So the recession is really starting to bite now, and we’re starting to see law firms closing down and partners getting out of the profession. It’s OK though: Most bank economists agree that we’ll see an upturn in 2010 – so perhaps you can still outride the storm. But what if they are wrong? And even if we do see an “upturn”, will that be enough to save your practice? And for those firms who haven’t been saving for the proverbial “rainy day”, how do you hang in there?
The first phase was to cut costs. Retrench the people you didn’t need. Close offices that weren’t profitable. Cut back on the luxuries. And in some firms, partners agreed to take a cut in salary. All of this helped, but in many firms it wasn’t enough. That left firms with a handful of alternatives: Cut some more. Borrow money to weather the storm. Or try and get more business – as difficult as that is.
For a lot of firms, cutting back alone won’t save the practice. And borrowing money is only feasible if the recession is going to turn soon. For conveyancing practices, it is unlikely that the volumes of two years ago will come back anytime soon. And for law firms who were heavily dependent on conveyancing, it has been carnage. Lesson one, in case you’d forgotten this from the previous recession, is to diversify your practice!
The next phase is to clean up your practice. Recover all of your time. Collect your debtors. Bill your clients timeously, and where possible, get them to make progress payments. Don’t take on bad cases which will sap your time for little or no return. And time your invoicing right.
For conveyancing practices, you may want to cut back on the number of software licences you are paying for. Or better still, you may want to change to transactional billing for your conveyancing software, especially at today’s low volumes. You might also want to shop around for Deeds Office searching, since that has now become much more expensive. And you may want to outsource your technology support needs rather than to employ someone full time to do that for you.
But even when the economy does turn, many people (businesses and consumers) are going to be battered and bruised, and quite heavily in the red. So it’s unlikely that you’ll see a flood of business coming through your doors in early 2010. Even Debt Recovery, which should be a great business in a recession isn’t doing that well for most firms because consumers can’t pay. Having said that, some Debt Recovery practices are doing very well right now.
That pretty much leaves one other option: grow your income. “Easier said than done,” you say. And you’re right – it is never easy to find new business, especially for lawyers, who are professionals, and not salespeople. But if you want to survive, that’s what you are going to have to do.
You may be able to increase your prices slightly, because most of your clients approach you on a per matter basis. And if you religiously log all time spent on matters you can probably increase your billing substantially. Today, most legal accounting systems offer decent fee recording functionality. If you’re not using the direct-debiting facility in your accounting software, you’re probably losing a lot of money each month.
Advertising also doesn’t bring much new business, since people have become jaded about advertising. But marketing to your existing customers might bring you more business, since they already have a relationship with your firm. It is commonly believed that it is eleven times easier to sell to an existing client than it is to win a new client! And what type of marketing should you do?
These days, it is easy to merge your client information into letters. All you need is Microsoft Word. You can also send out a monthly or quarterly email to all clients, providing breaking news. For example, immediately when an interest rate cut is announced. Or anything else that will be of interest (and of benefit) to your clients. This keeps your firm name foremost in their thoughts. You can also market your products in these emails – for example “Is your will up to date?”
It may be an idea to try to understand where your existing clients are coming from. Are your clients from a geographic community? Or perhaps you have a relationship with a particular large company, or a bank. Once you know where your business is coming from, you can look for more business from other clients in the same situation. Or you can try to get more business from your existing client base – by creating awareness of other products, or by offering them an even better service.
And remember that people deal with people. Try to get ‘face-time’ with your larger clients. Remember when times got really tight for the banks ten years ago, and your bank manager actually phoned you to make an appointment to chat? Maybe it is time for you to do the same with your clients!
Something’s got to change. If I’m right and it is going to be some years before things improve significantly for law firms, then you can’t simply ‘wait it out’. You have to change something. My advice is to look for the easiest, least disruptive, quickest, and most valuable changes first, because that brings quickest relief. Then tackle the other things later. And write up a plan, detailing what you are going to do, and by when, or you’ll find that you’ll simply carry on as usual.
Practicing law today is just like running a business. So most business rules apply. Ignore them at your peril!