Ross Ipsa Loquitur Blog – Buying Smart – From Law Practice Today – Feb. 2013

In case you don’t get the ABA LPM e-zine, “Law Practice Today,” here’s my article from the February 2013 issue (also online here):

Title: Buying Smart: The Right Technology Makes More Than it Costs

Are you “buying smart” when it comes to tech in your practice, or just “saving a buck?”

There’s nothing more expensive than buying the wrong technology for your practice. Except, perhaps, buying the “right stuff” and implementing it poorly. Sometimes, the lowest-cost technology over the long haul isn’t necessarily the least expensive to purchase. Unfortunately, the old proverb “penny wise and pound foolish” traps even tech-savvy lawyers and dooms them to ineffective technology, or worse, more chaos with new tools than they experienced previously with the “obsolete” stuff.

Buying smart and buying right can turn even a single technology addition, such as a desktop scanner or new document management system, into a profit center – generating more profit in many situations than a new leveraged billable person.

Here’s an example, based on feedback from one of my clients. A 65-year-old small-firm lawyer was concerned that he was forgetting to enter many small time entries; he said he remembered the half-day blocks for contract drafting or a client meeting, but that he routinely forgot to enter the myriad 1/10 or 2/10 of an hour timeslips for things like responding to emails or taking a phone call. He estimated that on an average day he forgot two or three 1/10 hour time entries.

I asked him, “so how much do you think forgetting those little time entries every single day costs you?” He said, “I don’t even want to think about it.” I suggested we do some basic legal business math and asked for a legal pad. We took his average net hourly rate of $200 and for the sake of math simplicity, we presumed he failed to record 15 minutes per day (he shook his head at this point and said “And a lot more on some days . . . “). Here’s the calculation:

  • .25 hours X $200/hour = $50 X 5 days per week = $250 X 50 working weeks per year = $12,500

$12,500.

That’s real money, and it shocked him to see that the little 1/10 or 2/10 timeslips he was losing daily, which seemed like a “cost of doing business” as he described it, added up over time. He reminded me that it was actually probably double that because he was underestimating the lost time.

So keep that number in your mind – $12,500 (he was thinking “more like $20,000 in reality”).

My advice was to implement his firm’s first fully integrated financial and practice management system. In his case, it was Tabs 3 and Tabs PracticeMaster Premier, the venerable and widely-used system from Software Technology, Inc. (www.tabs3.com). We also recommended he integrate these systems with the Worldox legal document/email management system and Microsoft Outlook. Together, the four systems tightly connect to form a unified law practice management system.

One of the key characteristics of the Tabs PracticeMaster practice management system, as some others do as well, is to allow many entries in the system that would normally be made in the course of a normal workday, to be turned into time entries without having to remember to separately create a time-entry. Examples include electronically jotting down the notes from a phone call with co-counsel, or posting a time for a call with the court in the calendaring system, or saving a document to a client’s electronic matter file.

So the idea is simple – you get off the phone with co-counsel on a case (or during the call if you’re using a microphone or headset) and you jot down your notes and save them to the matter’s file in the practice management system. Now in the old world my client once lived in, he had to then remember to find his PAPER multi-part timesheet (I’m serious – and this was in 2011) and write down the timeslip, hopefully remembering the right codes. More often than not, he told himself “I’ll remember to enter that at the end of the day because I have to take this call that’s waiting for me.” As 5 PM rolled around and he struggled to recall all his “little” time entries (while trying to dash out the door to pick up his wife for dinner), his mind inevitably went blank and the entries disappeared forever into the “financial ether.”

But now, Tabs PracticeMaster pops up and pre-fills a timeslip for him for a pre-determined amount of time (decided during the pre-implementation setup process for the program) – 2/10 of an hour in his case. All he has to do is click to “OK” it, and he has a time entry recorded, where one would have otherwise been lost.

Tabs 3 (the billing module) and Tabs PracticeMaster Premier (the practice management module) cost his firm around $2000 fully implemented for four people, including software costs, training and professional services. After the first 12 months of use I asked him how it was going and he said, “This program you put in front of me made me an extra $21,000 this year!” I reminded him that it wasn’t, in fact, “extra,” but had been his money all along; it just wasn’t being captured.

