Solo and Small Law Firm - COST RECOVERY

This research was intended to gather information to better understand current cost recovery practices and challenges in small law firms.
The objectives of the research were to:
– Identify which components of cost recovery costs are recovered
– Understand which costs are not recovered
– Determine who at the firm is involved in the recovery process
– Identify tools and products used to recover online research costs
– Discover what aspects of the cost recovery process are difficult
2

th,
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ONLINE LEGAL RESEARCH SUBSCRIPTION SERVICES
2/3 of respondents subscribe to Westlaw or Lexis
Westlaw 42%
66%
Lexis 24%
FastCase 5%
Loislaw 4%
CaseMaker 3%
Other
None/Don't know
11%
28%
1/4 do not subscribe to
OLR services
10% 15% 20% 25% 30% 35% 40% 45% 50% 0% 5% n=582
To which paid legal research services does your firm subscribe?
5

1/2 of respondents attempt to recover all or part of their online legal research costs
No,
50%
Yes,
50% n=417
Does your firm attempt to recover online research related costs by billing all or part of it back to clients?
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COST RECOVERY PRACTICED
Nearly 1/2 review costs on client by client basis, while 1/4 attempt to bill back all costs to clients
We review costs on a client by client basis and write-off those costs we believe should not be billed to the client
45%
We attempt to bill back all costs to the client
26%
We usually only bill-back extraordinary expenses to our clients
21%
Other 9%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% n=209
Base = those who attempt to recover online research costs
Which statement best describes your firm’s cost recovery policy for online research expenses?
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COST RECOVERY PRACTICED
Legal Research Costs Included in Cost Recovery Efforts
Out of plan charges (usage outside your contract)
Document retrieval such as dockets, briefs, or other court filings from an online service
Copying charges
Online subscription charges
Printing charges
Downloading
Other
81%
69%
54%
40%
39%
17%
7%
Most respondents include out of plan charges and document retrieval as part of their legal research costs. n=194
Base = those who attempt to recover online research costs
What components of the legal research costs are included in your firm’s cost recovery efforts?
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COST RECOVERY PRACTICED
On average respondents recover about 2/3 of the online subscription charges or out of plan charges they bill to clients
Overall, about what percentage of actual (Westlaw/LexisNexis) online subscription charges does your firm recover from clients?
Mean : 62% n=76
Base = those who attempt to recover online research costs and include online subscription charges in their cost recovery efforts
Overall, about what percentage of actual (Westlaw/LexisNexis) out of plan charges does your firm recover from clients?
Mean: 67% n=156
Base = those who attempt to recover online research costs and include out of plan charges in their cost recovery efforts
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COST RECOVERY PRACTICED
Partner(s) 62%
Attorneys
Office Manager /
Firm Administrator
Paralegal / Legal
Secretary
4%
Librarian 2%
15%
26%
Partners are most commonly involved in setting and managing the policies around cost recovery
Other 5%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% n=210
Base = those who attempt to recover online research costs
Who at the firm is involved in setting and managing the policy for online cost recovery?
.
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COST RECOVERY PRACTICED
Over 1/2 indicated that an attorney’s experience at other law firms was considered when setting their cost recovery policy
Considerations in Setting Firm’s Cost Recovery Policy
Yes No Don’t Know
Attorney’s experience working at other law firms
Other Solo or small law firms’ cost recovery principles
55% 34%
37% 46%
11%
17%
ABA guidelines
Bar associations’ or other legal organizations’ policy papers
28% 51%
22% 62%
21%
16%
Articles or white papers about cost recovery 20% 61% 19%
Other 13% 52% 35% n=190
Base = those who attempt to recover online research costs
For each of the following statements, please indicate whether or not the factor was considered when setting your firm’s cost recovery policy.
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COST RECOVERY PRACTICED
Tools developed in-house are the most commonly used cost recovery tools, 1/4 of respondents also use QuickView+
Cost Recovery Tools Currently Used
Yes No Don’t Know
Other tools developed in-house 29% 57% 14%
QuickView Plus (Westlaw) 25% 62% 13%
LexisNexis PowerInvoice 14% 74% 12%
APS LookUp Precision 87% 13%
Other 13% 66% 21% n=190
Base = those who attempt to recover online research costs
Which of the following cost recovery tools or software are currently used at your firm for online legal research?
