You are Wrong, I am Right.

Quite often I converse with attorneys who start their sentences with the phrase "The right answer is...”  It's absolute and it feels reassuring and neat; for every problem, for every question, there is a perfectly right answer.  This phrase always gets me wondering: who are they trying to convince, me or themselves?  Are they giving me the right answer, or are they just forcefully making the case that it is not the wrong answer?  Or more to the point, that they are not wrong. 

I got to thinking about being wrong, and the fear that we all have about being wrong after watching an interesting TED Talk.  Kathryn Schulz lays out what we all know and see every day; we have been trained not to be wrong.  As an attorney, you are indoctrinated even deeper into a code of always being right.  It is generally a good instinct to possess as an attorney; clients do not like to work with lawyers who provide incorrect advice or work product that contains mistakes.

As a small law firm owner, or an aspiring one, you need to wear another hat that is critical to your success: that of an entrepreneur.  Successful entrepreneurs take risks, try new things that are uncertain and yes, they make mistakes.  Successful entrepreneurs make lots of mistakes.  Often, doing it wrong is the only way to figure out how to do it right.

How can you start taking calculated risks when it feels so uncomfortable?  The answer is planning.  By leveraging the best available information to determine possible outcomes, comparing risks of action against no action and establishing ways to measure success, you will feel empowered to take smart calculated risks and make good decisions. 

To get started, focus on the following:

-You are never going to have perfect clarity.  At NexFirm I spend my days helping aspiring founders and managing partners of small firms launch and grow their businesses.  We look at critical decisions from every angle and bring to bear all of the information we can put our hands on.  In the end, we determine the probability of potential outcomes and make the best decision we can.  Often it comes down to one simple point, can we live with this decision if the worse (not worst) case scenario plays out.  You will never have perfect information or the “right” answer; if you wait until you do you will never affect change.

-You are likely to overestimate the risk of the unknown, and underestimate the risk of no action.  If you are working at a BigLaw firm and you think that you will “probably” make partner, the odds are against you.  If you think you can’t do better for yourself as a small firm founder than as an associate, you are again playing against the odds.  Staying with the status quo always seems more comfortable, and the unknown feels risky.  Planning levels the field, allows you to measure the risk of no action fairly against proactive decisions and move ahead.

-In the small law firm business, the odds favor those who pursue growth.  Many small law firms tend to suffer from the same problem; when they are busy they don’t have the time to engage in business development, when the work ends they starve while they feverishly work on bringing in billable hours.  Growth brings diversification and richer financial resources, and it is a key to longevity.

Try to step out of your comfort zone and seek out some calculated career risks, investigate and quantify all that you can to make the best decision possible and don’t focus so much on not being wrong.  You may not get the right answer, just the best answer.

David DePietto is the founder and CEO of NexFirm. He can be reached at dd@nexfirm.com.

Clarity Versus Certainty: How to Hire the Best

For many, a great thing about working at a BigLaw firm is the certainty around compensation.  With each passing year you and your peers advance up the ranks with an associated compensation increase.  There aren't many other jobs out there where you know what you can expect to earn each year for the next eight years on your first day of work. 

Small firms cannot provide this sort of certainty, which can make recruiting top talent a challenge.  So, how do you compete with the big guys for great talent?  Fight certainty with clarity.

BigLaw attorneys have no clarity.  None.  They don't know how their firm makes money (or does not make money) off of their efforts, how the firm is faring financially, what the partnership objectives are and most importantly, what is expected from them so they may succeed and make partner.  Some don't even know what their bill rate is.

This secrecy was tolerable when the certainty of advancement seemed guaranteed.  Lately, it is harder to count on the certainty that BigLaw offers.  Layoffs, compensation cuts and other career disenfranchising has made it difficult to believe the way that BigLaw lawyers used to.  For many, the secrecy of BigLaw has become intolerable.
  

How can small firm partners leverage BigLaw's newfound uncertainty to recruit the top performers in the field?