So about $2000 of initial expense, plus a couple of hundred dollars per year for ongoing software maintenance works out as follows:

  • Cost per year – first year = $2000 startup cost including first year of software maintenance. Subsequent years = approximately $300 in software maintenance. Five-year cost = $2000 + $1200 = $3200
  • Return on $3200 = $21,000 per year in “extra” captured time X 5 years = $105,000
  • Net return after costs = $105,000 – $3200 = $101,800 more top-line revenue

That was a clear example of buying smart – the right software, implemented properly, measured well and generating a proportionately enormous return on the dollars spent.

So the essence of buying smart really has little to do with “getting the best deal,” whatever that might actually mean. A lawyer who proudly and perhaps smugly suggests that the DIY Excel spreadsheet she created 15 years earlier to track all her time and boasts that it “cost me nothing and works great” is deluding herself. If she’s not capturing the three of four 1/10 of an hour entries she admitted to forgetting, and her technology tools don’t help her to remember or act as a financial safety net to help her capture that time somehow, the cost is enormous. Here’s what I explained to her, again, asking for a yellow pad to do the legal business math neither she (nor I) had learned in law school:

  • Cost of not entering three 1/10 hour time entries at her net realized hourly rate of $175/hour = $52.50 per day X 5 days per week = $262.50 X 50 working weeks per year = $13,125
  • $13,125 per year is the cost of not spending about $1500 for a fully implemented financial/practice management system to help automate the capture of that time.

The “bargain” Excel spreadsheet was put out to pasture the following week and she wondered why she hadn’t done this years ago.

So what are some ways you can “buy smart” in your practice? The following tips will help ensure that you spend just the right amount – not too much, not too little – and generate a provable, measurable profit on the money you spend on your technology:

  • Look for areas where you waste otherwise billable time. Examples include time spent looking for information you can only find in a paper file, or being honest with yourself about how many “little” time entries you forget to enter on a typical day, or how often you “reinvent the wheel” and redraft language in a flat-fee matter (like estate planning) that you know you wrote before and could’ve leveraged, if only you had been able to find it.
  • Assign amounts of time you spend subsidizing those activities.
  • Take out a legal pad and do the “legal business math” – multiply the amount of otherwise billable time wasted by your approximate average hourly or realized hourly rate.
  • That figure is your RRT (Revenue Recapture Target) – in other words, what you can expect to additionally bill if you can find a way to recapture that time,
  • Then whether you decided to represent yourself pro se on your tech matters, seek out the advice of your state bar’s practice management advisor, or retain a professional legal technology consultant, find the technology tools that will specifically address each area of waste. Perhaps a financial/practice management system that automates timeslip entry or a tool like Chrometa (www.chrometa.com) that captures all your time spent on your computer systems to be imported into your billing system, or a desktop scanner such as the popular Fujitsu ScanSnap in its latest ix500 iteration (www.scansnap.com), and document manager like Worldox GX3 (www.worldox.com) or NetDocuments (www.netdocuments.com) that turns physical paper into electronic paper – in real-time as soon as it hits your desk, and then makes it all instantly searchable so the wheel never has to be reinvented again. In other words, plug the gaps and recapture YOUR otherwise wasted time and get it billed out and collected. Or use an iPad or Android tablet (or iPhone or Android smartphone) with Chrometa to capture time when it’s not convenient to fire up your Windows or Mac laptop, and then review the time captured, import it and bill it (http://www.chrometa.com/mobile.html).
  • Of course, spending as little as possible is still smart business. For commodity tech items like printers, scanners, mainstream software like Adobe Acrobat or Microsoft Office, use internet pricing engines like Pricegrabber.com or Google Product Search (www.google.com/products) to get the very best pricing.

Then, mostly importantly, always work to “spot the issues” – something we lawyers all were taught to do by every law school. Work to root out the areas where otherwise billable or productive time is wasted, and then assume the answer to the question “is there technology that can put an end to that and turn most or all of it into billable time” is going to be some version of “yes.”