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Lead Generation for Attorneys

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Lead Generation for Attorneys

Lead generation can be a very scary prospect for someone who has never done marketing before. You’re probably a terrific lawyer, but that doesn’t make you an expert at sales. Nevertheless, finding new clients is a critical part of running a firm.

So what are the best ways to generate new clients if you’re a marketing beginner?

Network in your community

You probably plan to garner new clients in your local community. So you have to start networking locally! Go to local events, volunteer for causes that are important to you (and relevant to your practice) and let your face be seen. This will help you establish credibility as someone who works with and within the community.

The American Bar Association puts it best in their article about successful networking:

Ask any successful lawyer how he or she built a practice, and you’ll hear, “It’s all about relationships.” The success of a law firm depends on maintaining and expanding relationships with existing clients and attracting new ones. You can’t do that unless you’re engaging with people and genuinely committed to helping others.

Join social media sites

Of course, networking hasn’t been the same since the advent of the Internet. Social media has changed everything, but that doesn’t mean you should sign up for every site that exists. Choose the right social media sites for you and your practice, ones that reach your target clientelle. The most common and useful for professionals are LinkedIn and Twitter, but 40% of attorneys also use Facebook.

Tips for…

Create a marketing letter to collect new interest from old clients

Client referrals are a great way to build a practice, but clients may not realize you want to be referred much less depend on it to grow your business! By crafting a marketing letter and reaching out to previous clients through snail mail, you put a personable touch in a digital world. No one needs yet another email, but we all love receiving letters and postcards from people we know.

Learn the basics of creating a marketing letter with this handy guide. And don’t forget to mention the obvious: you appreciate referrals!

Do you have any lead generation tips and tricks that have worked for you?

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Tax Considerations & Benefits for Law Firms

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Tax Considerations & Benefits for Law Firms

Whether you’re a partner or an associate in a law firm, the Internal Revenue Service has rules that apply specifically to you as well as several opportunities. Following is a list of tax provisions that affect attorneys in particular.

Tax Benefits for Partners in a Law Firm

Home office deduction

The home office deduction may be available to practitioners who run their business out of their home. This deduction is not as straightforward as it may sound: the space must be dedicated to running the practice. In addition, the deduction is based on the square footage of the dedicated space, not the total square footage. Once the square footage is calculated, a proportional share of expenses, including mortgage interest, real estate taxes and utilities, may be deducted. The deduction does come with a cap.

Unreimbursed expenses

Law firm partners may be able to use Schedule E to deduct business expenses that were not reimbursed by the firm. This is a valuable deduction because it reduces both taxable income and the self-employment tax.

Capital account loans

Interest paid on capital account loans also are deducible on Schedule E.

State taxes

State taxes are tricky. The total allowable deduction for all state and local taxes is limited. As long as the amount isn’t exceeded, you may be able to deduct any state taxes the firm pays on your behalf on Schedule A of your personal return. Ensure that you are filing in all relevant tax jurisdictions and document your filings and consider filing composite state returns.

Self-employed health insurance

If your firm shows a profit for the year, medical, dental and long-term care insurance costs may be an above-the-line deduction. This deduction is worth more than an itemized deduction.

Retirement savings

Take advantage of tax saving offered by your firm’s retirement plan. Deferring income can result in substantial tax savings.

Tax Considerations for Associates

Associates are salaried employees at their firms who have federal and state income tax taken out of their paychecks and whose income is reported on Form W-2. Consequently, they have fewer options for deductions. They cannot take itemized deductions unless they exceed the standard deduction amounts.

While more restricted in their options, associates may benefit from the following:

Unreimbursed business expenses

These expenses can no longer be deducted as a line item, but associates can ask their firms to implement an accountable reimbursement plan. Such a plan would allow associates to be reimbursed without having to report the reimbursements as income, and the partners would be able to deduct the amounts on their Schedule E.

Income deferral

Deferring income by maximizing use of the firm’s retirement plan may reduce taxable income.

Student loans

If your firm has a student loan payment program, the amount they pay may not be taxable if certain parameters are met.

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How to Open a Virtual Law Firm

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How to Open a Virtual Law Firm

Virtual offices are sweeping the nation, and if you’re thinking of transitioning from brick-and-mortar into a virtual law firm your options are expanding.

Whether your leaving your current firm and going solo, or you are looking to decrease the cost of office rent, a new sector of virtual law firm providers is popping up to help: boutique office spaces that cater to attorneys, and attorneys alone.

