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How much good does it really do to shave overhead?

samgloversamglover Minneapolis, MN Admin
This is what I wrote for the Lawyerist Insider today. If you missed it, sign up for our weekly newsletter so you don't miss the next one.

There is a section in The E-Myth Revisited (which every business owner should read) discussing overhead — that is, the expenses you must incur to keep your business running. The author recalls planning a consulting business to help enterprises shave overhead. His initial research looks promising — Company X could save $1 million a year by using refurbished toner cartridges instead of new! — until he realized that the savings were so small as to be not worth the time it would take to make the changes necessary to save the money.

I think solo and small-firm lawyers may place undue emphasis on this sort of cost savings. Sure, going with an e-fax service saves money (for me, it was something like $60/month). But look at the big picture. Saving $720 a year is great, but if $720 will make or break your firm, you have got bigger problems. $720 should not be enough to matter.

The same thing works in reverse. Let's say you would like to be able to scan documents, but you just aren't sure you want to spend around $430 on a ScanSnap. Why the hell not? If $430 will be a hardship for you, your firm is in trouble. What if that were the price of a deposition transcript in a contingent-fee case? If you need it, you spend the money.

All this is to say that I think we (especially when we are just starting our firms) sometimes over-sweat the small stuff. Neither saving $720 with an e-fax nor getting a ScanSnap should be a big decision. Will it improve your practice and increase the level of client service you can provide? If yes, do it. If not, don't worry about it. You are wasting time worrying when you ought to be working.

Comments

  • I agree with you for the more seasoned solo; new lawyers in debt may not be able to make the type of small investments that are needed to improve their practices. Also, there are some people who could justify any purchase as an "investment" in their practices. But overall, the lawyers who can not seem to cough up $420 for a Scansnap make me do a big eye-roll.
  • samgloversamglover Minneapolis, MN Admin
    I know. I was trying to channel you when I wrote this. It's something you've said many times, and that you are absolutely right about.

    Many lawyers are strangely reluctant to spend the money it takes to succeed. You're right that this is harder for a new lawyer, but even then, you have to get what you need, even if you go with the cheap stuff to start with.
  • I disagree. I go through a cost benefit analysis of every purchase. Look around your office and see how much stuff/services you have purchased that are not being used or are prematurely obsolete. These things add up. Kinda like a few extra calories a day adding up to a bloated waistline over time.
  • If you buy a $5 lunch every day, that adds up quickly over the course of a year.

    Purchases should be carefully calculated, but don't be stingy. Buy the best, cry once.
  • samgloversamglover Minneapolis, MN Admin
    jflora1 said:

    I disagree.

    No you don't. The point of my post is that lawyers should start doing a cost-benefit analysis and buy things when it makes sense, instead of agonizing over "expensive" things and obsessing over saving insignificant amounts.
  • Yup. Unfortunately people are sometimes slow to understand that their paid time spent thinking or bickering is worth more than the savings they make. If they actually do, that is.
  • samglover said:

    jflora1 said:

    I disagree.

    No you don't. The point of my post is that lawyers should start doing a cost-benefit analysis and buy things when it makes sense, instead of agonizing over "expensive" things and obsessing over saving insignificant amounts.
    Yes, I do. Lawyers always sweat the small stuff or they find themselves on the receiving end of a malpractice suit. Running your own business should be no different.
  • The issue is not cost, but value. If the product will save you hours worth of work and you have the money, it is worth purchasing. However, if it is a one-time need, then it probably isn't worth purchasing. Ask yourself what you will do with it and how it will help your practice.

    Spending $400-$500 for a scanner pained me in the beginning of my practice, but I did it anyway. The Scansnap made life easier. I am glad that I spent the money. I was looking for certain functions (like duplexing) that other scanners didn't do for the same price). The alternative was to get something for the here and now only to have buy another one a short time down the road. That would have been a waste of money.

    The point is to do a cost benefit analysis and don't just get something because you can. Also, don't forgo something that you need just because of the price. Watch how you spend and you will be fine.
  • Agreed. My firm subleases two offices to another firm, and I recently had a conversation with one of the attorneys about hiring a courier to file a document in another courthouse. She was concerned about charging that to the client. The courier costs $40, the round-trip to and from the courthouse was 2 hours, which would have been $400 in billable time...why was this a conversation?

    Likewise, when I mentioned buying a standalone scanner, like the 3 ScanSnaps that my firm has, she asked why her all-in-one wasn't sufficient. Well, sure it is, for a 1-2 page document. But you're trying to scan a 30-page discovery response and it's taking almost 10 minutes to do it. Surely there's a better use for your time. And given that you use efax, and therefore use a scanner on a DAILY basis for faxing, how does this not make sense?

    I think it falls under the general umbrella of penny-wise, pound-foolish. But I've also learned not to spend my time (billable or otherwise) trying to assist those who persist in their agonizing.
  • samgloversamglover Minneapolis, MN Admin
    edited March 2013
    ASJackson said:

    penny-wise, pound-foolish

    I could not remember this expression for the life of me when I was working on this post, but that is exactly it.
  • It was a happy day in my practice when I found out that for less than $10 I could have a messenger pick up a package 3 blocks away that would have taken me at least 15 minutes roundtrip.
  • Sam,

    I agree very strongly with your major thesis that lawyers tend to overthink things and end up losing time and money trying to save pennies. That is especially true of one-time expenses such as a dedicated scanner or Adobe Acrobat. If you can't afford $400, you're in trouble.

    I would only add, however, that recurring costs have to be shaved whenever possible. I recently called my ISP/phone provider and knocked $90 off my monthly bill, and also knocked $100 off my cell phone bill. Note that both of these were already competitively priced before the cuts. I actually got faster Internet speed and more minutes. I shopped around for malpractice insurance and general liability insurance for my office and saved some money there as well.

    Yeah, and use messengers and attorney services. There's no point in filing stuff yourself when you can have the process server company do it for $20 bucks that you pass along to the client.

    William
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