• Share the firm’s objectives.  Provide some background knowledge on the firm's growth and future expectations for business development.  Where do you see the firm in 15 years, and what does your hire's position look like in your vision?  Knowing there's a plan for growth and that they play an important role in achieving that goal gives your recruits the stability they need to stick with your firm over BigLaw offers.
• Create a clear path for attorneys.  This means more than a list of titles. It should include the objectives and an understanding of the overall firm development.  You should also give your attorneys an understanding of how their contributions effect the firm's reputation and bottom line.  Above all, your team will benefit from a strong understanding of how they provide excess value to the firm and how they get paid for it.
• Provide professional development tools.  Make sure your attorneys know that they will become better attorneys by working with you.  BigLaw attorneys can fall through the cracks, but small firm attorneys have the benefit of working closely with senior members.  Lay out the processes in place at your firm to help your team members hone their skills.  I listed several methods for incorporating professional development into your firm's everyday operations in a previous post.

Small firm partners who know how to communicate all they have to offer can be sure that they will hire the best of the best.

David DePietto is the founder and CEO of NexFirm. He can be reached at dd@nexfirm.com.

What happens to you if you take drugs?

I have a four year old son.  He is a sweet boy, but I find that it can be difficult to reach him when I employ my subtle parenting techniques that worked so well with his older sisters. With Jake, blunt force trauma is only way to connect.  So, I brainwash him. 

If I ask him: "Where does money come from,” he is conditioned to answer "Work."  If I ask "What happens to you if you take drugs," he responds "you die.”

It's not very sophisticated, but it works.  I am considering using the same strategy for conditioning some of the newly minted managing partners at the small firms we work with every day.

Where does money come from?   Invoices.  What happens to your firm if you don't send out your invoices in a timely matter?  It dies.

At NexFirm we have a well structured process for our clients to send invoices.  We check throughout the month to confirm that they are entering time as they go (read this prior post to learn why this is critical).  Just before the month comes to a close, we review matters to be certain that we have all the information that we need to know how they will be billed.  On the last day of the month, we send reminders and follow up with those who haven't entered all of their time.  Pre-billing begins in the evening on the last day of the month so that those who need to review can do so in the AM on the first of the month.  We follow up (read: hound) billers to review, edit and approve invoices so that we can send them out on the first.  For our clients that adhere to our process, bills are out on the first and payments can come in as soon as 15 days later and realization rates are generally high.

For those who do not follow our process, invoices can go out a few days late.  They get paid later, but that doesn’t mean they get to pay their own bills later.  Not such a great deal, but for those who can afford it they don't fret much.  They should.

The cash flow disadvantage that arises from billing late is easy to conceptualize.  Some of the other effects are not as evident, but are equally as damaging.

-Realization goes down.  When you don't demonstrate a seriousness to collect your fees by having a prompt, methodical billing process, clients can't help but test your boundaries.  Payments come in later, which may require your billing department to reach out to clients with "past due" reminders and increase the pain of payment experience.  As time passes, the probability that clients find reasons to make deductions to your bills or refuse to pay increases.

-Perception of value goes down.  The moment that you resolve a painful issue for your client, the memory of that pain fades.  If they are paying the bill months after you have provided your services, they remember only the pain of paying your bill, and not the value you provided.

-Your staff perceives that you are sloppy.  A firm that habitually sends out their invoices late is often perceived poorly by the staff.  You start hearing them begin sentences with: "Unlike here, but at a real firm..."  Obviously, this is not what a managing partner wants to hear.

-Your borrowing costs are higher.  The shorter and more dependable your cash recovery cycle is, the more access you have to borrowing at favorable rates.

Needless to say, the busier you are with the daily operations of managing your practice and providing services to your clients, the less time you’ll have for administrative tasks such as invoice preparation and review.  But when you weigh the pain of spending a few hours a month to get it right against the negative impact to your firm (and your finances), can you really afford not to?

David DePietto is the founder and CEO of NexFirm. He can be reached at dd@nexfirm.com.

