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By J.D. Houvener
Patent Attorney and Founder

Hello out there and welcome to the Bold Warrior show. I’m your host JD Houvener with my co-host Matt Kulseth. Matt, how’s everyone doing?

Matt: Doing great. How are you guys doing?

JD: I’m here. I’m doing great. We’ve got our special guest here, Doug Bend from Bend Law Group. Doug, hello to you, sir.

Doug: Yeah, thank you for having me. You’re very welcome. This is awesome.

JD: So, we’re on video here, broadcasting across Facebook, LinkedIn, and YouTube. This is our new YouTube channel on the Bold Lawyer show. This is my effort to make a real, you know, hanging out there, tell everyone about what it’s like running a law firm. The audience here, I’m hoping, is going to be maybe some people that are in-house or at a larger firm or in-house or even still in law school, trying to get them interested in information that may not be as public about what it’s like running your own law firm, starting your own law firm, and all the ups and downs, challenges, and opportunities and fun things too that we can talk about. So, we’ll keep it pretty free-form here, and I want to give you the opportunity, Doug, to start it out if you don’t mind with a founder story. Can you share about what got you started toward owning your own law firm?

Doug: Sure, I’d be happy to share that. Every now and again, someone will tell me that I’m so brave for starting my own law firm, but the truth of it is, that’s not really what happened. I wish I could look back and say that it was due to me taking this big step without being pushed over the ledge, so to speak. But I started the firm in 2010, and I got laid off in 2010. I was applying to jobs; it was a downturn, no one was really hiring. While I was applying to jobs and not hearing back from anybody, I started to hear from friends, mostly friends of my brothers who went to business school, asking, “Hey, while you’re looking for work, do you mind doing some stuff for us on the side?” After a while, I started looking at the numbers and thought to myself, “Well, you know what? I’m not even marketing myself here. Maybe I should really go all in on this law firm idea and start my own law firm and see where it goes.” And that’s what I ended up doing. I started taking on clients in August of 2010, and by December 2010, that’s when I filed my business license to go ahead and start the firm officially.

JD: That’s awesome. Doug, I mean, we all came out of law school around the same time. I came out in 2011, very similar experience. I guess pain is a good motivator for me, right? So, I was doing Doc review right out of law school. I hated it. I was working until I was doing a night shift Doc review thing and then trying to hustle my business on the side. No, I give you a lot of credit. I think you are braver than you think you are.

Doug: Yes, of course, when forced.

JD: So, 2010, and so, I assume it wasn’t a team at that point. It was just you, is that right?

Doug: Yeah, it was just me. It started with a road trip. I got laid off; I live in San Francisco, work in San Francisco. Decided to clear my head and took a trip down Highway one for a few days and visited a friend, JD Levy, down in LA. He was a law school classmate of mine who had started his own law firm a couple of years prior to that. I said, “Levy, we’re having dinner. It seems so daunting to me for you to go out and start your own law firm. That just seems crazy to me that you would even do that.” I’ll never forget this conversation. I could almost picture the table where he said, “Doug, starting a law firm isn’t hard. You need an IOLTA account; you need a city business license. The hard part is getting clients. That’s the hard part. Hanging up your own shingle, that’s actually not that difficult. It’s getting enough clients who are going to trust you to do the work and who are going to pay you for the work in a way that’s going to be sustainable for you to have a healthy lifestyle.”

JD: It’s always that ramping up period. I had the luxury of having a day job as I started the practice. I was at Boeing, if you remember. Did you have something like that where you’re actually able to just have enough money to eat and pay the bills?

