Day 5 of our 30 day challenge is upon us. By now you’ve learned how law firms can turn more phone calls into clients and how lawyers can leverage free advertising through Craigslist. Yesterday we discussed how attorneys can make more money by switching to flat fees. Now we’re going to look at how attorneys can make it practical for more people to retain them.
I opened my doors in August of ’06. As the economy began to struggle in 2007-08 an increasing number of people were unable to provide “cash up front” even for the affordable flat fee structure I discussed yesterday. The outdated attorney business model of requiring full payment up front just wasn’t going to work anymore (and won’t work today due to the low wage growth in the U.S. and the high number of people who are struggling financially). I wasn’t going to do payment plans, however, because the simple truth is people don’t make the payments once their case is over. I needed a way for people to pay the fees over time while ensuring I collected everything. This can be accomplished via the wonderful U.S. banking system.
Again, I started in my living room in ’06. By 2010 I generated seven figures of revenue even though I only actively took cases for nine months that year. More importantly, the amount of receivables (a.k.a. unpaid fees) I had at the time I wound down was minimal – only about $22,000 after four years even though I had three associates by 2010. Payment plans work as long as you have a guarantee of being paid. This leads us to one simple step.
Many attorneys can increase cash flow by allowing clients to write post-dated checks
When I was retained for a new family case I would represent the client, in an unbundled capacity, through a certain stage of the case. Once that stage came they had to re-retain me or I withdrew. Typically, someone coming in for a new divorce case would be taken through an initial Motion hearing for $3,500. Many people asked “do you do payment plans?” The answer was “sort of” as long as they had a checking account.
I started new matters for $500 down for clients who were willing to write bi-weekly post-dated $500 checks for the remainder of my flat fee. The number of people who were able to retain me grew overnight. Getting $3,500, in full, over 3.5 months is much better than not getting $3,500 at all. Let’s address a few things you may be asking.
But what if the checks bounce? Obviously this is the first question that popped into your mind. This was a non-issue as very few of these checks bounced. People typically know better than to bounce a check to an attorney (bouncing a check is a crime after all) and, again, this simply wasn’t an issue in the roughly three years I had this practice. That being said, I would never drop the payments below $500 on a bi-weekly basis and I made clear to clients that payments would be deposited on the date they were written for. People were already getting a payment plan and anyone who needed to negotiate it down was more likely to bounce a check in my opinion so the amounts were rigid. Again, I ran a good-sized operation for four years and only had $22,000 in collectables when I wound down and almost all of the collectables were from cases I handled on an hourly basis.
But then you have to wait to get paid! The answer to this concern is simple – would you rather just not have the client at all even though they are going to pay you in full? If your answer to this question is that you would rather turn away the client then you’re ignoring the realities of the U.S. economy.
Does this work for all practice areas? Nope! It doesn’t. Hopefully attorneys aren’t naïve enough to take a check from a criminal defendant. Also, this only works in practice areas that can adapt the flat fee structure we talked about yesterday. Just keep in mind that the flat fee structure is great for most solos or small to mid-sized firms because it reduces administrative time and increases profits.
Yes this worked for me. Does it work for other people? The answer is “yes.” We put a system like this in for the attorney I discussed in the first day of this series. His monthly revenue went from $10,000 to $30,000 in three months with no collection problems. Another attorney I’m currently consulting with is seeing good results trying this tip.
The economy has changed. People are working more, earning less, and have little prospect of their wages growing. Attorneys have only been following the same business model for 500 or so years. It’s time for a change and to acknowledge new realities. Making your services affordable will increase your client base dramatically.
Day 5 action items for attorneys wanting to increase profits
You’re only 5 days in and if you’re following all the steps we’ve laid out then you’re going to be seeing a rapid increase in business. Today’s action item is simple – develop a payment plan for clients willing to write post-dated checks. If a client doesn’t want to write you a check then the good old “cash up front” rule applies. Also, familiarize yourself with the local District Attorney’s procedures just in case one bounces – although this won’t be much of an issue.
The first five days of our challenge will increase business for attorneys dramatically. Tomorrow we’re going to start putting an infrastructure in place to help you manage the increased case load.