Five Keys For Cost-Effective Marketing Of Your Legal Practice Or Small Law Firm

Courtesy of Guest Blogger Bruce Segall

Organizations of all kinds struggle with the right level of marketing to support their growth without “breaking the bank.” This challenge is especially true for small professional services firms focused on serving current clients. Some smaller firms engage high-priced consultants or try new search marketing schemes, while many others do without any formal marketing at all. The online world is now bursting with advice for lawyers and law firms on marketing, but much is geared toward large, well-resourced firms. The following are five fundamental steps geared toward those with truly scarce resources:

1.     Have a clear, compelling statement about your service niche.  As competition for legal services grows, many lawyers report that the flow of referrals has slowed down vs. 10-20 years ago. In today’s challenging environment, you should help your clients and professional contacts help you, specifically by clearly communicating who you serve and what makes you different. Many solo practitioners or small firms have a diverse practice, and want to stay “open” to a broad range of business. While this seems practical, your friends can help you more if you give them something focused and memorable, rather than general, to work with. Commonly called an “elevator speech,” this is used in person or on the phone, but can be easily adapted for emails. I advise you to keep it short, with punchy words and sentences. You should refer to an emerging challenge or issue in your practice area rather than something generic like “I am a civil litigator.” Focus on the quantifiable results e.g. examples of a recent favorable decision. Two resources: (a) Search “lawyers” on 15secondpitch.com for some good examples; and (b) Consultant Peter Helmer has an excellent example at the end of a recent blog post .

2.     Use your TIME and resources wisely.  Time is the most valuable, scarce resource in marketing. Unless you are a born “rainmaker”, you’ll need a system to fit business development into your already busy schedule. You may have the best plan, but unless you have a disciplined way to execute, your efforts will break down. Here are two tips:

•      Divide relationship-building into tasks to be completed in a shorter time frame, such as week, month or even quarter
•      Set aside a time during the week when you know that clients do not call, and make an appointment with yourself for business development

3.     Develop and Maintain an Accurate Contact List.  Relationships are everything in legal marketing. You can manage some of your closest relationships individually, with great care and customization. You and the other attorneys can’t possibly manage your broader contacts as carefully. For these, you’ll need a firm contact list, an essential aspect of marketing that many professional firms overlook or underemphasize. The list can be housed in many ways - stand-alone or integrated into your other systems. Regardless, the list is only as good as the effort you take to build and maintain it accurately. While many attorneys are good at maintaining their Outlook contacts, keeping a high-quality firm list requires significantly more effort.

4.     Have a Regular Process for Cultivating Your Relationships.  Clients, past clients and other professional contacts account for most of your new business. To maximize the chance for referrals, you need to stay top-of-mind with these individuals and cultivate relationships. A face-to-face meeting is the best way to stay top-of-mind, and a phone call is also an alternative in today’s busy world. So I suggest a simple tracking sheet whereby you target and record reaching out to 10 people every week, so that 5 respond to you and you have at least 1-2 in person meetings. I further suggest targeting people who worked with you as a client previously, but have moved on to another company. These “client alumni” are more likely than other professional contacts to hire you or at least provide meaningful referrals. LinkedIn is a great way to reconnect with client alumni.

5.    Stay Visible.  Existing contacts who provide referrals will probably not fill your new business pipeline entirely.

     Professionals need to stay visible through speaking engagements, articles, blog posts, guest lectures at law schools, and professional associations. Not only do these activities keep you in front of current clients; they enlarge your circle of relationships. You can find ways to stay visible without investing an inordinate amount of time. For example, write a guest blog instead of committing to your own blog. Or you can simply “post an update” to your LinkedIn network once a month. These take me five minutes, and I often hear people say that they “see me” on LinkedIn.

One final note:  I believe that Marketing has to be highly customized to the firm/individual attorney’s situation. For example, this post is especially directed to those whose primary audience is businesses. Those going after individuals should consider tactics used in consumer marketing - paying close attention to rules around ethical solicitations and advertising, of course.

Bruce Segall is a professional services marketer and President of Marketing Sense for Business LLC.

Every Position, Every Player, Every Game

I have three active children; so I spend a good deal of my free time coaching a variety of sports teams.  It’s fun, rewarding, and at times quite challenging.  Everyone wants to win every game we play (I am talking about the parents, of course).  It's nice to win, but youth sports are about learning, not just winning.  The kids have to make their own mistakes on the field if they are going to develop.  So every game I coach, I create a substitution grid that allows me to ensure that every player plays every position in every game.  If it is our weakest player's turn to be in the scoring position in a tight game, so be it.  Sometimes we don't win as a result, but the kids gain valuable experience and grow to be better players in the long run. 

In the practice of law, it seems difficult to risk taking a "loss" in the name of cross training and professional development.  But, in terms of the long term strength of your team, providing access to skill building is key.  You, your clients and your staff benefit tremendously from these activities.  So, how can you incorporate training into your workflow without sacrificing the firm's work quality or reputation?