Doug: I really didn’t. I don’t come from a wealthy family. There was no trust fund. I had been at a big law firm, so I had saved a little bit of money to have a bit of cushion to get going, but there wasn’t a lot of cushion. This wasn’t something that could take years for me to figure out. I started kind of doing a few hours here and there and then started to look at the numbers, saying, “You know what? I’m not even marketing myself. I’m making two to three grand a month.” One nice thing about the law is that margins are good. Starting to think about really what would it take to make this a viable business. One thing that I like to chat with people about when they’re thinking about starting their own law firm is that the metric is very different for success than the metric at a big law firm. If you’re at a big law firm, they expect you to bill eight hours a day. If you’re not billing that, you may be asked to leave. When you have your own boutique law firm, if you’re able to keep your expenses in check, you can make good money billing two, maybe three hours a day. That’s easier said than done to get those two to three billable hours a day. There’s a lot of work that three billable hours a day. But if you run the math on it, if you do 48 weeks in a year, billing 12 to 15 hours a week at $300 an hour, and you’re keeping your expenses in check, you can make 100 grand just billing two to three hours a day, and taking a pretty good size multiplication of that per year. That’s cool, really good. Let’s talk about billable hours; that is still a foreign subject to me too. Start wherever you want in terms of the past 13 years of your firm.

Doug: Yeah, how do you do that effectively? Like you said, easier said than done to even get those two or three billable hours. What are some of the big golden nugget things that have helped you get to that level where you are able to bill consistently at that two to three hours per day? I think that, by half the work we do, is on a flat rate, about half the work we do is on a billable hourly rate. I think the first thing is taking a look and thinking about what types of services do you want to offer. Early on, I did some estate planning work, some probate work. I wasn’t sure if I wanted to do business law or if I wanted to do estate planning. I think there’s a lot of similarities in that; both areas of the law add a lot of value to the client, and that feels good to me. Figuring out what step one is, what area of the law do you want to practice. Just because you did something in a different law firm doesn’t mean you have to do that at your law firm. Maybe that’s a component of what you’re doing. The second step is, out of that scope of services, what things are conducive to flat rates, and what things are not conducive to flat rates.

So, for example, for us, a lot of contract negotiating isn’t conducive to a flat rate. I experimented with that early on, and you really run into two problems. Problem number one is a lot of clients treat it as an all-you-can-eat buffet. It’s a flat rate for reviewing and negotiating this contract. Maybe they ask you to have seven rounds of revisions, where if I was paying on an hourly basis, maybe there’s just two rounds of revision. People taking advantage of that. And two, negotiating contracts, a lot of that’s outside of your control. We have a very good idea how long it takes us to review that contract initially and to provide feedback, but we don’t know the other party. Are they going to sign off on revisions? More likely, there will be some back and forth. Is it one or two rounds? Is it three to five rounds? Because there’s so much variability there, we do that on an hourly basis. That’s just an example of types of work that maybe are more conducive to hourly work than flat fee work.

And then the last thing I’d say, I think I’ve learned anything, is that you don’t want to be the lowest-priced option that’s out there because you’ll attract a certain type of clientele that aren’t the best clients. It’s a race to the bottom. Early on, a mistake I made was that I had my rates set too low because early on, it’s all about breaking even. I need to make this much to live in San Francisco; it’s more expensive than other parts of the country, so I need to make this much. I just need it every month, trying to break even. Quoting myself too low sometimes in the hopes of signing that last project on the 28th of the month to put me over the hump. But I think what I’ve learned over time is that the best clients are willing to pay a fair market rate if you have great expertise, and those are the clients that you want. If they’re calling three different attorneys and one’s quoting a thousand, one’s quoting two thousand, and one’s quoting 300, they may look at the person with 300 like, “What’s wrong here? What are they not doing that needs to be done? What are they missing?” I may not go with the two thousand dollar attorney, but maybe I hired the thousand-dollar attorney because I want it done right. Making sure that you don’t undersell yourself; you should have fair market rates that reflect the level of experience you have and the value that you’re adding to the client.

