The Virtual Firm and You
Virtual firms are becoming more and more prevalent. Here are some things to consider before launching your own cyberfirm.
Once upon a time I practiced in a traditional law firm. I started a solo firm which became a twelve lawyer firm based in rural Massachusetts. As the founding partner I ended up managing attorneys, staff, and three offices. I was a lawyer responsible for making billable hours, marketing the firm, and still I had to manage staffing, making payroll, overseeing benefit plans, purchasing new technology and sweating out the accounts receivables. Not surprisingly, the hours were tremendously long with many days starting early and going into the night.
But this was supposed to be all good – after all I had achieved my parents’ dream of becoming “their son-the lawyer”. There is great satisfaction helping clients with their legal issues and controversies, reacting to crisis after crisis, all while running this growing enterprise called a law firm. The adrenaline addiction was something to write home about.
Eventually, the firm had achieved significant annual gross revenues, but our overhead was also substantial. Something was wrong. Daily I would put in long hours, mostly stress-filled, between client demands and office management issues, but never realized the implicit promised reward of financial independence. How much I took home was still very much tied to how much I personally billed and collected requiring an increasing demand for billable hours. In effect, we had a business that was being run by the seat of the pants.
I decided that I had to learn more skills about running a business and determined there was no better way to do that than getting my MBA. After all, running a business was not something I was taught in law school. There the focus was on teaching me how to think like a lawyer-not how to be a lawyer. I figured that an MBA would give me those skill sets that law school had left out. So I started going to business school at night, made the subject of every project my law firm and learned a tremendous lesson.
After all my years of work, I had not built a business. I had built a job.
The amount of my income was mostly of a function of how many hours I personally billed. If I did not go into work, then I would not make money. The firm would not make me money if I was not there. And, I learned, that the very vast majority of solo and small firms in the United States are on this same treadmill.
I decided that it was time to get off that treadmill. I was helped by the fact that in all organizations there is a natural cycle of decline. The firm experienced setbacks in a declining economy as many clients did not pay and some even filed bankruptcy leaving us with large receivables. With a tightened financial situation, associates left for other arenas. I decided it was time for me to go as well.
But what would be my new destination? I could join another small firm but that would just mean a repetition of what I already had with someone else’s name on the door. It would also mean that I would still be on the treadmill. I could look for a job in a company but, by now, I was older and running a small law firm was not the specific type of work experience that companies were looking for. Besides, I still wanted that sense-perhaps false- that I could control or at least steer my own destiny. Working for someone else, after working for myself for so many years, was not appealing.
So I decided to do something radical. I started a new virtual law firm. I applied the lessons learned from business school and came up with the following decisions.
1. Fixed overhead should be minimized as much as possible .
When I had the traditional law firm, we had to have nice offices to appear successful and prosperous to clients. In addition, the firm had to staff up to support the demands of what was primarily a litigation practice. As long as the firm had a structure of fixed overhead, I was going to be on that treadmill. With a virtual firm, however, I have reduced the overhead and made it variable depending on the needs of each project. I rely on independent contract staff, all working from their home, on a project by project basis. I have thus reduced staff and office overhead. Technology gives me the flexibility to gear up or down as necessary by allowing the firm web site to become our new office space-where we go to work and where we meet to get things done.
2. Doing many types of law as a general practice is a mistake.
In my traditional law firm, we began by taking what came in the door. After all, we were young and hungry. What this led to, however, were multiple types of practices under one roof. Each of those practices had different demands and required different types of costly support. Litigation, and especially divorce, required lots of support staff and cash outlay to pay for case expenses. It also meant carrying clients as they often had difficulty replenishing the retainer once it ran out especially given the usual reluctance of our state judges to release you from a case because of a non-paying client. Real estate practice required specialized software and technology to get a volume of closings done in a timely fashion. Estate planning required marketing outlay to attract clients and to distinguish us from all the other firms.
In the virtual firm, we do one thing and one thing only. For us, it is reverse mortgage closings, but it can be any single practice area. The advantage of a focused area of practice is that you can become really good at that one thing. The more expertise we have the more our clients (lenders) demand our services because they know we do not dabble. By turning down work outside of our area of expertise, we actually create a greater demand for our services. In addition, we do not get distracted by the next new thing. Lots of traditional firms get in over their heads when they take cases they really do not know how to do but feel they must to maintain billable hours.
