Now that the election is behind us, instead of the constant barrage of news about presidential politics, there’s no escaping news about the economy – and that news seems to keep getting worse.
By now, most lawyers have experienced at least the beginnings of the economy’s impact on their practice. The obvious warning signs include clients’ in-creased focus on rates; a decrease in new matters; requests to postpone projects or deals; delays in payment or in return of engagement agreements; decreased responsiveness of clients; reduced attendance at functions; and an overall reduction in phone calls. Other warning signs may not be quite as obvious. Be alert for clients whose trust in you seems to have eroded along with their trust in the economy. Clients may begin questioning you more, trusting you less and scrutinizing your work more closely than before. Still, opportunities abound, even in this economy, if you take a realistic look at your practice and develop strategies that take the current market into account.
What should you do? Have a heart-to-heart with the key decision-makers within your firm (even if that’s just you) and ask how a potential long-term economic downturn would affect your strategy and decision-making. Start to think ahead about what new risks you are facing and what you can do to minimize them. Think creatively about what new opportunities will present themselves, and how can you capitalize on them.
Although it may seem counter-intuitive, this is the time to re-evaluate your existing client base and your client selection process to eliminate your least valuable clients and focus your best efforts and resources on the best clients. Your least valuable clients are the biggest drain on your practice; let them go elsewhere. Become laser focused on your clients, their needs (even if those clients don’t immediately recognize those needs), and helping them get through this crisis. Clients whose businesses are affected by the economy may have untapped legal needs. If you can recognize those opportunities and aid your clients through the rough times, you will be infinitely more valuable.
Be an island of stability in an unstable world. Stay in touch with your valued clients so that they know you’re there for them and you won’t abandon them. Find ways to proactively enhance the relationships with your key clients –particularly if you have not done so properly in the past. Visit your major clients. Find out how each is faring given the economic upheaval, what changes they expect to their business and how you can help them. Look for potential clients who need help in your areas of expertise and meet with them. Be vigilant about follow-up after establishing those contacts.
Re-evaluate your services and your marketing. Even if you provide clients with exceptional service, you must be sure that clients and potential clients are aware of the value of your advice. Know your value and be able to articulate how your firm and your services are different and why clients should hire you. Create new value by providing services you may not have considered before. Instead of focusing on hours, focus on how you can work better with clients. Find ways to re-apply existing skills and experience to a diversified practice area or target market if necessary.
In tough times, the knee-jerk reaction is to try to cut costs. While taking a hard look at your expenses and cutting the fat makes sense, cutting too much can be worse than not cutting at all. Determine which services are essential and which services (and staff) you and your clients rely upon. Downsize/eliminate nonessential projects and discretionary spending, but avoid focusing too much on the short term and throwing out the baby with the bathwater. Trimming good talent with potential may cost you more in the long run. Cutbacks on marketing and client relations may cripple your future; clients will pick up on your panic and your lack of attention.
Preserve cash flow. Send bills timely and follow accounts receivable closely. Shorten collections cycles and follow up on late payments immediately. Take deposits and retainers before beginning work. Reduce funding of client expenses. Build cash reserves to help you through lean times by not distributing all profits. Be vigilant about your firm’s credit standing.
Consider payment alternatives, such as credit cards, to help keep accounts receivable low. Take advantage of new technology, such as check scanners which will allow you to more quickly and securely deposit client checks.
Create an effective trust account withdrawal process. Flat fees or retainers can be withdrawn from a client’s trust account as specified in the engagement agreement. Where permissible, use staged billing arrangements which allow you to obtain access to fees earlier.
Brainstorm creative ways to increase productivity and work more cost-effectively. Consider billing alternatives – help clients budget and they’ll find you easier to work with (and easier to pay).
A law firm’s biggest asset is its intellectual capital. Remain engaged with professional and non-professional staff in the office. If you’re worried about the future of your practice, your employees are certain to pick up on that concern and assume the worst. Be open about how you expect the economy to affect your practice and reassure key employees wherever possible.
Evaluate staffing needs. Is your current staff meeting or exceeding expectations? It may be unpleasant, but underperforming staff are a drain on profitability and morale; true talent resents being brought down by the dead weight. But be aware that cuts of any kind will affect morale, and be prepared to address that by communicating with staff and stopping speculation and negative gossip in its tracks.
Continue to recognize and reward top performers in creative ways. Make their lives easier and show appreciation, even if your ability to increase monetary compensation is limited.
One of the lessons learned from this Presidential election is that consistency and good strategic planning can work wonders, particularly if those elements are paired with true passion, purpose and an ability to connect with others. Instead of closing ranks and focusing only on stopping the leaks, think about how you can re-invigorate your practice. Instead of thinking about how you can hold on to clients, think about how you can delight your clients. Find the purpose that keeps you going and that will keep your clients coming back.
Sometimes, difficult times are opportunities in disguise. The old saying, “Necessity is the mother of invention” applies. Convene a meeting of your firm’s decision-makers now. Create a list of things that must be done (with deadlines) and assign individuals to accomplish them.
Look at other industries to see what is successful and how you can apply those principles to your practice. Seek input from everyone in the firm about how you can improve your services and create loyal clients. Stay connected with your clients and your employees and make sure your clients have an exceptional experience with your firm, even in these uncertain times. Remember: it’s usually the smallest (and most unexpected) aspect of your service that makes the biggest impact.
Allison C. Shields, Esq., President of Legal Ease Consulting, Inc. helps lawyers create productive, profitable and enjoyable law practices by providing coaching and consulting services in the areas of practice management and business development. Visit her website at www.LawyerMeltdown.com, her blog at www.LegalEaseConsulting.com, or contact her at Allison@LegalEaseConsulting.com.
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