The Necessity of Managing the Business Side of a Solo or Small Firm

RI have always felt that my law school education missed one key component. There was never a course on how to manage the business side of a law practice. Oh yes, I do know that now-a-days a number of law schools have developed a basic business class. I’ve actually been a guest lecturer in these classes at a few different law schools over the years. I just don’t think that the limited number of hours typically devoted to a broad range of topics suffices. What I’m talking about is this. There should be a serious year long course that delves into the ins and outs of managing a small professional services business. After all, the success of any small professional services business, let alone a law firm, depends upon the business’s ongoing ability to deliver a quality product or service in a timely fashion and at a fair cost. The more a firm misses that goal, the greater the likelihood the business will fail over the long haul.

As I see it, the key to developing and maintaining a successful professional services business comes from having it effectively managing from the get go. In my experience, however, I think too many small firms miss the boat on this issue. I am well aware that management practices and styles differ widely among firms and I will admit that some firms have developed a strong and effective management system. That said, too many others fail to recognize that their existing management system is ineffective or the firm attorneys have allowed the business to reach a point where no one is truly in charge. In fact attorneys in this later group will often wait until some problem becomes completely unavoidable before someone reluctantly (and often ineffectively) steps up to try and deal with whatever the current crisis is.

Here are three common examples that demonstrate the kinds of things I’m concerned about. In the first we have a solo attorney or small firm’s principal attorney who believes you can’t make any money if you’re not practicing law. He may eventually step in or tell someone else to address any fires, but only after it becomes absolutely necessary. In short there is a complete failure to recognize or appreciate the value of having the business properly managed. The second example is a firm in which the partners decide to manage by consensus. No one is tasked with the responsibility of making any necessary business decisions because the group must first meet and try to reach consensus. The result is that substantive decisions rarely occur and any decision that does get made often occurs long after it was needed. The final example is a where the attorneys have hired an office manager intending to delegate many, if not all, managerial tasks to this individual. Unfortunately, while delegating responsibility, they refuse to pass along the necessary authority and this person simply goes through the motions with little progress ever really occurring.

While a blog post is not the most appropriate place to delve into a thorough discussion of business management best practices; it is a place where I can highlight the principle areas that any successful small business does effectively manage. If your firm isn’t responsibly addressing one or more of the following management responsibilities I would encourage you to remedy the situation as one way to further ensure the long-term success of your small professional services business. I understand you are a solo/small firm.  As a solo you may have to compartmentalize this different responsibilities but they still need to get done, even if you outsource some of the work.  The goal is to get you think of the tasks at hand.

Practice Management (Think Quality Control):

This management area focuses primarily on the effective and efficient delivery of legal services. Responsibilities should include things like determining the types of matters the firm will handle; setting appropriate caseloads; developing a client screening/intake process; establishing effective systems such as conflict checking and calendaring systems which should include the ability to monitor compliance with said systems; developing calendaring guidelines; and creating file organization standards for both paper and computer files. This position might also be tasked with recommending and deploying new technologies such as mobile devices or the utilization of cloud-based services. Ignoring this area can easily result in malpractice claims, ethical missteps, lost clients, and a poor reputation in the legal community.

Administrative Management (Think Leadership):

This management responsibility is more organizational in nature. Duties would include staff assignments; staff training; developing policies; and most importantly, providing firm leadership. As firm leader, this person is responsible for establishing the firm’s vision, direction, and culture. Attorney and staff achievement and motivation will be impacted as a direct result of this person’s efforts. Ignoring this area can result in higher than normal attorney and staff turnover, create a situation where the firm is forced to downsize, and low morale.

Financial Management (Think Accountability):

This management area is all about being responsible for the firm’s financial health. Duties would include preparing budgets; managing cash flow to cover payroll, taxes and other expenses; issuing invoices; purchasing necessary goods and services; keeping proper account balances including trust account and tax records; setting fee schedules; and preparing financial statements. Ignoring this area can have catastrophic consequences not the least of which could be cash flow problems, an excessive number of accounts in arrears, and unintentionally creating a situation where someone in your employ could steal client funds.

Human Resource Management (Think Culture):

Responsibilities that come with this area include recruiting, hiring, evaluating, maintaining, and directing the personnel – including lateral hires, associates, secretaries, file clerks, bookkeepers, paralegals, etc. and this includes virtual hires. The person serving in this role is going to be on the front line and responsible for many of the day-to-day decisions that concern personnel. Ignore this area and you basically find yourself a camper at Camp Run-A-Muck. Some of the most troubled firms I have worked with found themselves in trouble directly and solely as a result of not effectively managing personnel. I will share that several of these firms no longer exist as a result of this management failure.

Marketing Management (Think Presence):

This area brings responsibility for developing and maintaining the firm’s visibility and presence both within the legal community and the legal marketplace. The goal is to let those with legal needs know what services your firm provides and why your firm is best suited to meet their legal needs. Optimally this manager’s efforts (that means you!) will generate a steady stream of business that can grow with the firm as its ability to handle additional work also grows. Not only should this person seek new business, she should also work to expand or supplement the firm’s existing client relationships. This individual must also stay abreast of applicable law firm advertising rules in all jurisdictions where the firm does legal work. Ignore this area and income streams typically stagnate then eventually decline. Ignore it long enough and the firm will eventually be forced to shut its doors for want of new clients.

This list is not exhaustive by any stretch of the imagination and responsibilities certainly overlap in places. That said, I hope it begins to demonstrate the need for and value of effective firm management. Depending upon the size of your firm, there is no reason why any of the above areas of responsibility couldn’t be handled by several different individuals even if it means outsourcing to virtual help as a solo. The trick with any of this will be in how successful you are in clarifying responsibilities, delegating sufficient authority to allow the manager/s to effectively manage, and most importantly trusting them to make decisions that are in the firm’s best interests. In my experience I have found that it’s the failure to delegate enough authority and/or the lack of trust in the manager/s that undermines the entire effort. Do all you can to avoid this trap because at the end of the day the long-term survival of your business may depend on it.

All opinions, advice, and experiences of guest bloggers/columnists are those of the author and do not necessarily reflect the opinions, practices or experiences of Solo Practice University®.

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