Here are a few things that have worked for our clients:

Capitalize on teaching moments.  Identify matters that are good teaching opportunities and get junior people involved in a meaningful way.  Leveraging inexperienced resources to provide assistance on a complicated case may increase billing opportunities, but it is unlikely to further their learning.  Assigning more comprehensive tasks on less complicated matters allows junior attorneys to learn to assume responsibility of deliverables, and is more likely to create lasting teaching experiences.

Delegate parts of matters.  Give a junior team member part of a matter with clear deliverables.  Not only will this give the junior member a chance to work and learn under your supervision, but it will also give you a chance to observe the workproduct of your staff.  With feedback and time, you will be able to trust in the quality of your staff's workproduct.

Use mentoring teams.  When a matter is large enough to require two attorneys, assign one more-experienced team member and one less-experienced.  The more-experienced attorney gets the opportunity to advise and mentor the junior member, and the junior member gets hands-on training.  It's a win-win situation.  This will also help your firm develop a culture in which junior members don't hesitate to ask for advice when needed, and senior members take an interest in junior members' development.

Perform an autopsy.  After a matter project is completed, or an issue occurs, dissect and critique the performance and overall results with your whole staff.  This is an excellent way to ensure that your entire team will learn from each others' positive and negative actions.  It's also an effective way for the managing partner to lay out a definitive process for similar instances in the future.  Performing regular project critiques may even inspire your team to generate new and innovative ideas. 

At some point you have to let people take the plunge and do something different.  If you can't ever feel comfortable that your team can exceed expectations without your supervision, you don't have the right people working for you.

David DePietto is the founder and CEO of NexFirm. He can be reached at dd@nexfirm.com.

What Is SaaS?

Courtesy of Guest Blogger Jeremy Diviney

Does the term “SaaS” sound familiar to you? Although this term is slowly merging in the technology world, everyone has been using SaaS for years. It stands for “Software as a Service.” It functions like software but think of it as a cousin of software. The key factor of SaaS is its use of the Internet to reach you. Loosely termed, it uses “the cloud.” Unlike traditional software, you have access to SaaS software anywhere you are connected to the internet.

The Internet started off solely being a reference source of information. Now it has progressed to being interactive, connecting people all over the world. So why not connect them to a single SaaS?

You Mean I Already use SaaS?

You’ve already been using a SaaS, if a single program online enabled you to do the following on any computer:

·         store information online

·         limit access to this information to a selected group of people

·         allow the group to edit this information

·         allow the group to share their edits with you.

Hotmail and DropBox are perfect examples of SaaS. People all over the world use SaaS for their legal billing software, accounting software, and word processing software.

What’s the Difference Between Software and SaaS?

With the many similarities and differences between the two kinds of software, here’s a point-by-point comparison:

Jeremy Diviney is Head of Operations at Bill4Time and can be reached at jeremy@bill4time.com.

2011 Year-End Tax Planning: Tips & Strategies for Indivduals

Courtesy of Guest Blogger Steven Perrotta

2011 Year End Tax Deduction Acceleration Planning, Tips & Strategies:

• You may want to consider paying tax deductible expenses by December 31, 2011 instead of 2012, including medical bills, charitable cash contributions, real estate taxes and/or make charitable non-cash donations by December 31, 2011.
• You may want to consider paying your January 2012 monthly mortgage bill by December 31, 2011, to get an additional month of mortgage interest tax deduction on your 2011 tax return.
• You may want to consider taking advantage of realized losses in 2011 on your stocks/securities while still being invested in the market.  There are several ways this can be done.  For example, you can sell your original holdings by December 31, 2011, and subsequently buy back the same securities at lesat 31 days later to avoid a wash sale transaction.  I would recommend discussing your year-end stock trades with myself as well as your financial advisor before making them.
• You may want to consider increasing your 401(k) or IRA contributions for 2011.
• If you become eligible to make health savings account (HSA) contributions in December of this year, you can make a full year's worth of deductible HSA contributions for 2011, which would reduce your taxable income.
• You may want to consider using a credit card to prepay expenses that can generate tax deductions for 2011.
• You may want to consider purchasing big ticket items in 2011, such as a car, in order to assure a deduction for sales taxes on the purchases, if you will elect to claim the state and local general sales tax deduction instead of the state and local income tax deduction.
• If you are a homeowner, you may want to consider making qualified energy efficient improvements to your residence, such as installing energy saving windows, and energy efficient heaters and/or air conditioners.
• You may want to settle an insurance or damage claim in order to maximize your casualty loss deduction for the year ending December 31, 2011.
• If you expect to owe state and local income taxes when you file your 2011 tax return, consider asking your employer to increase your W-2 withholding of state and local taxes (or pay estimated tax payments of state and local taxes) before year-end to increase the deduction of those taxes in 2011, if it won't create an alternative minimum tax (AMT) problem.
• Consider prepaying eligible higher education expenses f/y/e December 31, 2011 to obtain extra credit/deduction for 2011.

