This is among the most important issues you will face as a solo practitioner. If you aren’t getting paid, the rest doesn’t matter.
It seems to me there are two extremes of newly minted lawyers. Mucho Bravado and Wee Chickenlittle. Mucho Bravado was the PITA in school who always thought he was smarter than everyone, including the professor, and was always making snarky comments from his seat at the very front of the class. If he could have pulled a chair up to the podium, he would have. He thinks that simply by virtue of passing the bar that he is suddenly and miraculously endowed with the knowledge to take any case he wants and will do so, recklessly and without a second thought, until he is able to wallpaper his overly-appointed office with bar complaints he shrugs off like tiny mosquito bites. Making a mistake doesn’t faze Mucho Bravado, even if a client’s livelihood is at stake. He had it all figured out long before sitting for the LSAT and looks with pity upon others who don’t parade around the courthouse like a peacock suffering from a Napoleon complex.
I was not Mucho Bravado. I was Wee Chickenlittle. I got my bar results and thought “oh God, now I have to actually PRACTICE. I don’t know HOW to practice! Where can I hide?” To be candid, I spent much of my first six months in practice on the verge of tears because I was terrified of screwing something up. Making a mistake, for me, is a punishment not exactly worse than death but pretty close, especially if I’d be taking someone else (a client) down with me.
Quoting Fees. As a new lawyer, it takes a lot of gumption to look a client in the eye and say that you’re worth $200 an hour (or whatever your fee is). I worked trade shows throughout college and law school and was thrilled to get a DAY RATE of $250. To one day decide that I was worth that PER HOUR was almost incomprehensible. However, over time you realize that all the education you suffered through was substantial. Not everyone knows what we know and we went through hell to learn it. That knowledge is worth something.
However, be consistent in your fees, for your sake. I knew of a firm whose senior partners would inflate the retainer based on the type of car the client drove. Ford Escort? $1,500. Mercedes M-Class? $5,000. Eventually that has to come back to bite you. If a client ever found that out, any goodwill the firm had with the client would evaporate instantaneously. Even with set flat fees (like mine) clients often feel like they’re getting screwed. I think they perceive lawyers as charlatans who wave a magic wand over a contract or a case and charge up the wazoo because only we are given the wands. Don’t make that perception worse by trying to wring more money out of wealthier clients.
Sticking to Your Fees. I charge flat fees. I always have. When I first started my firm, I’d quote a very reasonable flat fee for a project and then IMMEDIATELY and without the client even having a chance to speak, reduce my fee by at least 50%. It was like a reflex. I couldn’t help myself. It went something like this: “I usually charge $500 for that butforyouI’lldoitfor$200.” The client would look at me, puzzled, and of course accept the lower fee. Then I’d kick myself. I just had a hard time accepting the fact that I was worth the higher rate. If you feel the same way right now, don’t worry. Over time you’ll realize that you’re worth more. If you’re one of those recently minted lawyers who got positive bar results and automatically thought “hell YES I’m worth $500 an hour now, bitches!” then this blog probably isn’t for you. You already have it all figured out. Buh-bye.
A business coach friend of mine suggested a way to stick to my fees, if artificially. He suggested I quote the fee, then STFU. Whether I mute the phone, bite my knuckle, or hold the phone away from my mouth, just shut it. And if I’m compelled to say something, say “I accept credit cards.” I chose the latter and it worked pretty well.
Trading Out. There seems to be a trend of “bartering” for services. I don’t recommend it. Here’s why: no matter what you do to avoid it, someone in a barter arrangement will feel like they got screwed. And that’s the exact explanation I give to people when declining a barter or a trade-out. I once traded about $2,000 of contract work for four personal training sessions. Guess who felt like they got screwed there? Then I traded a year’s worth of litigation defense for a logo redesign and new letterhead. Again, screwed. And you never want the client to feel screwed. Not to mention the small issue of valuing the services for tax purposes. Even if you trade out you’re still supposed to record the value of the service received as income and the value of the service rendered. At that point, why not just do things the old-fashioned way and pay each other?
GET PAYMENT UP FRONT. Yes, I Capslocked that. It’s that important. If you don’t require payment in full up front, you run an almost certain risk of working into the hole for a client (where you’re working without payment). Once you get involved in a matter, it’s not always easy to just stop working until you get another check. Easily half of your time in practice can become collections. Too much money in accounts receivable can be a death sentence for a solo lawyer. But there’s an easy solution: require payment in full up front. Why more lawyers don’t do it is beyond me. I’ve required payment in full up front since I started my firm and very few people take issue with it. If they do, chances are they aren’t the clients I want. Every time I’ve made an exception, I’ve gotten screwed.
When clients balk at the payment up front rule, I explain that the policy enables me to eliminate the headache of collections and keep my rates reasonable. That explanation satisfies most clients. Those who aren’t satisfied are often the ones who weren’t planning to pay me anyway. Sometimes I get the “this is an urgent matter and I need this done RIGHT NOW even though I can’t/won’t pay you RIGHT NOW.” To which I answer “lack of preparation or planning on your part does not create an emergency on mine.” I don’t actually say that, but I have a look that I think conveys it pretty well. \:-|
I managed to dodge one last week. Met with a new client Friday morning who wanted a contract written between his company and Company B. I quoted my fee and he said Company B was going to foot the bill but wasn’t able to cut me a check until Monday. He said he’d lost a month because the contract sat on another lawyer’s desk for weeks before the lawyer decided he was unqualified to handle it. Then he asked if I could have a draft done by Monday. I explained that I don’t work weekends for paying clients (which isn’t exactly true), much less clients who haven’t paid me. Fast forward to Monday. Company B decides they don’t want to pay a lawyer after all. Do you have ANY idea how mad I’d have been if I’d sacrificed my weekend to write up a contract for this guy?
Suing Clients for Fees. Whenever I promote the “payment up front” policy to other lawyers, I’m often asked why it’s such an issue, as we can simply sue the client. We ARE lawyers, after all. While that may be true, you’d be amazed at how many clients don’t pay their lawyers. And you’d be amazed at how much time it takes to actually deal with a lawsuit which is time away from your practice – getting new clients, working on paying client matters, and fostering relationships with those paying clients. Plus, if you sue a client for fees, you have to disclose that information on your malpractice insurance applications. I can only imagine that your premium will go up as a result, otherwise they wouldn’t ask. To me, it isn’t worth the headache. Sure, I’ve lost clients over the payment up front rule. But I’ve been equally surprised at how many clients come back a few months later, with check in hand, ready to proceed because they saved up the money.
In short, set your fees, stick to them, and get payment up front even if you have to decline a representation.