A recent article by Bruce Stachenfeld over at Above the Law reminded me of my biggest pet peeve regarding law firm financial performance: misleading law firm profit margin figures. Bruce correctly points out that “profit margin is a dangerous statistic to use in comparing law firm profitability” because it “can be completely manipulated by two factors: [t]he titles that a firm gives to its lawyers; and [t]he leverage in the system.” Essentially, for a given number of associates, the more partners a firm has, the higher its profit margin (%) will be. The reason for this is that typically all partner compensation is included as profit. This is a mistake. Keep reading to learn why this is a problem and to learn how to calculate law firm profitability the right way.
Picking a practice group is an incredibly important decision for any young attorney. Your practice group will dictate the substance of your day-to-day duties at your firm. But, your initial choice also has the potential to set the course for your entire career. Inertia in the workplace is powerful. Spend a few years doing real estate work and people are going to start thinking of you as a real estate attorney. Once people think of you as a real estate attorney, you’re likely to have a difficult time switching to a significantly different practice area. Or even more generally, it’s difficult to switch from litigation to corporate even if you’ve only been practicing for a year.
One factor that I suspect junior attorneys frequently overlook are the billing rates associated with a particular practice group. [Read more…]
Printing correspondence and stuffing and stamping envelopes is exactly the kind of low-skill commodity task that law firms should outsource. For small and solo practices, do you really need to be paying your legal secretaries and paralegals for this kind of work? There are higher value tasks more befitting of their salaries. And for larger practices that already employ several employees for mail-room functions, wouldn’t it be nice to reduce headcount and overhead without having to worry about disruptions to your operations? Traditionally, stuffing and stamping envelopes was a necessary evil for legal practices because many documents must be transmitted in hard copy form. Today, you can use a mailing vendor to easily and cost effectively outsource this task, without having to agree to a lengthy contract or pay exorbitant costs upfront.
How a Mailing Vendor Works
The mailing vendor is use is called Docucents. Once I have a final version of my document ready to go, either in Word or PDF format, I simply upload it to Docucents via their web-based print driver. I copy and paste the addresses in, hit send, and voilà, they take care of the rest. It’s just as easy as adding an attachment to an email.
I can select single-sided or duplex and whether I want a proof of service. Docucents was designed with the California workers’ compensation system in mind, so there is some additional functionality for practitioners in that field (like me). But anyone can use it.
If you want the proof of service option, you can download it directly from your web account, have it emailed to you, or have it automatically uploaded to a cloud-based storage account (e.g., Dropbox).
Docucents charges $1.25 per recipient for the first 12 printed pages and $0.05 for each page thereafter. This includes the proof of service.
Another mailing vendor is Postal Methods, who charges $1.02 per letter plus the page charge (which depends on the number of pages sent). Because of the format Postal Methods requires for submissions, a one-page letter would most likely be a two-page submission (i.e., the first page is a cover page and the second page is your letter).
I’ve tested Postal Methods, and here’s why I think Docucents is the better option for most legal practitioners:
First, it’s less expensive for letters that are more than one page. Second, you have the option of a proof of service, which Postal Methods doesn’t provide. Third, Docucents is much more user friendly. You can upload any document through their web-based print driver or their regular print driver, which works just like sending a document to your in-office printer.
In contrast, Postal Methods requires submissions to be formatted with the recipient address and return address in an exact location on the first page. For most legal practices, this will require the user to generate a separate cover sheet or create new document templates. Once you’re past this cumbersome set up, though, submitting a letter on Postal Methods is extremely easy: you just email it as an attachment to their designated address.
Postal Methods may be the better option if you have a need to mail a large number of one or two-page documents that are generated automatically, such as invoices, disclosures, or marketing materials.
Is it worth it?
Since postage is included, we’re basically talking about paying a vendor somewhere between $0.50 and $0.75 to print a letter and stuff and stamp an envelope. Docucents provides a calculator to compare the costs of its service to the DIY option, which includes the costs of the office supplies, equipment, and related personnel expenses. The default values appear to thumb the scale in Docucent’s favor, but you can play around with the variables. You’ll find that unless you employ workers with very low wages and very high productivity, it’s more cost effective to use a vendor.
Moreover, one factor that’s left out is convenience. When it’s 8pm, and everyone has gone home, it’s a very nice feeling to serve a 10-page petition on multiple parties without my hands ever leaving the keyboard.