Finding a good provider is the most important part of going virtual. Below we break down the 3 steps you should take before committing to any virtual office.

STEP 1: Take a tour!

Make sure you tour the office space before you sign up for services! You may be having meetings downtown and you want a space that is beautiful, has plenty of meeting room options, and friendly staff on hand.

Here’s an easy checklist for you while you tour:

☐ No logos (you want it to feel like your space)

☐ A few meeting room sizes

☐ Professional & welcoming entryway

☐ Comfortable common space

☐ Kitchenette/Cafe for you and for guests

☐ Bonus points for natural light in common areas & gorgeous views

Luckily plenty of companies have virtual tours of their space online, so you can complete this step asap.

STEP 2: Ask yourself “Will I be virtual permanently?”

Are you scaling down as a last step towards retirement? Or are you going virtual to launch your solo practice? If you may need office space in the future  make sure the provider’s offices and contracts fit your requirements.

Ask for a pricing break down on physical space and let them know you may go permanent in a year – if they are straight forward they will provide all the information you want without deflecting. And if they deflect their contracts are most likely convoluted, and you should move on in your search.

STEP 3: Interrogate your potential office space providers

The business of law demands flexibility and extensive support options. Make a list of all the needs for your law firm, and when you tour locations ask if the office provider can help support these needs.

A good provider will have paralegal support, admin support, front-desk personnel and reception services. But they may also have partners that can help with your billing/collections and court reporting. It can’t hurt to ask, and you may be surprised by the services provided.

Benefits of opening your virtual law firm with a boutique, attorney-centric office space provider

You already know the benefits of going virtual, that’s why you’re reading this article. Scaling down overhead costs. Achieving a great work/life balance. But you can receive even more benefits as a virtual law firm if you select the right office space provider.

  • Legal office staff downtown (even though you aren’t): everything from law clerks to paralegals to court filings without having to hire any personnel personally
  • Attorney peers you can connect with online: networking is a vital part of any firm’s new business generation, and many providers have online community sites to help this
  • Events for legal education & networking: all providers host events, and ‘bring your dog to work day’ or ‘group yoga’ sound fun but you don’t want to rearrange your schedule for these activities. A complimentary CLE webinar, on the other hand, is appealing, and helpful for you and your practice.

Want to read thoughts from attorneys running virtual law firms (and loving it!) before you start these steps? The American Bar Association interviewed 5 law firm leaders for their insight on being virtual attorneys.

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The High Cost of Employee Turnover at Your Law Firm

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The High Cost of Employee Turnover at Your Law Firm

Hiring is not an easy task, and sometimes it takes time away from your legal work. Too many businesses focus on the wrong aspects of employment. Keeping your current employees happy is just as important as hiring the right people for your law firm. Employee turnover and retention should be at the top of your considerations. By creating good retention practices, you can have a competitive edge in your field.

In studies on employment, one in three employees expects to change jobs within six months. So how can you keep your valuable legal support staff from leaving?

Determine the reasons for employee turnover.

The most important metric to track is why your employees are leaving. There are plenty of reasons having nothing to do with the company itself, such as life changes or relocation. But what about the reasons that are closely related to your firm and management style?

Are your employees leaving because they are dissatisfied with management, their co-workers, or their duties? If so, only you have the power to make these things better.

As each employee leaves, your focus turns to replacement rather than retention. These costs reach beyond salary and benefits. Your time is also valuable, and the more time you spend searching for the right candidate, the less you can give to your law clients.

It’s easy to think the solution comes down to bigger pay rates, but there are plenty of other factors that affect an employee’s decision. According to the Society for Human Resources Management, 42 percent of people responding to an employment survey indicated they would leave a job due to a toxic workplace, and 31 percent say it would come down to work/life balance. Considering a range of incentives to keep your top legal employees happy will only enhance their experience.

Think about the office environment.

It may not occur to you, but your law office also impacts an employee’s satisfaction on the job. Are they comfortable? Do they have all the tools they need, including technology and software, to make their job more efficient? If they’re feeling frustrated just by accomplishing their normal tasks on a daily basis, it can lead to unhappy, disgruntled employees. Keeping your firm conducive to productivity will cost less over time than replacing your legal staff with others who also will quickly become unhappy in the environment. Learning where to make investments to keep employees happy is the first step.

Realize why productivity levels will drop.

When an employee leaves, it doesn’t affect just their individual job. You will lose the productivity in that role, and it will affect the rest of your team. Someone will need to take up the slack and accomplish the work of two people while you search for a replacement. This will cause that employee’s productivity levels to dip for both duties. It can even start the cycle of unhappiness over again. Unhappy employees also affect their co-workers. The entire team will influence each other, and one disengaged employee can begin an avalanche.

