By Jim Calloway

As we reach the end of 2017, it is a time for looking back at the year’s accomplishments and planning for the year ahead.

Whether you have been directly impacted or not, we are in an era of significant change and challenges for lawyers, the practice of law and the methods of delivery of legal services. Competition is increasing. Dealing with change is always a challenge, even more so for a profession that is focused on predicting the future by learning from the past precedents.

Was your 2017 a successful year? If so, how can you make 2018 an even greater success for your law firm? If 2017 was not a year of significant success, what should you be doing to ensure that 2018 is more successful?

Lawyers have many measures of success from their reputation in the community to their various successes on behalf of their clients. Some years it is finalizing that move to a new office location that seems like the greatest success of the year. Sometimes success is when a new major client comes on board.

At the end of the year, the measure of the law firm’s year is often focused on economic success. Was the firm profitable and did the lawyers all receive adequate compensation for their work? The path to determining and improving these measures is having proper financial statements and understanding how to interpret them.

THE THREE ESSENTIAL FINANCIAL STATEMENTS

Long gone is the day when a lawyer could operate the firm out of a checkbook and rely on their bank statements for their financial reports. At a minimum, the following documents should be generated and reviewed on a monthly or bi-monthly basis, not just created for end-of-the-year tax preparation.

• Balance sheet: This statement provides an overall financial picture of your law firm’s business operations. As an equation, it looks like liabilities + owner’s equity = assets. The two sides of the equation must balance out.
• Profit and loss statement: A profit and loss statement, also referred to as an income statement, enables you to project revenues and expenses and typically covers a period of a few months to a year.
• Cash flow statement: This statement highlights how much money is coming into (cash inflows) and going out of (cash outflows) your business. Cash inflows will normally be reimbursements and attorney fees received, but could include other items like interest earned on investments or loans incurred.

Larger law firms generate these documents and many others as an ordinary part of their business operations. Some law firms base compensation on formulas that require much more detailed information, including client origination, time billed, write-offs and other relevant factors. Aging of accounts receivable is another important item to consider. Some smaller law firms and solo practitioners may not have historically generated financial statements so routinely, but these statements reveal the financial health of your practice and are very important for law firms of all sizes. The U.S. Small Business Administration has helpful free information about these statements. The assistance of a local accountant can also be invaluable.

CLIENT DEVELOPMENT AND CLIENT RETENTION

People are shopping and researching their purchasing decisions online. If your law firm doesn’t have a website, this is a serious problem. If you do have a website, how long has it been since the website was updated? Have you visited your own website from several types of mobile devices to see how it looks on each? Do you have a clickable phone number on your website that allows visitors to place a call to your law firm from their smartphone with a tap without having to enter the number?

Facebook is very powerful today and many people use it as the platform to visit all other web content. For law firms catering to potential individual consumer clients, it is very important to have a law firm Facebook page. My personal opinion is that Facebook ads (or sponsored posts) that are narrowly targeted to your geographic and practice areas are perhaps the best value in law firm marketing, but you have to have a Facebook business page to utilize Facebook advertising.

Obtaining new clients is important and essential for a thriving law practice, but retaining your existing clients who have been with the firm for years is also critical. Spend some time thinking about how you can reach out to those clients and deliver more value in the upcoming year. It is a competitive legal marketplace today and you never want to give your long-term clients the impression that they are being taken for granted.

YOUR TECHNOLOGY TOOLS AND SKILLS

As I have been communicating to Oklahoma lawyers at every opportunity, every business is a technology business and a law firm that mainly manages and processes many pieces of information is certainly no exception.

Technology used to be about the tools we used while practicing law. Using modern tools appropriately is still absolutely critical. If your technology skills could stand some improvement, there are many inexpensive online training courses, legal technology blogs and other resources. The OBA CLE Department is hosting a Legal Technology and Law Practice Management Institute Technology Summit Feb. 2-3. The summit will feature Baron Henley and Paul Unger of Affinity Consulting, who have presented at OBA programs before. For many lawyers, more training on Microsoft Word would yield immediate results and Mr. Henley does a great job at demystifying advanced Word features.

