Building a Better Law Firm

By Adam Philipp, an EO Seattle member and founder of ÆON Law

I thought I was a lawyer! I went to law school and passed the bar. However, as I began working at different law firms, what I heard about the business of law seemed broken. In particular, the billable hour business model sucked at my soul and annoyed my clients. All that mattered at these firms was a single metric: how many hours were billed to clients.

I thought changing law firms might help but every firm was stuck with the same business model. Eventually I joined some other lawyers and founded a new firm. The billable hour business model was the only model I knew, and I brought it with me. In spite of the model, I was able to grow my firm. I had 10 lawyers and four staff. But I still felt like the billable hour model was broken and was searching for a new model.

I wished there was some way to get clients to pay me before beginning the work. But how could I? Clients hate locking up money in “evergreen retainers,” and I had no idea how to estimate the projects that half my attorneys were working on.

But there had to be a way! So I sat down and started making a list of my clients’ interests and my interests. Under the billable hour model, the lawyer’s and client’s interests are usually out of alignment.

Then it hit me: don’t just change the billing model, change the compensation model as well. I had been thinking like a lawyer, not like an entrepreneur. There weren’t  just two players, there were actually three sets of interests I should be aligning: client, lawyer and firm.

The client wants their work good, fast and cheap. The Firm wants low overhead, good talent and cash flow. The lawyers want income, work/life balance and appreciation for their skills.

By switching to a project-based model I could align almost all of these. It took a few months of sorting through the formula, but it works. Unfortunately, most of the lawyers and all of my staff were not set up for change. In fact, only one survived the change with me. Now with five lawyers and three staff, our revenue and profit are above what we had when there were 14 employees. Our clients are singing our praises and my firm is attracting top talent.

The flat fee model allows our firm to systematize what was previously a bespoke service. With better processes in place, our lawyers can focus on the high value portions of projects and achieve even greater satisfaction with their work and appreciation of their skills.

Categories: Business/Finance Tips Management Productivity

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2 Responses to “ Building a Better Law Firm ”

  1. Andrew on

    This is a great innovation that Adam Philipp has come up with. Redesigning how the compensation works between a law firm, clients, and the attorneys in the firm is something that could potentially be done to many other firms if it is done correctly. Getting a job as an attorney involves finding the right firm, but in Adam’s case, reinventing the wheel was needed, and doing so benefited him and the members of his firm.

    Reply
  2. Anya McCann on

    Adam, brilliant! Richard has just gone back to private consulting and would like to charge more on a value added basis for his services. He’d like to talk to you about how you make it work. You always have terrific ideas!

    Reply

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