Posted Feb 18, 2009 06:35 pm CST
Ted Kim has cut his rates by one-third, and his clients couldn’t be happier.
The former Heller Ehrman partner founded Kim Law Advisors after his old firm went belly-up in October. Kim, whose billing rate had doubled to $600 an hour in the past five years, now enjoys the luxury of setting his own profit targets and fees, and claims to possess the golden ticket eluding many of his colleagues in these turbulent times: job security.
“The feeling of job security is higher for my team because we have constant and full communication throughout our organization. That can’t be done at a large global law firm,” Kim says. “I guarantee whether you ask my associate or paralegal if they felt more secure here or at Heller or another large firm, they would say [here,] absolutely.”
Ironically, Kim joined the now-defunct Heller in search of stability after riding out the 2001 downturn with the Venture Law Group, which was absorbed by Heller in 2003. But as his clients, mostly Silicon Valley start-ups, balked at escalating billing rates, Kim was forced to write off a lot of hours.
“This put a huge amount of pressure on efficiency,” Kim said. “With big-ticket M&A work or public offering transactions, you often need an army of associates to perform due diligence, and they can just bill. With start-up companies, it just doesn’t work.”
Kim also questions the economic soundness of maintaining a highly leveraged, BigLaw infrastructure as legal work in many areas continues to dwindle. Heller employed nearly 30 full-time marketing employees at the time of its demise—supported by less than 250 partners. When technical and administrative staff was added, overhead costs were staggering, according to Kim.
At their new venture, Kim and associate Erin Gordon, who left Heller with him, keep their operating budget low by doing their own accounting and outsourcing human resources tasks. Kim also credits being part of a new generation of tech-savvy lawyers with eliminating the need for information technology staff and services.
“Most law firms invest millions of dollars in having a document system on site,” Kim said. Kim and Gordon manage all their documents through a software-as-a-service company called NetDocuments, which stores data on a central server accessible through the Internet.
“For less than $100 a month, we have all the capability we had at Heller,” Kim said. “For a small, three-person shop to have the big-firm capabilities that five to six years ago you could only get at a huge shop is a cool thing.”
While Kim admits there are many different mindsets on the best way to run a law practice, he says one thing is certain, law firm “cost structures are changing.”
“All of these middle-tier firms with 500 to 1,000 lawyers that have aspirations of becoming global firms are the ones that are going to feel the pinch,” Kim said, “They have the infrastructure of those top-tier firms, but may not have the same strength of practice to pull them through.”