Most consumer oriented law practices have a big problem. Lawyers who practice family law, bankruptcy, criminal defense, estate planning, personal injury, real estate, and other areas, have a preponderance of "one time" clients. Once the initial case or engagement is completed, the attorney gets no additional revenue, or at best, very little.

The problem is worsening. It costs more to bring in a new client today, and overhead and manpower expenses to service those clients are also higher. But clients aren't willing to pay more, and they don't have to. With more lawyers competing for the same clients, clients have more options.

I just spoke to an attorney who is spending $13,000 a month on yellow pages. The good news is that her ads bring in a lot of new clients. The bad news is that she loses money on every one.

The solution to this problem is for attorneys to develop their "back end"–services and other profitable initiatives they can offer their clients after the initial engagement.

In any business, most of the profits are made on the back end. There is a cost to acquire a new customer, and while it is hoped that this can be done at a profit, it's not required. So long as the business can make enough profit after the initial sale, if the back end is big enough, most businesses are willing to lose money on the front end.

How can an attorney develop a back end?

Some attorneys are branching out into new practice areas. So the bankruptcy lawyer who sees a downturn in new clients starts offering family law or estate planning services. The problem with this is that it makes it much harder to get referrals from family law and estate planning attorneys with whom you are now competing. It's also more difficult to market a general practice than a specialized one.

Instead of taking on new practice areas, here are two things an attorney can do to develop a back end:

1. Expand and systematize referrals. Focus on getting more referrals, better referrals, and more frequent referrals from your clients. In this way, each client you bring in on the front end represents more profits on the back end. If you spend $1000 to bring in a new client who pays you $1000 on the front end, but you earn an average of $3000 from their back-end referrals, you can afford to bring in as many "break even" clients as possible. You can even lose money on the front end.
2. Market the services of other lawyers to your clients. Instead of you taking on a new practice area, associate with other attorneys who are specialists in those areas and offer their services to your clients in return for a share of the fees (if ethically permissible) or in exchange for marketing your services to their clients. (You aren't limited to working with other attorneys; you can also market the services of other professionals and businesses.)

A key number every attorney must know is the "lifetime value" of a new client. This includes the value of their repeat business, their referrals, and other revenue derived as a result of having them on your list. Take some time to determine this number and then work on increasing it.

"Besides the noble art of getting things done, there is the noble art of leaving things undone. The wisdom of life consists in the elimination of nonessentials." -Lin Yutang, writer and translator (1895-1976)

Last night, I spoke at an event. One of the topics I talked about was "The 80/20 principle," aka, "The Pareto Principle," the idea that a large percentage of our results come from a small percentage of our activities.

Afterwards, I was chatting with a man who works for a bankruptcy attorney. He liked my talk and was telling me about their practice and how busy they were. He quoted something his employer said, but I wasn't sure I'd heard him correctly so I asked him to repeat it:

"It's the cases I don't take that make me money".

He explained that the attorney was very selective about the cases he accepts. A lot of business comes knocking on his door, but he turns down a large percentage. He turns down the lower-end of the spectrum of clients, the ones who don't have enough for a retainer, who need installments, price shoppers, etc., in favor of those who can pay his higher than average fees.

A lot of attorneys will take the lower-end clients, figuring that whatever they pay will contribute to overhead. But this attorney understands that those clients would actually cost him money, and not just in the literal sense of "not paying," but because they would take up a disproportionate amount of time and energy.

And, he doesn't have the extra overhead he would have if he accepted the lower end clients.

By eliminating as much as eighty percent of the possible client pool, he is able to run a lean and profitable practice. I'm sure he also makes it home for dinner.

When I opened my own office shortly after law school, I had an abundance of free time and a lack of clients or experience. Once or twice a week, I volunteered the day at a legal clinic for women. The clients had mostly domestic violence and other family law issues. When I began, I knew very little about family law but I quickly learned. I was able to use those skills in my private practice.

Last week was "pro bono" week. This article presents the "Top 5 Reasons to Do Pro Bono Work". I'm sure I can lay claim to all five. The article misses a reason, however. My pro bono work helped me to build my practice.