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COST RECOVERY PRACTICED
Don't know, 12%
Most firm’s recovery rate has remained the same over the last two years.
Remained the same,
54%
Increased,
23%
Decreased,
11% n=189
Base = those who attempt to recover online research costs
Compared to two years ago, would you say the percentage of online research costs recovered by your firm has increased, decreased or remained the same?
About 1/4 indicate an increase in costs recovered.
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COST RECOVERY PRACTICED
Firms that do practice cost recovery would find ABA guiding principles, articles or white papers, and market research beneficial tools to help with their cost recovery strategy and processes.
Market research on SLF best practices 69%
ABA guiding principles 63%
Articles or white papers
Online Training/Webinars
48%
45%
CLE 36%
Other 9%
-10% 0% 10% 20% 30% 40% 50% 60% 70% 80%
Base = 200
Which of the following would help you with your cost recovery strategy and processes? (Firms that practice cost recovery n=171)
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COST RECOVERY NOT PRACTICED
More than 1/2 respondents cite their firms do not recover online legal costs because it is tradition not to charge, or to maintain relationships with clients, or the time and cost for billing and tracking is not worth it.
Firm traditionally does not charge for
OLR costs (n=197)
76%
Maintain client relationships (n=197) 62%
Not worth administrative time and cost for tracking (n=198)
52%
Competitive Advantage to not bill clients
(n=196)
47%
0% 10% 20% 30% 40% 50% 60% 70% 80% n=197
Base = those who do not attempt to recover online research costs
Thinking about the reasons your firm does not recover online legal research costs; indicate your level of agreement with the following statements.
1
– 5 scale where “1” means strongly disagree and “5” means strongly agree.
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COST RECOVERY NOT PRACTICED
Adjust hourly billing rates to include OLR
(n=196)
Client refusal to pay (n=199)
45%
33%
OLR chrgs not assembled, prepared or approved when client invoiced (n=194)
Failure to obtain client approval before expense incurred (n=195)
21%
19%
OLR chgs not assigned to right client ID
(n=195)
9%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% n=197
Base = those who do not attempt to recover online research costs
Thinking about the reasons your firm does not recover online legal research costs; indicate your level of agreement with the following statements. Please use a 1 – 5 scale where “1” means strongly disagree and “5” means strongly agree.
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COST RECOVERY NOT PRACTICED
Don't
Know, 3%
Very Likely,
2%
15% are likely to start recovering costs.
Likely, 13% Most
Overhead
SLF firms are not likely to shift to
Recovery
Model in next
2 years
Very
Unlikely,
32%
Neither
Likely nor
Unlikely,
15%
Unlikely,
36% n=199
Base = those who do not attempt to recover online research costs
How likely is your firm to start recovering online legal research costs in the next two years?
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COST RECOVERY NOT PRACTICED
Firms that do not practice cost recovery would find ABA guiding principles, articles or white papers, and market research beneficial tools to help with their cost recovery strategy and processes.
Market research on
SLF best practices
ABA guiding principles
Articles or white papers
Online
Training/Webinars
CLE
41%
38%
55%
55%
66%
Other 10%
0% 10% 20% 30% 40% 50% 60%
Base = 200
Which of the following would help you with your cost recovery strategy and processes? (Firms that do not practice cost recovery n=29)
70% 80%
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– Two-thirds subscribe to legal research services through Westlaw/Lexis
– Half of respondents attempt to recover all or part of their online research costs.
– About half review costs on a client by client basis
– Majority of clients include out of plan charges and document retrieval as part of their recovery efforts
– Two-thirds of online subscription charges or out of plan charges are recovered
– Typically partners are involved in setting / managing policies around cost recovery
– One-fourth indicate an increase in costs recovered over the last two years
– One-half said their costs recovered have remained the same over last two years
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For those who do not recover, common reasons include:
• Have never charged for research costs
• Maintain relationships with their clients
• Administrative time and costs involved
Noteworthy :
Firms that practice cost recovery and firms who currently don’t practice both state they would benefit most from:
– ABA guiding principles
– Market research
– Articles or white papers about cost recovery
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