The 2018 Solo & Small Firm Conference will be June 21-23 at the River Spirit Casino Resort in Tulsa. Mark your calendar now so you don’t miss this opportunity for more education and training!

Digital client files containing PDF images of every document and all other information associated with the client file are now the standard for law practices. Practice management solutions organize these files and many also provide client portals. Many lawyers will still maintain their traditional physical client files and folders, but the idea of critical client information being only kept in paper format with no backup seems increasingly out of step with today’s business practices. The main benefit, however, is that once you’ve made the conversion to digital files you can practice more effectively and quickly than having to thumb through bradded stacks of paper looking for a particular document.

Practice Management Advisor Darla Jackson is available for free consultations to help you narrow down your choices between the many practice management software solutions. We now have a designated community in MyOKBar Communities called Practice Management Advice where we post at least one technology tip or online resource every week.

I predict that in the near future lawyers will spend (and bill for) much less time drafting most routine legal documents. Using templates and automated document assembly is becoming a standard practice.

Technology advances have moved far beyond simply tools and now impact substantive law and process. Family lawyers have to understand how to extract evidence from social media and present it in court. At the Annual Meeting, I gave a presentation on cutting-edge trends in the law where I discussed artificial intelligence, blockchain, cryptocurrencies like bitcoin, legal analytics and self-executing smart contracts that will never be the subject of litigation because they will perform using blockchain connections for fund transfers and verifications. I certainly can’t claim that I would have seen those topics being on the horizon a few years ago. Smart contracts for major corporate deals will be a reality sooner than many of you think.

LIMITED-SCOPE LEGAL SERVICES

Another change we see is the increase in the public’s appetite for delivery of limited-scope legal services. We cannot deny the growth in the number of websites delivering legal services to consumers online. The Oklahoma Supreme Court’s adoption of District Court Rule 33 this summer provides the roadmap of how lawyers can appropriately and ethically deliver this type of legal service. Lawyers have traditionally provided full-scope legal services, handling every aspect of a matter to ensure it was properly accomplished.

Today there is much discussion about access to justice and the affordability of legal services for the average citizen. Provision of limited-scope services is one avenue that can be utilized to ensure that our courts are open and available to all of our citizens. Lawyers are trained to carefully examine the risks of every situation. Some lawyers will have concerns about limited-scope legal services. These types of services are not meant to be delivered by every law firm, but many lawyers who cater mainly to individual consumer clients will find the services to be an important tool to help them serve a broader range of clients.

The OBA CLE seminar “Delivering Limited-Scope Services Effectively and Safely” is available as an on-demand webcast at www.bit.ly/LimitedScope (case sensitive). I believe there are many specific techniques that can be used, including detailed documentation of the interaction with the client and detailed instruction sheets to assist the clients in performing those tasks that they have decided to complete themselves. Demand is shrinking for some types of legal services. We see these services as a growth area.

DRAFT A 2018 LAW FIRM BUSINESS PLAN

We take notes during interviews to assist our recollection. For the same reason, your business plan must be in written form. It can take whatever form you like, and for many law firms, bullet points are more effective than long narrative statements. Law firms are very busy places. The best way to achieve your long-term goals for your law practice is to commit them to writing and then review the plan every month to see how you’re progressing toward the goals that you have set.

Hopefully 2017 was a great year for you and 2018 will be even better, but law practice today requires improving efficiency and dealing with the rapid changes in the business world. Doing things the way you have always done them is not a guarantee of future success. As the cliché goes, “plan your work and work your plan.”

Mr. Calloway is OBA Management Assistance Program Director. Need a quick answer to a tech problem or help solving a management dilemma?  Contact him at 405-416-7008, 1-800-522-8065 or jimC(at)OKbar.org. It’s a free member benefit!

Originally published in the Oklahoma Bar Journal — December 16, 2017 — Vol. 88, No. 33