Matt: Smart, Doug. So smart. That’s a lesson that I had to learn too, is that my services, my expertise, or lack thereof when I was younger, it’s important today, right? It’s worth something. I don’t fool around with clients who aren’t willing to pay a fair rate for the products and services anymore. I think really, one advantage of having your own practice is that you can experiment. When you work with another law firm, it’s very much, “Your hourly rate is $300; your associate’s is $400. This is what it is. Next year, you bump up a little bit higher, but this is what it is.” When it’s your own shop, you can set it at whatever you want to set it at, experiment with quoting different rates, and seeing what the conversion rate is. If you’re quoting 20% higher, but you’re signing up a few fewer people, maybe you’re netting more money for less work. I always found, for me, that whenever I raise our rates, we don’t do it that often, maybe annually we’ll take a look at it. But typically, when you raise our rates, our reaction isn’t like, “Oh, let’s backtrack, let’s go back to what we were before.” It’s, “Oh my goodness, people are still saying yes.” That’s something that I’ve discovered too, is that the market for legal services is pretty elastic. The clients that I work with and that I value, and who value me, if we increase our prices like we’ve had during the last couple of years, it doesn’t impact the retention rate or the sign-up rate for our clients. If anything, the firm’s able to make more income. Have you ever done that, Doug, where you actually charge more for the same service?

This is a private setting, right?

So, I have, and it’s usually a few different things. One of my favorite sayings to JD, we’ve talked about before, is don’t paint the red flags green. When you’re onboarding a new client, during the interview process, it should be more of an interview where they’re feeling you out, seeing if they want to work with you. You should be seeing if you want to work with them. If we’re seeing a lot of red flags, either referring that to another attorney that might be a better fit for that client or baking that into the pricing. Particularly, if it’s a flat rate, saying there’s a lot of wrinkles here, a lot of things are coming up. If this is on the initial call, who knows what else might be out there? Let’s make sure that the flat rate reflects this additional layer of complexity that this project is going to entail. That’s one example where a California LLC might cost X for one type of client and Y for a different type of client.

Over time, I have grandfathered in clients with older rates as I’ve increased my rates over time. Part of that is a thank you for them getting involved with me early on, and part of it, frankly, is an availability with my time. At this point, my book is pretty full in terms of the amount of work I do, and we have other attorneys at the firm. So, it’s to say, “Hey, I have a lot of experience, but I don’t have a lot of available time. If you really want to get that time and you’re a new client, there’s a bit of a premium there. We have other attorneys at the firm; they’re very capable of doing great work for you. Their rates are lower, maybe you want to work with them instead.” Kind of encourage clients to sign up with some of the other attorneys at the firm based on availability. Where the clients have been here for a while, their rates tend to be a little bit lower to reward them for getting in early on.

Matt: Oh, that’s really cool. What I thought you were going to say is for basically PITA (pain in the ass) clients, right? There’s a tax for that as a way to maybe usher them out, free up to the marketplace, charge them more. I’ve always said I would do that; I don’t think I’ve actually ever done that. Have you guys had the guts to do that? Yeah, would you recommend it?

Doug: For my clients that are fun and easy to work with, that have a good set of boundaries between us, those clients get first-class service and they get first-class rates. They get a good, reasonable rate. If you’re a client who’s texting me on the weekends and always in my ear or jumping on my calendar without prompting me, the next time we do business, I’m going to charge you more. That’s just it because I know that you need your handheld, and you’re a heavy user, and my participation is going to reflect that. I know a law firm here in San Francisco; they charge a premium for work that’s done on the weekend or after business hours if the client insists on it. If it’s, “Hey, if I’m deciding to log in on Saturday morning to do it because that’s when I have availability, they don’t charge more.” But if the client says, “This has to be done this weekend,” they charge a premium, and it’s a pretty hefty premium. I think part of that is the culture that they’re trying to build in their law firm, to be more of a balanced relationship with the client. If that client’s expectations really are that I expected to be picking up the phone at 1 pm on a Saturday for something that’s not a true emergency, maybe that firm’s not the best fit. They’re trying to build a culture where there’s a little more balance with their attorneys and the work that’s being done.

Matt: Interesting. Hey, Doug, I have a rule myself for the clients that I work with. My rule generally speaking is if I’m not talking to the owner of the company that I’m working for, that company is not a good fit for me. If they have a general counsel, that’s probably not for me. Why not?

Doug: I like to have a personal relationship with the business decision-maker. I find that that is really important. It kind of lubricates the process, and if I’m working between intermediaries, my efficient process just goes to pieces. I’ve learned that I like to work with companies where I’m talking to the owner or the decision-maker. If that’s not the case, then I got a referral for you, and it’s a bigger firm here in Minneapolis.