The clinic I worked at allowed us to offer our paid services to the clients. Granted, most of them had little or no money, but I did get some paying work. And little or nothing was definitely better than nothing. It allowed my nascent practice to stay afloat, which allowed me to continue to volunteer.

I also got some referrals from those clients. Yes, most of them were in the same financial shape as the clients who referred them, but not all of them.

I was also able to network with the administrators of the clinic, their benefactors, and the other attorneys who volunteered. I met people who introduced me to others and as my network grew, so did my practice.

I'm not ashamed to admit that growing my practice was one of the reasons I volunteered at the legal clinic. I don't think any of the hundreds of clients I saw for free or almost free would have any objections.

The success of Legal Zoom, the online legal forms service which advertises heavily on the web and on talk radio, has apparently demonstrated that there is money to made in the low end of the legal services industry. Wherever you find money, you're sure to find Google, which recently invested in Rocket Lawyer, the newest contender in this growing market.

What does this mean for your practice?

For most lawyers, the answer is "not much". Online legal services are still small relative to the size of the market and inasmuch as they primarily provide forms and access to inexpensive legal advice, provide no direct competition. Unless of course your practice targets the same lower end of the market and in today's economic climate, more and more attorneys are doing just that.

I don't have a crystal ball but here are a few of my predictions:

• No matter what the economy does, the online legal services industry will continue to grow and continue to take business from attorneys who offer commodity-level services to consumers and small businesses.
• Attorneys who continue to target the low end will find it harder to compete with the simplicity, speed, and lower costs available online.
• The attorneys who survive this trend will be those who (a) abandon this market altogether, in favor of higher level services (e.g, "asset protection" vs. "simple Wills") or offer services where the hands-on advice and ongoing involvement of an attorney is mandated, or (b) get very good, and very creative, at marketing and finding under-served niche markets where they can carve out market share.
• The growth of online legal services will expand the overall legal services marketplace, ultimately leading to more work for all attorneys. How that work is distributed and at what price points is the multi-billion dollar question.

Never fear competition. Embrace it, learn from it, prepare for it. Competition will make you a better attorney and, in the end, make you more money.

Lawyers haven't always billed by the hour. In fact, it wasn't that long ago that fixed fee schedules were mandatory in some states. Legal fees were regulated by state bar associations and everyone was required to charge the same amount for the same service.

Today, hourly billing is the norm but many attorneys advocate alternative fee arrangements. I'm one of them.

When you equate what you do with the amount of time it takes to do it you put artificial limits on your value, and your income. In contrast to the oft-quoted statement, lawyers have far more to sell than their time.

We sell our experience, our creativity, and our problem-solving abilities. We do more than write documents, argue, or negotiate, we save lives and preserve fortunes. We help the free world stay free.

Clients prefer fixed fees, too. They want to know how much it's going to cost them to hire you. They want to know they won't be giving you a blank check. Lawyers who offer alternatives to hourly billing are thriving.

Not everyone agrees. Some lawyers defend hourly billing. Maybe their clients are different.

I'm not an expert on alternative billing models, but I do know that the world's highest paid attorneys, the ones who earn the equivalent of thousands of dollars per hour of work, don't charge by the hour. Not if they're honest, anyway.

Attorneys can begin to earn more (without working more) by embracing the idea that they have far more to sell than their time.

I'd like to hear from you. Do you use alternative fee arrangements? If not, why not? If so, how have you benefited?

Attorneys are creatures of conformity. They don't want to stand out from the crowd. Think about it–don't most attorneys offer essentially the same services at the same "prices"?

A small group of attorneys, perhaps five to twenty percent in any given market, earn a lot more than other attorneys with similar experience.

Why?

The world's highest paid attorneys aren't conformists. They think and act differently. They don't offer the same services, at least not so you can tell.

