Things your lawyer won't tell you
openforum.com
openforum.com
http://news.ycombinator.com/user?id=grellas
I have had none of the problems listed on this form. I don't get sneakily billed or over-billed, I get personal attention from two lawyers (including George whose name is on the door), and I get what appears to be very sound legal advice.
I have had two friends hire lawyers to set up their companies, and Grellas's hourly rate was much lower, and the final cost overall was half of what one friend paid and less than half of what the other paid.
Moreover, unlike a lot of Valley lawyers, Grellas's firm only represents start-ups - they have no VC clients. This means they know about the issues I face, and I can be comfortable there are no conflicts of interest when I look for VC money.
What a wasteful brain drain. How much better off would our country be if more of those students went into engineering or became entrepreneurs?
And, if engineering is so much more important than law, why not pay engineers more than lawyers?
Someone has to prop up the "higher" education system.
-a non-practicing attorney, soon-to-be entrepreneur
If you're doing a startup, you may want to take some lessons from the eons of microeconomics and management wisdom condensed into some of these things instead of cheering at the burning effigy of the man with the briefcase. It's a much more pithy, intuitive introduction to concepts like economies of scale and capital investment than a theoretical overview:
1. Charging for modifications to document templates instead of original forms as though original --
It is common to leverage technologies, procedures and and/or existing assets as part of a service offering. Who does anything from scratch more than 5 times before they get tired of it?
This is no different than one of us building an API or a framework so that programming tasks that used to take 20 hours can now be done in 5 hours.
In our world, that does _not_ mean you should now be billing the customer 5 hours for the same task, at least, not if you have any business sense. If you do that, you derive no economic advantage from the up-front work you put into building that framework, nor do you even make back the time (money) you spent building it. There's no incentive to do that; in that case, you're better off doing everything from scratch and billing for it.
The proper thing to do is to transmit some of the advantage of your lever into the price. If the task used to take 20 hours, now takes 5, bill the customer 15. It's cheaper for the customer and improves your competitive position while allowing you to earn a return on the up-front investment you made in developing your efficiency-enhancing technology, which can sometimes be hundreds or thousands of man-hours.
This is a form of amortisation; a fraction of the cost of the capital outlay in producing the technology is distributed into the cost basis of every application, deployment or instance. Big companies do this all the time; it's one of the key points that guides their pricing decisions on services that capitalise on internal tool chains, utilities, etc. For example, if the IT department at Nortel spent $1m building a new CRM and case management system for all the support people to use, you bet the cost of that $1m is going to be distributed into the cost of support contracts by people figuring out the bottom line. This is not only normal, but prudent.
So, while it may be deceptive to _claim_ that a document was literally prepared from scratch and bill as if it were, charging money corresponding to the literal amount of time spent on something even with the efficiency advantage of a lever you had to build is dumb. The lawyer did, at some point, have to actually build those documents; they're entitled to recoup their investment and build fat margins into it on top.
How much is a question for price competition; the market-affirming answer is, "as high as they can get away with."
2. I hand off work to peons but charge you a lawyer’s rate --
Mostly, clients do business with a law _firm_ and pay for the services of that firm as a whole, in the aggregate. This includes a cost basis consisting of overhead.
Again, to bring this back to our industry, this is no different than charging the customer $100/hr as a web design/development company, despite the fact that parts of the project might pass through a range of people with widely varying skill, credential and compensation levels. Some of these people may be internal, others outsourced, etc. Hourly billing is not a continuously variable transmission; it doesn't jump up and down depending on whose exact eyeballs are on your project at this exact moment. Compensation is for the company as a whole.
Besides, it requires up-front and residual investment to find, qualify, hire, train, and continuously employ a paralegal, assistant, clerk, etc., and there is no reason why their work on your behalf as a lawyer can't fetch much higher hourly rates than what you pay them. This is no different than the reason why project-based contractors earn more hourly than permanent employees. You want to pay $50/hr for the services of a paralegal instead of $300? Fine, then hire them on full-time at $60k (~$30/hr) + benefits yourself, and figure out how to direct their efforts and utilise their capabilities yourself.
It's $1 for the nail, $199 for knowing where to put it.
There is absolutely nothing wrong with billing a composite rate in consideration of all the time, money and expertise put into creating a firm - together with the right people, management, process and assets - that produces useful results as a cohesive whole.
Why would we hold law firms to different standards than we hold technology consultancies and service firms?