Matt: Okay. It reminds me a little bit of Tim Ferris’s four-hour workweek. One of his core principles is that 20% of your customers, clients, almost regardless of what business you’re in, create 80% of your headaches. Really, as a business owner, it’s to get rid of that 20% and really focus on the clients. Another 20% of clients give you 80% of the gain. I think there’s a lot to be said about that and really thinking about who’s a good fit for your firm and really if you’re a good fit for them long term.

Doug: Yeah, and I think that goes back to what JD and I do, which is flat fee too. We have a process in place that fits probably 80% of the clients that walk through the door, but the other 20% maybe doesn’t fit clean, and we’re not a good choice for that because we don’t bill by the hour. We bill on the project. So, something else we just did, this is fresh off the presses, we just implemented this. In our client service agreement, we’ve snuck in – we’ve added in our hourly rates even though everything we ever plan to do is going to be on a flat fee schedule. Because after, say, we file a provisional patent application, there can be a full year without any actual work being done. There’s not an open schedule, but oftentimes we’ll get pinged on our status. They pay what’s going on. I’m doing this with a manufacturer. Are we okay? Up until now, we have done that for free. No longer is that going to be the case. It’s either hourly or you have to pick a maintenance plan, we haven’t settled on the naming of it yet, but some sort of a plan where we’re going to be their routine retain counsel, and you’ve got to pay to have that representation during that lull or in between the flat fee schedules. What are your thoughts on that, Doug?

Doug: I think there’s a lot to be said about that. It’s all about fair billing. One of the nice things about a flat-rate project is a client knows what they’re paying going into that. I think a key on the lawyer’s side is to have a very specific list of exactly what’s included in that project. So, when it goes outside that scope of what’s included, it’s fair for both parties to say, “You hired us for X. You’re also now asking us to do Y. That’s not included within that original scope of services, so that would be extra.” As long as you’re transparent with the client, saying, “Just so you know, this is outside your flat rate, and we’d be billing you hourly for this. Do you still want me to get back to you on this analysis?” I think that’s perfectly okay. I think where clients get frustrated is when they get a bill that they don’t expect. No one likes getting an invoice they don’t expect. When they get an invoice at the end of the month that says, “Oh, I didn’t realize that you’d be billing me for this,” that’s where they get frustrated. I think sometimes it’s on the client. We send out hundreds of invoices a month, every month. There’s one or two where it’s like, “I’m surprised I got billed for this.” Often my reaction is, “Why are you surprised? You hired us. You retained us. You pay pass invoices, and I’m not doing this for fun. This is what I do for a living.” Sometimes you think it’s on the client, their expectations. But sometimes, as an attorney, particularly the scope of a flat rate project, let them know that these are really what you hired me to do for that flat rate. Happy to help you out with this other item, but that would be additional. Do you want me to move forward?

Matt: That’s really good. One thing that Megan, at our firm, she’s our CEO, is that we have that ability to charge, but we also have that ability to say, “You know what, you’re just checking in for the status. Don’t worry about it.” It’s on the house. It’s sort of that extra benefit of waiving that of what we could have charged. I think maybe even the biggest leverage to just show you’re doing right by the clients. But for those helicopter clients, those 20% you’re trying to kick out, they’re getting a bill. What I really try to do is I think an invoice is many things. One of the books I read about practice management really emphasized that an invoice can also be a marketing document, which is a lot of times people don’t think about it that way. Taking that extra 30 seconds when you write off time to put that on the invoice – 0.1 hours wrote back to the client, wrote off 0.1 hours – I think what that shows is that invoice is much more likely to be paid when they’ve seen that you’ve already written time off for them, working on a project. I almost view it as marketing time, taking that extra step, the additional entry into the invoice. The client can see when we’ve written out any time off.

Matt: Oh my gosh, okay. I’m writing that one down now. Lawyers, we’re just scratching the surface.

Okay, well, let’s fast forward. Let’s talk about your firm – Bend Law Group. Tell us about your firm and the attorneys, you know, what you guys are currently doing and what’s your business plan.