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Do You Need a CFO for Your Law Firm?

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Do You Need a CFO for Your Law Firm?

Your law firm provides necessary services to your community. And while your focus should be on providing the best legal advice to your clients, sometimes you might feel like you also need to be a tax and human resources expert as well. It is easy to get frustrated when all you want to do is concentrate on your law work.

How can you focus on what you do best and still run a viable firm?

One option includes expanding your workdays into 24/7 marathons as you to try to handle everything by yourself. Or, you can hire individuals with other business specializations to handle all of these different tasks for you, which can get expensive if you’re a small firm.

Consider hiring a virtual CFO.

Administrative help is an important cornerstone of any business, but these administrative tasks take up lots of valuable time that you could spend doing plenty of other important work. If you decide to tackle all of these tasks yourself, you quickly will realize that financial statements, tax planning, forecasting, cash flow, and payroll create far more work than one person can reasonably do. The typical solution for lawyers is to hire both an accountant and an administrative assistant, but adding these salaries to your payroll can place a burden on your growing firm, even if the results are beneficial in the long run.

For a more economical solution, outsource these tasks to a virtual CFO. This is a service that specializes in all the professional knowledge required to handle the business aspect of your law firm. Often, these services charge a reasonable flat annual rate for their high levels of accuracy and professionalism. If you believe this safe and affordable way of obtaining administrative and financial help can enable you to better run your law firm, check out the options for working with a virtual CFO.

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How to “Right-Size” Your Law Firm

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How to "Right-Size" Your Law Firm

Some firms euphemistically call downsizing right-sizing because it enables them to alter their workforce according to the amount of business they’re currently generating. The staff-to-work ratio is deemed “right” and the workforce is the “right size” for the firm, hence the more upbeat lingo.

An even more optimistic interpretation of right-sizing is called “flexible” right-sizing.

Flexible right-sizing means providing alternative work arrangements to associates or support staff rather than laying them off or downsizing during slow periods. This method helps firms scale down or up, depending on the demand for services, without losing valuable employees.

If you’re looking to right-size, but not let anyone go, consider offering support staff the following:

  1. Sabbaticals or furloughs are unpaid time off. They may be offered to staff who would be difficult to replace or they may be suitable for seasonal employees when the firm anticipates that the slowdown in work may be temporary.
  2. Telework allows associates to work from home. Some firms find that by allowing more of their staff to make work-from-home arrangements, they can shift to smaller offices and save on leases and related expenses without sacrificing productivity. In fact, some firms find that productivity goes up. And with specialized Virtual Office phone programs, your workers can still maintain their business lines with their mobile!
  3. Reducing the number of days worked per week may shift some full-time associates and support staff to part-time hours, or it may further decrease part-time hours.
  4. Job sharing arrangements involve two employees who share one available position. Job sharing may coincide with flextime, in which your staff can work flexible hours according to their availability and job needs. This is ideal for people such as paralegals who may work with other lawyers and firms, and are not always available.

Flexible right-sizing isn’t always an option though. If you’re downsizing as you move to your own solo practice, then consider virtual assistants, who can work on-demand and allow you to maintain the right amount of support staff for incoming casework.

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Will Your Law Practice Be Affected by New Leasing Standards?

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Will Your Law Practice Be Affected by New Leasing Standards?

Who is Effected?

In 2016, the Financial Accounting Standards Board (FASB) effectively turned the lease accounting rules upside down. The new rules, which became effective on January 1, 2019, for public companies using a calendar year, are scheduled to be effective for private companies using a calendar year on January 1, 2020.

The changes will significantly affect the financial statements of every company that leases property or equipment, especially those that rely on operating leases (i.e., leases 12 months or less that do not include an option to purchase the underlying asset that is reasonably certain to be exercised).

Important Changes

All leases longer than 12 months in duration must be recorded on the company’s balance sheet. That’s a big change from the current rules, under which operating leases were recorded as a rent expense that didn’t appear on the company’s balance sheet. Under the new rules, with limited exceptions, all leased property or equipment is considered a right-of-use asset and must be recorded as such on the company’s balance sheet.