2011 Alternative Minimum Tax Planning, Tips & Strategies

• Taxpayers who are affected by the Alternative Minimum Tax "AMT" have additional considerations to think about.  The AMT eliminates and/or reduces the federal tax deductions for medical expenses, state and local taxes, real estate taxes, and miscellaneous itemized deductions.  If you are subject to the AMT we encourage you to pay those expenses when they are due instead of trying to accelerate or defer them to avoid/reduce your chances of being in the AMT.
• i.e. Instead of prepaying your real estate taxes for 2012 in 2011, wait until the actual due date to pay the real estate taxes since real estate taxes are an adjustment for the AMT calculations.

2011 Income Deferral Planning, Tips & Strategies

• Consider asking your employer to pay out your 2011 bonus in 2012.
• Consider holding off on selling stocks/securities and other investments with taxable gains until 2012.
• Consider holding off on taking taxable distributions from an IRA or other retirement accounts until January 2012, to reduce your taxable income for 2011.
• Consider making investments that won't generate income until 2012 i.e. purchase investments that mature in the following year.  The income on these investments will be reported in the year the investments mature.
• Consider when you want to start collecting Social Security benefits.  If you will turn 62 in 2011 or 2012, you are eligible to collect SS benefits at a rate that is less than what you would collect at your full retirement age - Please visit www.ssa.gov for more information on your full retirement age.

Other 2011 Tax Planning, Tips & Strategies for Individuals:

• You can make a tax free gift in the amount of $13,000 in 2011 to an unlimited number of individuals.
• You may want to consider converting a traditional IRA invested in stocks or mutual funds, which have significant losses into a Roth IRA if eligible to do so.  This conversion will increase your income for 2011.  If you are in a high tax bracket in 2011 this may not be optimal for you.

2011 Year-End Tax Planning, Tips & Strategies for Businesses & Business Owners

• If your Business wil be profitable f/y/e December 31, 2011, business owners may want to consider making fixed asset purchases that qualify for the full depreciation deduction under Section 179 of the Internal Revenue Code.
• For tax years beginning in 2011, the expensing limit is $500,000 and the investment limit is $2,000,000.  A limited amount of expensing may be claimed for qualified real property.  Please note: this depreciation expense deduction under section 179 is not prorated for the time that the asset is placed in service during the year.
• Business owners should also consider making qualified leasehold improvements that qualify for accelerated depreciation.
• Business owners should also consider tax credits such as the: Work opportunity tax credit, this is a credit issued for hiring qualified workers (such as unemployed veterans, etc.) before December 31, 2011.
• Self-employed business owners may want to consider setting up a retirement plan, such as a SEP.
• Business owners may want to adopt a Defined Benefit Plan or Defined Contribution Plan for additional retirement savings as well as additional tax deductions.
• Please note some of these retirement plans can be funded up until the date the tax return is filed, which defers cash outflow.
• If you have an interest in a partnership or an S corporation, you may need to increase your tax basis in your entity, in order to deduct a loss that you may be incurring for 2011.

Above are some 2011-year-end tax planning, tips & strategies that can be implemented for the tax year ending December 31, 2011.  I would be more than happy to go over with you anything listed above, as well as other year-end tax planning tactics that I feel may fit your particular situation.


Tax planning is very important for everyone; don't let Uncle Sam get the best of you!

Steven Perrotta is Tax Manager at Schulman Wolfson & Abruzzo, LLP and can be reached at sperrotta@swallp.com.