Sure. So, we serve as outside general counsel for entrepreneurs. We’re based in San Francisco. Our clients are mostly in the Bay Area, but we have clients around the country and around the world. We help set up over 50 new companies a year, a lot of contract drafting, negotiating, raising capital, some buying and selling companies. We also have a couple of litigators on staff. So, there are six full-time attorneys at the firm. It started with myself initially as the only attorney. I hired my first W-2 employee in 2013. Since then, every few years, we’ve added someone on as the growth of the firm has indicated that maybe we have enough volume work there to support it.

Oh, that’s awesome. Good for you. What have you found to be the top few things that have helped you to grow?

Well, I think a lot of it is, you know, it just takes time. Time, and I think when you start a law firm, it’s frustrating. I probably like this analogy because I’m from Nebraska originally, but I view it very much like farming. You plant a lot of seeds, and some of those seeds take a while to grow and to mature into great referral partners and great clients. When you’re getting started in the law firm, it’s frustrating. You’re out there doing all these things, and sometimes it just takes time for those to turn into actual close business. So, someone can like you a lot and want to send you business, but it may take a few months for that right lead to come up for them.

So, I think it’s easier said than done, but I think patience, especially on the early side, until really fostering those relationships. Recognizing who is likely to send you business, and you figure that out by asking other attorneys that are in your area, meeting with attorneys that do similar lines of work, and asking them who sends you business. For me, one of the answers I was expecting, one of the answers I wasn’t expecting, the answer I was expecting was other attorneys send business. Attorneys work, shocking. The answer that was surprising to me was CPAs. CPAs send a lot of work to business attorneys, and a lot of it is because of two reasons. One, they’re trusted people. You’re showing your CPA all your financials. They know a lot about you. So, they often trust that person. When there’s an introduction from a CPA, the conversion rates are very high. That trust often transfers.

And then, for the kind of work that we do, a lot of entity formation work, that’s often very tax-driven with setting up S Corps, particularly with SaaS providers. But I found that out by talking to other business transactional attorneys about who sends them work. So, I think Step One is identifying who your ideal referral partners are. Step Two is figuring out a way to add value back to them. If somebody is sending you five leads a year and you’re not doing anything that helps them back in some way or at least showing that you appreciate what they’re doing, they’re going to find someone else who does at some point. So, I think it’s being proactive and thinking about ways you can maybe generate some business for them. Or if you’re going to a networking event, ask them if they’d like to attend, especially if it’s a thing that they might be interested in, or if they like wine or baseball tickets, you know, comping them some wine or baseball tickets. Now, again, but at the very least, sending them a thank-you note, saying thank you, particularly a handwritten thank you. I appreciate your trust. I appreciate you introducing me to this person. I’m going to do everything that I can to help them out.

Oh my gosh, Doug. By the way, thank you for the referrals you sent me this year. The wine – I also looked at baseball tickets. What kind of wine do you like?

Okay, this is really good. I mean, if you’re sending work to other people, do you send a good referral fee for that? Are you a very select group of attorneys?

California’s minority rule state, and you can refer work and get a commission from it to other attorneys, as long as that other attorney doesn’t charge anything more to the client. And as long as they disclose it to the client. So, it’s really only – that’s probably less than half a dozen attorneys that we’re already referring a lot of business back and forth that have asked for that. And they asked for something that we’re certainly open to. But number one, the quality of work has to be very high because it’s a reflection on us, the kind of work that they do. So, it really has to be someone that we’ve gotten to know over a period of time.

And I think, you know, with that, a big surprise for me is that I was worried when I did it for the first time. I was afraid the client would think, “Is Doug referring me to this person because they do great work or because he’s getting a cut of the business?” And that really hasn’t been the case. I think a lot of – we work with a lot of business owners. I think a lot of them recognize that there’s real value in closed business when you send it to somebody else. Particularly if they’re working with an attorney that they really love that we facilitated that introduction.