Similarly, all lease payments are recorded as liabilities rather than operating expenses. This change affects other things as well. For example, interest expenses must be calculated as a cost of the lease and allocated over the term of the lease on a straight-line basis. This affects financial reporting across the board, including calculations for earnings before interest, taxes, depreciation and amortization as well as depreciation and certain tax calculations. The new rules also require additional quantitative and qualitative disclosures designed to enhance the transparency of a company’s financial statements and to allow greater comparability between similar companies.

Note that lease arrangements are contracts that can be structured as part of a larger contract rather than as a separate lease agreement. For example, a master lease can contain different terms for each type of property or equipment in the lease.

In addition, month-to-month leases come under special scrutiny, particularly if the lease is between related parties.

The tests include whether the lessee is

  • Depreciating significant improvements to the property for more than 12 months
  • The sole user of assets and is paying the lessor to service the debt
  • Guaranteeing the lessor’s debt
  • Able to relocate without incurring a great expense

Other Considerations

Other important considerations under the new rules include the following:

  • The definition of a reasonable useful life for the asset
  • Whether the asset has any useful life at the end of the lease
  • Who has title to the asset at the end of the lease
  • The cost of the asset to the lessor is at the end of the lease
  • The lease renewal options (e.g., what if the lease renews annually?)
  • What happens if there is no formal lease agreement?

The bottom line is that all businesses must take the time to review all their lease agreements, whether they are separate agreements, contained in a master lease or are part of another contract, and rework how their leased assets are accounted for and reported so they can be in compliance by January 1. The change involves the company’s processes and procedures for recording leased assets.

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Due Diligence for Law Firm Mergers

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Due Diligence for Law Firm Mergers

According to legal consultants Altman Weil, law firms in every section of the market are interested in mergers. They said that, in 2018, there were 106 mergers, which exceeded the previous record of 102 in 2017. The reasons firms merge vary, but they include such objectives as increasing size or geographic reach, acquiring or expanding a specialty practice and succession planning.

Due Diligence

Even if your firm isn’t ready to think about a merger just yet, it’s important to understand what firms look for when they conduct due diligence. The goal of examining the financial records of both firms is twofold: (1) objectively ensuring that the numbers align and (2) identifying any potential problems. Essentially, these goals are the same as the goals for any business merger.

Once a preliminary agreement is signed, the firms should perform due diligence examinations in the following areas:

  • Review of historical financial performance
  • Examination of current financial status
  • Future projection analyses
  • Entity structure
  • Tax implications
  • Outstanding liens and litigation
  • Existing contracts or leases
  • Quality of work product

The firms should also talk through the following:

  • Analysis of systems being used and how to align them (e.g., research, document management, client relationship management)
  • Personnel policies (e.g., performance management, annual raises)
  • Overlapping roles
  • Severance packages, if any
  • Nondisclosure and confidentiality agreements, if needed
  • Announcements of the merger, both internally and externally
  • Campaign for notifying clients
  • Changes in any locations, including closures or combinations and how and when this will be done

Sticking Points and Projections

Each of these elements is important, but a particular sticking point is how the new entity will be structured. The rules are complicated, but the result may be that individual partners or shareholders may find themselves with an unexpected tax bill. Consider these examples: suppose two partnerships merge. When the deal is consummated, taxable income might be accelerated for some or all of the partners because partnerships are pass-through entities that are not taxed at the partnership level. Now suppose the merger is between a partnership and a professional corporation. The rules in this case are different because corporations are taxed at the entity level. If the new combined entity is a partnership, the tax implications of liquidating the corporation need to be considered.

Pay close attention to future projections because they estimate the financial health of the combined entity. The analysis includes partner ages, the cost of existing partner buyouts, number of partners expected to retire in the next 5 to 10 years, the buyout structure going forward, projected rate of client retention and partner billing rates.

When firms merge, the best-case scenario is that the merger goes smoothly and everyone comes out feeling like a winner. Part of what reinforces that feeling is cultural fit. Cultural fit is hard to define because it is intangible. It encompasses things like how the firm values its employees and its clients, whether it values corporate social responsibility and what its overall growth goals are. Sometimes, firms need to meet with several potential merger partners before they meet a firm with which they feel comfortable.

If your solo/small firm is thinking about a merger, you might find important information in this case study of a solo practice merger.

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Cybersecurity and the Importance of Data Privacy

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Cybersecurity and the Importance of Data Privacy

Cybersecurity — especially data privacy — is one of the biggest problems facing businesses today. These security problems are compounded because every segment of every industry is affected differently, and each is subject to the risk factors peculiar to that segment. Grouping similar data together based on chosen parameters allows businesses to assess the privacy needs of each data segment they are holding. For example, the protections for public data don’t have to be as stringent as the protections for private data.