Among other things, the world's highest paid attorneys

• Eschew the "average" client, in favor of their "ideal" client, the ones who can and will pay more
• Package their services differently; you can't compare their "apples" to your "oranges"
• Bill differently; they don't have trouble getting money from their clients (and not just because their clients have money)

The world's highest paid attorneys may or may not have better skills than other attorneys, or get better results. But they definitely think and act differently. Today, "The Attorney Marketing Center" released a new audio program that reveals those differences.

"Cash Flow for Attorneys: How to Earn More Without Working More," is for attorneys who want to break out of the mold of the average but don't know how. Or they know how but need a shove in the right direction.

"Too many attorneys have clients but aren't making any money," said David Ward, the program's author. "Gross income is one thing, but we pay our mortgages with net income. For many attorneys today, net income is running a bit thin."

"Cash Flow" is also for the attorney who is overwhelmed with work and wants time freedom. "They live at the office or in court or in the car and they miss their kids. They also want to earn more without working more," Ward said.

"Cash Flow for Attorneys" is a 3.5 hour audio program and is available for instant download.

Last week's poll provided some interesting results. The numbers themselves were as predicted–most who responded said their income and/or number of new clients was down. You can see the results and add your vote if you'd like–the poll is still open.

There were some comments suggesting that attorneys are adapting to the current economic situation by taking on new practice areas.  How about you? If your income has suffered, what are you doing about it? If you're doing better now than in the past, how did you go about it?

Please take this new poll to share with our readers what you are doing to increase your income. Feel free to add your comments as well.

How has the economy affected your law practice?

If you practice real estate law, the last couple of years have probably been rough. On the other hand, some real estate lawyers are reinventing their practices and appear to be thriving. The economy has been good to them.

I believe that while some lawyers are doing better in this economy, most lawyers are not. Most are treading water and more than a few are going under.

To me, this is obvious. There are fewer (paying) clients and fewer jobs for lawyers. This morning I read an article about a law student who looked at the job market and asked the dean of his law school for a refund. I previously noted a law school graduate who sued his law school for misrepresenting his prospects for a job.

So, are things better or worse for you? Are you hanging in there or hanging by a thread? Please answer by responding to this (anonymous) poll:

Discounts can be tricky for professionals. They should be offered only occasionally, if at all. (I prefer freebies.) There's no doubt that discounts can generate a lot of business in a short period of time, but they can also damage the perceived value of your services (or your professionalism) if done too frequently or too aggressively.

I suggest you choose a charity or cause that you truly believe in, ideally, one about which you have a personal story to tell. Your personal connection to their cause will not only reinforce your "reason" for your discount, it should result in a higher response to your offer.

Most attorneys don't charge enough. There are several reasons:

• They try to match their rates to what other lawyers are charging, so they can "stay competitive"
• They believe they will get more clients by offering rates somewhat lower than other attorneys
• They haven't factored in the costs of overhead or inflation
• They start out low and are afraid that if they raise their rates they'll lose clients

Here's reality: the best clients don't shop around for the lowest priced attorney, and you don't want the ones who do. Don't compete on price. You'll attract the worst clients, and besides, there will always be someone who charges less than you, and that's a slippery slope leading to bankruptcy.

The best clients — the ones who return again and again and refer others — understand that you get what you pay for. In fact, if you charge less than most other attorneys, you'll actually make your clients nervous. What would you think if you found out that the doctor who was about to operate on your brain charged much less than other surgeons. Wouldn't you want to know why?

Low fees will often lead to fewer clients, not more. You don't want a reputation for being "low priced". Instead, you want clients to think of you as "charging top dollar but worth every penny." In this way, you get the better clients and maximize your revenues and profits.

I recommend that you regularly review your fee structure so that you at least stay in the upper third of fees in your area. You don't have to be the most expensive in town to get the best clients (although that may be an effective strategy), but you do want to be among that group.

Will you lose some clients as you raise your rates? Yes, but far fewer than you might imagine, and the revenue lost will be more than compensated for by the gains from remaining clients.

And, you may find that by raising your rates, demand for your services increases. More clients at higher rates? That would be okay, wouldn't it?