Myths and realities of budgeting

By Edward Poll Dolan Media Newswires BOSTON, MA -- One of the most important factors in getting paid is establishing a budget before beginning an engagement. Budgets ensure greater productivity and cost effectiveness for both sides, show clients that you are sensitive to their needs, and reinforce that the firm provides value and not just an hourly block of time. In turn, you significantly increase the chances of collecting your fee because the client understands what to expect in terms of events, money and time and agrees to the process you've outlined. Unfortunately, lawyers too often tend to dismiss the importance or even the practicality of preparing a budget. Typically there are three reasons for this: 1) Lawyers believe that providing their services depends on too many variables that can't be anticipated; for example, what motions opposing counsel will file or what problems might emerge in due diligence. 2) Lawyers want to excel at what they do, whether it's negotiating a deal, drafting a contract or litigating. They don't want their quality of services to be constrained by budget limitations. 3) Lawyers, to some extent, fear that budgeting a matter is merely an attempt on the client's part to reduce the fees that they are willing to pay. Such concerns are myths. The budget process means getting as much information as possible from the client about goals and expectations. Information should cover parties, issues, anticipated strategies and desired outcomes. Understanding the client's objectives will define the two crucial budget parameters: Time: Use common sense, be realistic and communicate accurately about the amount of time it will take to complete any work. Err on the side of caution and be sure to build in more than adequate time. Unless you are dealing with statutory or deal-making deadlines, the client is less concerned with exact time and more concerned about being hit by surprises. Money: Clients should have in mind how much money they want to spend to resolve a problem, just as they know what they want to spend on a piece of equipment. In either case, a higher initial cost may be acceptable if the long-term return on investment justifies it. Sometimes a legal problem is large enough that spending big sums on it is warranted. Most issues, however, involve everyday costs of doing business. It makes no sense to budget spending $2 million to try a case if a $100,000 settlement will meet the client's objectives. Because lawyer and client will each have unique information at any given time, they must be in constant communication about developments to keep the budget on track. The budget document should be periodically reviewed, with the client being told how much they have already spent and being asked to approve any necessary changes. That provides a benchmark for the firm's work as it is completed and billed. A bill that describes promises made and kept, complete with examples of value and service as defined by both parties in the budget, eliminates ''sticker shock'' and helps to ensure that the client will pay promptly. Attorney Edward Poll is a speaker, author and board-approved coach to the legal profession. Readers with questions for the Coach's Corner should e-mail edpoll@lawbiz.com or call (800) 837-5880. Also visit his interactive community for lawyers at www.LawBiz Forum.com. Entire contents copyrighted © 2010 by Dolan Media Company. All rights reserved. Reproduction in whole or in part without written permission is expressly forbidden. 222 S. 9th St., Suite 2300 | minneapolis, mn 55402 by Edward Poll Dolan Media Newswires BOSTON, MA -- One of the most important factors in getting paid is establishing a budget before beginning an engagement. Budgets ensure greater productivity and cost effectiveness for both sides, show clients that you are sensitive to their needs, and reinforce that the firm provides value and not just an hourly block of time. In turn, you significantly increase the chances of collecting your fee because the client understands what to expect in terms of events, money and time and agrees to the process you've outlined. Unfortunately, lawyers too often tend to dismiss the importance or even the practicality of preparing a budget. Typically there are three reasons for this: 1) Lawyers believe that providing their services depends on too many variables that can't be anticipated; for example, what motions opposing counsel will file or what problems might emerge in due diligence. 2) Lawyers want to excel at what they do, whether it's negotiating a deal, drafting a contract or litigating. They don't want their quality of services to be constrained by budget limitations. 3) Lawyers, to some extent, fear that budgeting a matter is merely an attempt on the client's part to reduce the fees that they are willing to pay. Such concerns are myths. The budget process means getting as much information as possible from the client about goals and expectations. Information should cover parties, issues, anticipated strategies and desired outcomes. Understanding the client's objectives will define the two crucial budget parameters: Time Use common sense, be realistic and communicate accurately about the amount of time it will take to complete any work. Err on the side of caution and be sure to build in more than adequate time. Unless you are dealing with statutory or deal-making deadlines, the client is less concerned with exact time and more concerned about being hit by surprises. Money Clients should have in mind how much money they want to spend to resolve a problem, just as they know what they want to spend on a piece of equipment. In either case, a higher initial cost may be acceptable if the long-term return on investment justifies it. Sometimes a legal problem is large enough that spending big sums on it is warranted. Most issues, however, involve everyday costs of doing business. It makes no sense to budget spending $2 million to try a case if a $100,000 settlement will meet the client's objectives. Because lawyer and client will each have unique information at any given time, they must be in constant communication about developments to keep the budget on track. The budget document should be periodically reviewed, with the client being told how much they have already spent and being asked to approve any necessary changes. That provides a benchmark for the firm's work as it is completed and billed. A bill that describes promises made and kept, complete with examples of value and service as defined by both parties in the budget, eliminates ''sticker shock'' and helps to ensure that the client will pay promptly. Attorney Edward Poll is a speaker, author and board-approved coach to the legal profession. Readers with questions for the Coach's Corner should e-mail edpoll@lawbiz.com or call (800) 837-5880. Also visit his interactive community for lawyers at www.LawBizForum.com. Entire contents copyrighted © 2010 by Dolan Media Company. All rights reserved. Reproduction in whole or in part without written permission is expressly forbidden. Published: Thu, Aug 12, 2010

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