Protecting the privacy of the data with which they are entrusted is a universal business goal.

Get started by answering the following questions:

  • What types of data does your business have (e.g., credit card information, health information, criminal history, biometrics)?
  • Which departments have access to that data?
  • Who are your data service providers and what are their credentials?
  • Which personnel can access the data?
  • What steps has your company taken to protect the data (e.g., encryption, back-up, internal controls)?

Federal and International Regulations

The United States has no federal law protecting data privacy. A number of states, however, are responding: at least 31 states have already established laws regulating the secure destruction or disposal of personal information. At least 12 states — Arkansas, California, Connecticut, Florida, Indiana, Maryland, Massachusetts, Nevada, Oregon, Rhode Island, Texas and Utah — have imposed broader data security requirements. Other states, including New York, are considering legislation. Illinois has nine items pending legislation so far this year.

California is a pioneer on the data privacy front. The California Consumer Privacy Act of 2018, which goes into effect on January 1, 2020, is similar to the General Data Protection Regulation (GDPR). Companies that do business in California will be affected by this legislation.

At least some of the activity at the state level is in response to the European Union’s enactment of the GDPR. Any company doing business in a nation that has adopted the GDPR must comply with its consumer protections regarding data privacy. The GDPR covers many types of data, including the following:

  • Personally identifiable data (e.g., names, addresses, date of births, Social Security numbers)
  • Web-based data (e.g., user location, IP address, cookies, and RFID tags)
  • Health (HIPAA) and genetic data
  • Biometric data
  • Racial or ethnic data

The bottom line is that U.S. businesses operating in multiple jurisdictions must consider these categories, as well as any other categories pertinent to their industry, as they segment the data they are holding. Understanding the data they hold is essential to instituting the right level of privacy safeguards.

Three Steps to Securing Your Data

  1. Understanding your data

  2. Knowing the relevant laws and regulations your business must comply with

  3. Staying alert for any indications of a breach

The sad truth is that many data breaches go on for quite a while before they are discovered. The time lapse between hack and discovery allows hackers to continue accessing vulnerable data. That makes constant monitoring an important aspect of any data security program. Watching for the signs of a breach — such as an unanticipated spike in bandwidth usage — can indicate a problem.

By following these three steps, businesses can be sure they are doing their best to protect the data they and their data service providers hold.

Learn more about cybersecurity for law firms with Above the Law’s two part series: Part One | Part Two

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Are You Concerned About Your Firm’s Cash Collections?

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Are You Concerned About Your Firm's Cash Collections?

Chasing after clients to collect money owed is no fun. That’s why attorneys often avoid the task until their coffers reach dangerously low levels. This is not a good idea. You can’t run or grow a firm without a reliable cash flow, which not only means attracting business but devising a system to collect what clients owe.

Here are 4 simple ways to improve the accounts receivable column of your ledger

Get Involved

Nobody likes calling clients and asking for money, especially lawyers, who can’t claim collections as billable hours. That’s why most law firms assign collecting receivables to lower-level employees, like paralegals or secretaries. Although this technique frees up partners and associates to do more productive work, it often is not effective. It’s easier to dodge the call of an assistant than it is to avoid the call of the attorney who’s handling your divorce.

If attorneys in your firm balk at getting involved with collections, you could tie their compensation to the money they actually collect, rather than what they bill. Also, tell them that every dollar collected is a dollar earned without putting in extra hours.

Don’t Delay

Clients won’t pay a bill they don’t receive, so it pays (literally) to send out invoices quickly and regularly. Don’t wait until the end of a case to bill clients, who then have no incentive to pay quickly.

Invoice Often

It’s easier for a client to ignore one bill than regular, monthly statements that remind them of how much they owe. Monthly statements inform clients of the terms of your service, how much they owe, and when you expect to be paid. Make sure statements have easy-to-read contact information so clients can call or e-mail you with payment questions or problems.

Become Tech Savvy

Technology may not be your specialty, but today’s billing software is so easy to use that it pays to invest in a program that regularly invoices clients and keeps track of those who fall behind on payments. If such software makes you shutter, consider outsourcing your accounts receivable division. You’ll pay money to collect money, but when you consider the billable hours wasted while you chase receivables, or the wages you pay someone else in your firm to collect funds, outsourcing won’t seem that expensive and, ultimately, could pay for itself.

Our next CLE will address attorney billing practices and how to maximize your collections. Join us on July 30th, email us at [email protected] for more information!

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