Yeah, yeah. I feel the same way about that. I don’t see any problem with it. You know, if it’s a relationship you’ve had for a long time that you feel is really important, integral to your business, your client’s business, and as long as it’s transparent to the client. And I’ve never – I’ve never, in 12 years of practice, I’ve never had a client once mention an in-house or relationship or like a referral fee or anything like that. They just see it, and they’re like, “Okay, I get it.” Right? Yeah, it’s like us attorneys are thinking about it 10 times more than the client is. We’re trying to analyze it from different angles, right?

Of course, we are because we have to. You know, we have a code of ethics, and it’s important that we’re actually transparent. And unlike a lot of professions who can do stuff on the slide, which is great, which is how I’d like to operate anyway. But yeah, we want to do right by our clients. So, that becomes part of the analysis.

Doug, I have a little bit of inside baseball knowledge about Lether. And how you track – you talked a lot in terms of tracking your referral sources. Can you share with us how you keep track of that?

Yeah, up until recently, it was just in my head, which is a horrible system. If this person seems to be someone who sends me a lot of business, I should make a better effort of sending them work back. And really, in the last two or three months, we’ve started to integrate Clio Grow into our practice. One of the things that we like about Clio Grow is that you indicate on the intake form who not just an attorney, such as a business, but who sent you business. Yes, you have reports that you can run. We can see who’s sending the most leads six months a year. Not only the most leads, what’s their conversion percentage? And so, are they sending me leads, are they sending me garbage? Sorry, still appreciate it. But who is sending me the best leads? And also, the average price on the lead. So, you can say who sends me the highest value leads, averages out 10,000, 50,000. Who are the people that should be really taken out to dinner, making sure I’m adding value back to them in their lives and hopefully, keep those leads coming.

Doug, yes, Clio Grow, game-changer for me because I do the exact same thing, right? I track every client matter that comes through the door. And with Clio Grow, who it comes from, if I have a referral arrangement with them, what percentage they’re going to get. It makes things amazing and makes writing those thank-you notes at the end of the year, the Christmas cards, you know, that much easier too. It’s pretty cool. Okay, gold. I got to put it down. We’re stuck in some other world. Yeah, Genie, we have to do Clio Grow. We have to do it. It’s incredible. This is the first time I’ve heard it from you now, Doug. And Matt’s been raving about it for some. So, Clio Manage, I hate Clio Manage. Clio Grow, that’s the sauce.

Okay, so, last couple of minutes here, Doug. Anything you wanted to share, anything top of mind, you know, coming into the show, let’s, you know, anything you want to say to a budding attorney that’s looking to hang their own shingle, perhaps?

I’ll say that the first year is the hardest. It’s hard for a number of reasons. One of the reasons it’s hard is that there’s a lot of things that you have to do that you’re not making any money off of or you’re spending money on – websites, business cards, you know, getting a work email account. So, you’re putting all this effort in planting all those seeds and waiting for them to grow. I think the first year is very challenging to start your own law practice. But if you can make it work long-term, I think that there’s a lot of unhappiness in the practice of law. This is an area that you can really have some better work-life balance. You know, and I work hard. I have a lot of flexibility in when I work. You know, my kid gets off to summer camp at three o’clock. I can go pick them up. It might mean I’m working a little bit later, you know, to make up for that time. If I’m in a big law firm, that’d be much more difficult to do that, right? So, I think I look at starting your law firm as an investment and perhaps having a more work-life balance. And long-term, it’s amazing.

Doug, thank you for that. Thank you for that. You’re – thank you for being on. A pleasure. Thank you for having me. Appreciate it. Maz, thank you for co-hosting. And for the Bold Lawyer Show, we’re out. We’ll see you next week, Tuesday at 2:30 Pacific. Take care, buddy.

About the Author
J.D. Houvener is a Registered USPTO Patent Attorney who has a strong interest in helping entrepreneurs and businesses thrive. J.D. leverages his technical background in engineering and experience in the aerospace industry to provide businesses with a unique perspective on their patent needs. He works with clients who are serious about investing in their intellectual assets and provides counsel on how to capitalize their patents in the market. If you have any questions regarding this article or patents in general, consider contacting J.D. at https://boldip.com/contact/