's generally emphasized in law school curricula; nor does it show up in customer service principles. It's a difficult utterance - and decision - for most lawyers. Many solo or small firm practitioners are caught up in the telephone dilemma: Either it rings far too much or it rings not nearly enough. There's a lurking fear that one "no" will bring to a screeching halt the flow of potential clients.

There are, of course, alternatives to turning away business. A lawyer can, for example, chisel extra working hours from her other activities, such as sleeping and spending time with friends and family. This is a common choice; everyone knows a lawyer who hasn't had a vacation in ten years. For all lawyers, devoting extra hours is sometimes necessary, especially when preparing for trial or the closing of a major transaction. Having a caseload so high it requires a constant commitment to extremely long hours, however, can render a high price, usually payable from the quality of legal services as well as the lawyer's health and career satisfaction.

A lawyer can also come up to speed on a new practice area that is commonly in demand by his potential clients. This allows him to accept cases that he might otherwise have referred to lawyers more knowledgeable in that practice area. If the lawyer is already pursuing the strategy above by stealing from personal time to do more work, it may be difficult to steal still more time to develop skills in a new legal area. The lawyer may also need to charge a lower rate for cases in the new area until he develops a sufficient level of expertise.

To further the goal of retaining their sanity while avoiding the necessity to turn down good business, most lawyers eventually consider adding to their legal talent pool. Unfortunately, many do not preface this decision with the kind of analysis that balances economic considerations with the practical realities of entrusting client work to another lawyer. Evaluating the financial and case data for the prior five or more years - or the entire history of a young practice - is a good first step.

Following are some important aspects of the existing practice a lawyer should address when considering whether to hire an associate(s) and, if so, the level of experience and expertise needed:

  • Primary sources of new clients, such as referrals from other lawyers, referrals from clients, advertising, personal marketing efforts, etc.;
  • Percentage of the firm's caseload comprised of repeat business for existing clients;
  • The lawyer's ability and commitment to marketing;
  • Number of cases turned away solely on the basis of lack of time or lack of a particular expertise;
  • Competition present or likely to develop in the lawyer's practice area(s);
  • Ability of the lawyer's support staff, systems and procedures to support the work of one or more additional lawyers;
  • Cost and difficulty of adding support staff or enhancing systems and procedures to support the work of additional lawyers;
  • Percentage of time spent and revenue derived (probably two different figures) from particular clients or industries;
  • Economic and/or social outlook for primary clients or industries;
  • Availability of recently admitted lawyers or competent lateral hire candidates;
  • Expectations for a new lawyer: Will he bring in a book of business or will he assist the lawyer with her own cases?;
  • Potential associates' activities or relationships that may contribute to the firm's marketing effort;
  • Ability and willingness of the associate candidate to provide the expected level of client service;
  • Time commitment an associate candidate is willing to make to the practice;
  • Salary and benefit requirements and trends in the market in which the lawyer competes;
  • Aptitude and inclination of the lawyer for training an associate;
  • Time available to invest in training an associate without neglecting important client obligations;
  • Willingness to mentor a new lawyer or allow the associate to utilize monitors outside the firm;
  • Ability to cover salary and additional expenses until associate achieves productivity and profitability;
  • Willingness and commitment to delegate and supervise, including providing learning opportunities and honest feedback;
  • Ability to finance continuing legal education, professional association membership, and other professional enhancement;
  • Cost of professional liability insurance if an associate is added;
  • Projected increase in revenue from the associate's work;
  • Net of projected revenue increase and expense increase;
  • Willingness to consider future partnership track;
  • Competitive advantage of adding an associate (e.g., coverage when the lawyer is unavailable, assurance to clients that there is always someone to assist, double check and brainstorming partner to improve quality); and
  • Competitive advantage of remaining a sole practitioner (e.g., clients always deal with the same person, personal control over work product and client service, personal control over expense decisions).

Dollars are, of course, an important part of the equation, but a lawyer who has built her own solo or small firm practice should focus on more than the financial opportunities and perils in deciding whether to add to the legal services team. A lawyer who hires an associate to work 40 or 50 hours a week will certainly not save that much of his own time. When finances are tight, he will still have to make payroll for the associate. He may have to take in cases that he otherwise would decline to assure that there is enough work for an associate. If times get really tight, he may have to consider terminating an associate whose professional growth he personally has fostered.

On the other hand, a lawyer who makes a wise decision in selecting an associate can provide quality service to more clients than she could by practicing alone, can supplement the bottom line, and can focus her efforts on the aspects of client representation that interest her while avoiding the aspects that don't. And - who knows? - she may be able to take her first vacation in the past decade!