3. You cannot sit by the telephone and hope that a client calls with work.
In a traditional firm, there is the tendency to wait for the work to come to you with the occasional foray into networking. This is not surprising as law schools do not teach us how to market. Instead there is an almost naïve assumption that somehow the work will come once you open a firm. Often, and this was certainly the case in my traditional firm, this means you take matters that you wish you had not which results in running so fast on that treadmill between client matters and practice management matters, that you do not have time to think through, never mind, actually do marketing. I believe that this often means that lawyers become specialized mechanics focusing on a specific client issue and never seeing the overall client picture.
For our virtual law firm clients- lenders- the big picture was not really how to get a reverse mortgage closing done but how to get those reverse mortgage customers in the first place. Where we could really help them was not in our specialized skills of doing a closing (after all, although we are very good at that, there are lots of law firms and title companies that can do a closing) but in meeting that larger need of helping them grow their business. This, in turn, meant that we had to learn to market and, in our case, not market ourselves but market our clients. We did this by developing a separate marketing group who go and get our clients reverse mortgage customers. This marketing focuses on a more client centric approach of looking at the problem through the eyes of the individuals that need reverse mortgages rather than as an attorney. The marketing group has time for marketing because the virtual firm requires less management demands. The increased emphasis on marketing allows for success of the marketing team and increased closings for all.
4. Seeing your staff every day is a waste of time .
In my traditional practice, everyone would come to work every day to the same place. There was the tendency to look over the staff’s shoulder coupled with the almost inevitable office politics. In the virtual world, you have neither the micromanagement nor the politics. The trade off is that you have to learn to trust your people to get done what has to be done in the time frame required. You no longer think of your people as being productive because of the hours they spend at the office. Instead you think of them as being productive based on what projects they complete. In our virtual office, the staff is mostly stay at home parents. The virtual world gives them the ability to make an income, stay involved with their family during the day and stay involved in a law practice. Some of them are even attorneys working for us in a paralegal capacity since this makes more sense for their lifestyle. Finally, there is the benefit of reduced time spent on human resources when using temporary workers and independent contractors.
5. Time slowed down is a good thing.
When I first started the virtual firm, I was scared to death that I had made a huge mistake mostly due to the fact that I did not feel “busy”. In the traditional firm, I would be rushing from crisis to crisis. That is not how you do business in the virtual world where you get projects done proactively as opposed to reacting to whatever happens next. You are actually more productive although, at first, you feel like you have too much “free time” since that adrenaline rush (and the accompanying stress) is not kicking in every day.
6. Stuff is bad.
This comes under the heading of the pragmatics of how to make a virtual firm work. The obvious place to start was technology and, most importantly, technology that would grow with us and be inexpensive. In the traditional firm we had printers, copiers, reams of paper, file cabinets, servers sitting on the floor, furniture, PBX telephone systems and stuff in general. In the virtual world, you have to learn to do without all that. We started by building our own web based system that does real estate closings (although there are lots of systems out there for different practice areas that are off the shelf). Ours web-based system is called SmartClosings. We built SmartClosings around excellent off the shelf programs such as a web based email/calendar system using Desknow. An alternative to Desknow is Google Mail and Google Calendars. Next, we chose Ecopy as a virtual printer. You also do not want your people storing things on their local hard drives, but want material placed where everyone can see it. My firm uses NetDrive. After that, you need to replace that PBX telephone system as well as the receptionist that used to answer the telephone in the traditional firm. We use Angel.com for this, although a good alternative is Grasshopper. These virtual telephone receptionist systems redirect callers to your cell phone or VOIP telephone. Finally, sometimes you just need to look people in the eye and for this we use the free video conferencing that comes with Skype. These systems are all relatively inexpensive (certainly a lot less expensive than what the equivalent cost in the traditional firm) but the key to it all was to change how we thought. In the virtual firm we learned that less stuff is better.
The upshot is that I now have a business and not just a job. Closings get done often without my involvement supervised by the appropriate lawyer for the appropriate project. I can take time off knowing that the business of my law practice will keep on running and that I will not come back to mounds of work that did not get done while I was gone. The decision to become virtual is a little disconcerting at first but it mostly comes down to deciding to change how you think about your law practice work life. For me, it came down to deciding to think differently about what practicing law meant.