The quality of your clients = the quality of your practice

Michael Hammond, The Daily Record Newswire

If you, like many of your colleagues, have stocked your practice with clients that aren’t a good fit, you’ll spend much of your career feeling frustrated, unappreciated and resentful. What’s more, you’ll never realize your income potential or find real satisfaction in your chosen career. Our research with many lawyers over many years shows that if you applied the Pareto Principle, also known as the “80/20 rule,” to your client base, you would probably find that 80 percent of your income comes from 20 to 40 percent of your clients. The Pareto Principle applies again because this small, quiet 20 percent that can generate up to 80 percent of your revenue only takes up about 20 to 40 percent of your time as well.
Most of you know from your own experience that all clients are not created equal, but you haven’t yet learned to trust your own instincts during the intake process. You may know instinctively that the client who shows up at your office clutching a page ripped out of the Yellow Pages is not quite the same as the client sent by your best referral source, but you still tend to give everyone the benefit of the doubt.

Don’t. Stop adopting clients and start selecting them. Become more rigorous in your screening procedures. Here’s how to do it.

The four client types
To keep this process simple, we classify clients into four types or levels: “A,” “B,” “C,” and “D.” Each type is judged on pre-determined, general criteria: the ability to pay and payment habits; loyalty; having needs consistent with your expertise; their ability to cooperate and trust; their opinion of lawyers in general; whether they are high or low maintenance; their ability to be satisfied with services rendered; and the likelihood of their sending more work or quality referrals.

Who are your A, B, C and D clients?
In this classification system, which you can customize for specific practice areas, A and B clients are the good, C clients are the bad, and D clients are the downright ugly. In short, the A and B clients are those you actually enjoy working with. They are the low maintenance clients that bring you the kinds of matters that fit your expertise.

They appreciate the value of the work you do for them, they cooperate with you and they trust your opinion. They don’t hassle your staff and they’re not crisis-driven. They show up for appointments on time and they pay their bills promptly. They can also refer other clients like themselves to you. Unfortunately, they are also the clients that tend to get lost in the shuffle as you scramble to handle the constant demands of your C and D clients.

Your C and D clients are basically the opposite of your A and B clients. They don’t sneak into your practice unannounced — they usually come through your door waving a variety of red flags. You know them when you see them. But all too often, usually because you need the money, you welcome C and D clients into your practice and ignore the red flags. But remember: for every negative characteristic you can attach to a client, you will spend more time with that client, persuading them to trust you, calming them down or trying to get paid.

The red flags
There are both financial and personality-based red flags that signal the arrival of a potential C or D client. Financially, the best clients are those who value your work and are willing to pay a reasonable fee for your services. Alternatively, a “yes” answer to one or more of the following questions should raise a financial red flag:

• Was the client referred by a C or D client?

• Is the client’s first question, “How much is this going to cost me?”

• Does the client mention that he or she knows another lawyer who is cheaper?

• Does the client resist paying a consultation fee or a retainer, or insist on only paying half?

“Yes” answers to these questions may indicate financial instability or unwillingness to pay and should be seen as red flags. The bottom line: Trust your instincts.

Personality-based red flags can signal future cooperation or communication problems with potential clients. Although some potential clients might be naturally distressed because of their need to see a lawyer, others may exhibit more extreme behaviors that can negatively affect you and your staff. Clients who are excessively demanding, always time consuming and difficult to please are rarely good clients for the long haul. A “yes” to one or more of the following questions should raise a personality-based red flag:

• Did the client show up with a full-blown crisis and demand your full and immediate attention from the start?

• Did the client make a point of telling you that he or she has already worked with two other lawyers on the case before bringing it to you?

• Does the client display a level of anger or a sense of revenge totally out of proportion to the matter?

• Does the client refuse to take responsibility for his or her own actions?

These red flag waving, high maintenance, crisis-producing clients are like bandits who repeatedly steal a disproportionate amount of your time and energy. Sometimes these are also the people who don’t pay you, but even if they do it will probably never be enough to compensate for the all the aggravation they cause. So heed the red flags. The best way to never work with another C or D client is to not take one on in the first place.

Next steps

If you find you have already stocked your practice with C and D clients, follow the steps listed below to conduct your own “housecleaning”:

1) Go through your case list and rank your current clients A, B, C or D. Take special note of your A and B clients and then do a quick mental calculation: Does the 80/20 rule apply to your client base? Now, identify the lower-level C and D clients on your list. If you have any doubts during this process and begin to vacillate on whether a client is a C or D, ask your staff. C and D clients often treat staff poorly and take up an unreasonable amount of their time, too.

2) If you think any of your borderline C clients can be rehabilitated and upgraded to a B level, then sit down and have a frank conversation with them about the problems they are creating and the needed solutions. Make clear that they must bring payments current, produce requested documentation in a timely manner or stop cancelling appointments. Some will respond positively to this approach, others will not. Take the rest of your C clients and refer them out if their issues are personality-based, not payment-based. Avoid sending clients who won’t pay to another lawyer.

3) Let your D clients go; the sooner, the better. You can do this in person, over the telephone or by letter. If you let them go in person or by phone, make sure you follow-up with a letter documenting your conversation. Your bar association will have sample disengagement letters you can use. Disengagement and non-engagement letters are especially critical when a lawyer decides not to continue past a specific stage in a case. If the issue is nonpayment, you are not ethically bound to continue work for a client that is not paying you. (Litigators must be careful here — confer with your trial judge.)

Imagine how different your practice would be if you worked with nothing but A and B clients and the pro bono clients of your choosing (instead of the clients who become pro bono cases by default). You might actually have a practice much closer to the one you always imagined. Carefully selecting the clients you work with not only helps to protect you from malpractice claims, it has the added benefits of saving a lot of time, improving office morale, decreasing stress, increasing income, minimizing collection problems and restoring some peace to an otherwise crisis-driven practice. Client selection is one of the most important practice management skills every lawyer should master. The effect on both your peace of mind and your profitability will be truly significant.

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Michael Hammond is a “founding father” of Atticus and is a Certified Practice Advisor. Michael has a depth of experience in lawyer marketing, one-on-one business coaching and strategic planning. To learn more about the work that Atticus does with attorneys or the Atticus Rainmakers program, please visit www.atticusonline.com or call 352-383-0490 or 888-644-0022.