3. I hope you don’t look too closely at the expense report --
Making margin on expenses is a normal and accepted practice in many other industries; it offsets the overhead of procuring them and dealing with them, as well as a certain amount of small, but calculated risk that you won't be remunerated for expenses incurred on the client's behalf.
4. You’re always on the clock --
That's also normal across the board in professional services.
5. Your bill is only a guesstimate --
Also normal, within a reasonable margin of error.
6. I’m training junior attorneys on your dime --
How is this different from, "I'm training junior software engineers on your dime?" Normal.
...
I'm not saying lawyers don't do seedy stuff; you'll find no disagreement from me. But let's be realistic here; law firms are businesses -- it's not fair to praise everyone else's fiduciary astuteness when they do these things and vilify lawyers for them just because we all love to hate lawyers.
The presence of the particular points I mentioned above in the article basically says to me, "Law firms are so evil, look at all the business-savvy and commercially normative things they do!" This is stupid.
http://pseudonym.tumblr.com/post/408523735/abalashov-a-rebut...
1. This isn’t pizza delivery: just because a lawyer has passed the bar, it doesn’t mean that they can whip up legal documents in 30 minutes or less. How “standard” is the document you’re requesting?
If it’s as standard as you think it is, then order it off LegalZoom.com and be done with it (or take said LZ document, and have your lawyer make modifications to it that fit your business situation).
I put together my first contracts by reading contract law books, BarBri material, and reviewing a variety of other contracts (both client, and vendor), and adapting it all to fit into my needs. That process took me a total of 10-12 days.
Now, using the example of my first contracts I did, take that same number, with 8 hours a day, and count the revenue I’ve lost out on by doing it myself. In the months after that, I met with various clients, who needed different legal clauses, and I spent no less than 1 day for each client, sometimes 2, making said modifications, researching them, and reviewing them.
And while my contracts always passed the client’s gauntlet of internal counsel, I never felt comfortable with it until I took it to a lawyer. You are paying for more than a document. Outsource your risk.
This is good advice for what the client should do. However, that is the client's choice. If they instead opt for the more expensive option of getting a standard document from a bricks-and-mortar law firm, for whatever host of psychological and practical reasons, that is their prerogative.
I understood the issue with template derivations to concern common documents. If the attorney provides a form document that is too generic to suit the specific requirements of an idiosyncratic business situation that truly merits a custom document, _that_ is the essential problem - call it deception, incompetence, etc. In any event, the problem there is altogether distinct from the concept of billing higher than literal time spent on template derivations.
2. Your web design analogy doesn’t apply. Law firms have different rates for partners, associates, and paralegals, and based on who works on your task, you are billed accordingly.
I did not know that. If that's in fact the case with a given firm, then billing you attorney's rates for a paralegal's work is wrong.
But again, it is wrong because that's not what they claim to do, not because it's wrong to bill out all work by all personnel out at a standard firm rate.
It may be unethical, but for a different reason than the one that appears to be given by the original author.
The partner is still 100% on the hook for any work that these folks churn out, so it better be right the first time. They don’t have unlimited time, and certainly not unlimited billing time. So any contract work that requires them to come back to and defend due to uncertainties/errors, is work they shouldn’t have done at all.
Agreed, but again, that's the attorney's problem, not because it's wrong to bill out a paralegal's work at $300/hr ipso facto.
And I’m pretty sure, the associates and paralegals don’t want to be called “peons”.
I'm pretty sure of that too. :-)
There’s an acceptable amount of margin, but even then, it’s not really margin. A copy doesn’t cost 5 cents. A copy costs man-hours to a) interrupt your existing train of thought, b) go to the copier, c) make said copies, d) potentially troubleshoot why the copier doesn’t work and correct it or find and alternative, e) collect copies, f) resume work.
Think about the cost of “context switching” next time you say you can make copies cheaper than the next person.
Strongly agreed. All the more reason to mark up the hard costs or charge a separate service fee for the end result of utilising the product.
Continue to look at it from a consulting/professional services view. Sure your client may call you up with some basic questions, and you can answer them no problem, but once the questions start getting complex, you start to get a little uneasy with giving them something valuable for nothing in return.
Personally, I give away a great deal of free advice, consultation and general communication to my clients.
But I don't fault someone else for being a little more practically minded than I about these things.
Your bill should not be a guesstimate. Everyone, and I mean, everyone is required to record the number of hours they spent on a task or project. IT consultants do it, and lawyers do it. No exceptions.
It should rather closely reflect actual time spent in the grand scheme of things, but there is an allowable margin of error and rounding, especially considering the impracticality of accounting for a few minutes here and a few minutes there in the context of human task switching.