by Antony P. Ng
When starting a solo practice, you are likely to be responsible for performing such tasks as preparing documents, docketing, maintaining an appointment calendar, tracking time and billing, etc. In fact, it is fairly common nowadays even for many experienced solo practitioners to type documents and post accounting information themselves. This is because current technology allows many solo practitioners having well-equipped offices to operate an effective law practice with no support staff at all. For example, a lawyer can perform legal research via online services, generate documents and correspondence on a word processor, transmit documents and/or correspondence via facsimile machines or e mail programs, and answer phone using an automated telephone system.
However, there comes a time when doing everything oneself can become very cost ineffective, especially for do-it-all solo practitioners. Of course many do-it-all solo practitioners often balk at the idea of hiring a staff person, thinking they just cannot afford one. But before reaching such conclusion, let's examine the situation again.
Do-it-all solo practitioners often reduce their fees to ridiculously low levels in order to attract legal work. When they start to generate legal work, they think they are busy because they work so many hours, but in fact they are just inefficient. They soon find that they do not make enough money to properly compensate themselves for the hours they put in, and they do not understand why they work so hard but take home so little.
In addition, do-it-all solo practitioners often fill their time with typing, filing, etc. when they do not have enough legal work to keep them occupied. Since do-it-all solo practitioners do almost everything themselves, they typically have low overhead; but interestingly, their operations may actually have high costs. The reason for this apparent paradox is that a high-cost personnel, i.e., a lawyer, is relegated to doing low level clerical work. So instead of functioning as the proprietor of a business, do-it-all solo practitioners choose to bury themselves in mindless clerical drudgery.
Quite often, lawyers view staff as a cost of doing business, i.e., an expense. However, this characterization may not always be true. Generally speaking, an expense is an expenditure for a good or service inherent in the process of dispatching work. For example, rent is an expense; paper clips and staples are also expenses. Needless to say, expenses should always be controlled carefully. On the other hand, an asset or investment is an expenditure that substantially enhances the value of a business. An asset has the capability of amplifying profits by multiples of the investment's cost, and investments should be judged by their potential return. If properly utilized, a staff person can be a lawyer's most important asset. A staff can support the legal work as well as non-legal work the lawyer needs to do, with the non-legal work being entrepreneurial, organizational and marketing work needed to grow the lawyer's practice.
If you finally come to a realization that a staff person may actually be beneficial to your practice, the next logical question would be "How much business should I have before hiring a staff person?" You are not ready to hire a staff person until your gross revenue is at least four times the cost of the staff person. So before you hire an assistant at $30,000 per year, you should have a gross revenue of at least $120,000. An assistant should be able to provide you with about 500 extra hours of capacity, but you will need about 250 hours of extra work to cover the additional overhead. Anything you generate over that will go to the bottom line. Thus, a good assistant can increase your profit by about double what you pay the assistant if you get work at a new capacity. The only way to get your hourly rate up is by increasing your marketing activity and effectiveness.
Your decision to add staff will also generate questions such as: What type of support staff is needed to accomplish the tasks in my office? Will a paralegal or legal assistant be more beneficial to my work? The answer to these questions is usually hinged upon the type of practice you are in, the location of your office, the extent to which you use technology. You also have a wide array of personnel choices, such as a staff employee, leased employee, or contractor. Each of these choices has its own advantages and disadvantages.
A staff employee is the traditional and perhaps the most obvious solution. Since a staff employee should be available to you on a relatively long term basis, you can build your corporate knowledge with in house expertise. However, adding a staff employee can be very expensive, and to maximize the benefit to your practice, you should hire carefully with the expectation of a long term relationship to the staff employee.
Alternatively, you can pay a staffing agency to provide you with a leased employee. Since the leased employee is an employee of the staffing agency, you have no payroll headaches and no benefit expenses. However, you will have to pay the staffing agency a premium for this convenience. Because of the high mark-up from the staffing agency, some people tend to avoid this option.
With a staffing agency, you may also consider hiring a "temp to perm" staff person. Basically, after a set term indicated in your contract with the staffing agency, you can then hire the leased employee as your staff employee. This arrangement lets you see a person in action before you make a hiring decision.
Contractors or Freelancers are available for contract work, but generally not for permanent employment. They are often described as independent contractors, and independent contractors are subject to heavy scrutiny by the Internal Revenue Service as to their employment status.
In the beginning of your law practice, it is often more cost-effective to make use of personnel such as secretaries, bookkeepers, title searchers, etc. on an as-needed basis. The cost may be slightly higher on an hourly basis, but can be geared to specific tasks at specific times. However, when you have more work than you can handle and you are billing at a sufficiently high rate to apply the four-to-one hiring rule, you should begin looking for a more permanent staff.
Reference
Paul McLaughlin, Practice Management Consultant
Art Italo, Hiring Staff for Your Law Practice
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