There is much written that Big Law. and traditional law firms in general, are more effective because they apply leverage to increase partner income. They employ associates (at various ratios) and staff, such as paralegals, assistants and secretaries, to leverage the work, billable hours, and collections per partner. But, what is not true is that Third Wave attorneys, work at home attorneys, carpet commuters, spare room tycoons, and solo practitioners do not apply leverage. In fact, I would argue, they apply a better set of leverage and a more economical type of leverage than does the Second Wave law firm.
First, you have to understand that the leverage a Second Wave or traditional law firm typically applies is expensive leverage. It costs a lot. The associates, the staff for the partners and the associates, the office space required, the marketing to bring in an ever increasing amount of business, the complicated technology that must be employed so all of these moving parts may communicate with each other, keep time, and collect fees is enormously costly.
Sure you can divide all of the cash flow evenly among all of the partners to show the cash generated per partner. However, is that not like putting Bill Gates in a room with six homeless, down on their luck, guys. Certainly, you can theoretically divide his wealth amount he seven in the room and say there are 7 billionaires present. But, in reality, you still have Bill Gates and 7 homeless people. My point is that the math is just silly.
The Third Wave attorney eliminates almost all of this infrastructure costs, and then, if the attorney is smart, he or she leverages in two ways.
One, the attorney leverages with the use of cheap technologies. Skype, automated attendants, Basecamp or other cheap extranet sites, Quickbooks or other cheap online bookkeeping software, and plain old Microsoft Excel and mail merge will do in most instances. And, the former and the latter are essentially FREE. But, what all of it does is allow the lawyer to leverage what he or she can do quickly, and effectively.
Two, is collaboration. This can be one of two ways, or both ways. First, the attorney can employ virtual assistance that only charge when they are actually working on a project. In short, it is a cost the attorney can or should be able to pass on to the client, and when there is no such client or need it costs the attorney no money.
Second, is collaboration with other attorneys for a mere percent of the fee or recovery. The attorneys can break up the case or cases into their essential parts and work on them together, or they can divide cases out. It does not really matter, but they can do this without ever employing staff, or sharing office space, or equipment, or anything else other than a duty to help each other help clients.
In the instance of a traditional law firm, leverage can become more of a steep treadmill on which it is difficult to continue. In the Third Wave firm leverage is exactly that. It boosts you, as the lawyer, to do more, to bill more, to collect more without ever taking anything away from the effort. Not to mention that staff and attorneys create management headaches in and off themselves. Management headaches means time wasted that you cannot recoup. If you do try and recoup such costs it makes you less competitive. This is not leverage. This does not represent leverage. This represents a loss, a hindrance, a set back, a drawback, and all of this should be disfavored.
So when Big Law or a traditional law firm lawyer talks to you about the advantages of leverage. Ask him or her what advantage? Tell him or her that all you see is liability, debt and losses, and that is not leverage. That is the opposite of leverage.
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