Tag Archive: Cash Flow – Finances
It looks like The Business of Law® is no longer an afterthought to the big firms.
Seyfarth Shaw recently announced that its profits in 2009 will fall by 5 to 7%, less than the estimated 10 to 15% projected for the legal industry, that is the large law firms.’
Usually a very private matter, this law firm with a nationwide work force of about 1600 made the announcement after also announcing the layoff of a third layer of people. Why? One guess is that the firm wanted to suggest that it is dealing well with economic realities and that the remaining members of the firm will be in good financial shape. Giving some reassurance is very appropriate since people usually fear the unknown more than the known, no matter how bad it may be … And in this case, the downturn is better than the expected industry average.
But, making this information public is unique, the American Lawyer notwithstanding. This is like the public stock market. And the audience is more than the "public." The audience is its clientele, to reassure them that the firm is economically viable … and to potential lateral partners, telling them that the return to equity partners will remain substantial, as well as to placate current equity partners who may fail to pay attention to the periodic financial reports issued by management.
While unusual, this simple announcement may have been unique … and may have achieved much goodwill for the firm.
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In an article in the ABA Journal, DuPont is reported to be looking at regional law firms, not just Big Law, for its outside counsel arrangements. DuPont started the trend to consolidate its outside counsel needs into fewer, larger law firms. This made sense. The more you can consolidate your resource needs, the lower per unit fee you can negotiate because of your increased power. Also, you can reduce your costs of operation because you have fewer billing statements to review, enabling you to keep better track of the accounting and reduce inadvertent errors.
As I’ve written before, however, Big Law, with all of the negotiating power of DuPont, still charges more than smaller firms with lower overhead and a smaller profit appetite. They’re hungrier for the business. I chided ACCA and its members for failing to see this.
They are about to get the message … good news for the smaller law firms whose quality of legal work is equal and whose economic appetite are more reasonable.
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Budgeting for the law firm … and budgeting for individual client matters (both litigation and transactional) has been an important tool for success for the law firm on the one hand and controlling legal costs for ton the other.
Incisive Media’s LegalTech West Coast panel will discuss how budgeting can be most effectively used by those who have ignored it in the past … A “why” and “how” session at a fast pace. Further, unless one bills for services, one doesn’t get paid … My mother used to say “You don’t get something unless you ask for it.” And without collections, you cannot keep the lights on or food on the table. This discussion will also focus on billing for work done, hoping to suggest collection tips as well. “Bottom line,” this is a numbers game that lawyers need to learn and be more effective. If not, they will not survive, let alone thrive.
Join me as moderator of an outstanding panel in Los Angeles on Thursday, June 25th.
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A client of mine asked me whether he should charge a prospective client a fee for their initial consultation, the meeting before being engaged.
There are three approaches to this issue, long debated amongst lawyers:
1. Free initial consultation
2. Paid initial consultation
3. Paid initial consultation with the payment applied to the total bill if they engage you.
There is no one right answer or magic bullet in response to this question. Obviously, everyone wants to get something for nothing. But, we then also run into the bromide that "you get what you paid for." In this case, nothing.
Whether you can charge for the initial consultation is normally a question of the client’s trust in you, their confidence in you … and how long it takes to generate those feelings in the client toward you …
I don’t think “free” connotes expertise … and that’s what prospective clients are looking for. In deference to the current economy, and the need attract clients, you might consider alternative #3 … charge them an initial consultation fee, and apply that amount toward the total fee in the event they should retain you.
This is never an easy choice. But, we must remember that people do believe they get what they pay for … and anything free is usually viewed with suspicion either as to motive or expertise. A discount in an on-going relationship, however, is viewed differently and not to be confused with the issue at hand.
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While the economic crisis is being felt by nearly every segment of the working population, one group of workers is faced with particularly tough decisions regarding their futures. Law firms need to be prepared to assist them in making a transition during challenging times. Six-in-ten workers (60 percent) over the age of 60 say they are putting off their retirement due to the impact of the U.S. financial crisis on their long-term savings, according to a survey by CareerBuilder.
I agree with Ron Friedmann that lawyers, even partners in larger firms, are feeling the economic strains of today’s world and therefore delaying anticipated retirement. But one group of lawyers may not: Sole and Small Firm lawyers. These folks have something of value that they can sell .. converting their equity into cash. Most lawyers never thought their law practice was a saleable asset. So, while their investments may have tanked, they can look to their law practice for ready cash.
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There is so much happening in our profession that it’s hard to keep track …
I read an interesting article in a recent issue of the New Yorker Magazine that employed workers are actually seeing an increase in purchasing power because of declining prices all around. Yet wages are not going down because, historically, companies have chosen not to change wages for reasons relating to employee morale. I’m not sure whether that historical fact holds true in this environment. I just read that a couple of the large law firms are telling their new hires that the starting compensation will be $145,000, NOT $160,000. Obviously, change is in the air.
The purchasing power for employees is an interesting thought. The key, of course, is to keep your job and even lawyers are facing challenges here.
And “readjustments” in the work force are taking place more quickly because of our recent adherence to “just in time” management. Interesting concepts. How is your firm handling the changed economic conditions?
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Join me for an ABA teleseminar. Outstanding panelists in a fast paced presentation that will provide tips to thrive in the new economy! Geared for sole and small firm lawyers. Sign up today!
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I was coaching a client today. She pulled at my heart strings by telling me the problems she is having with several of her clients who owe her money, big sums of money.
One of the clients paid her $37,000 two weeks ago and already owes her another $27,000. After complaining about some of the services and getting a $5,000 reduction in billing, he has not yet committed to a date certain for payment of this amount. Oh, yes, you guessed part of it. "The check went out last week."
Should she continue working for this client? My advice was to review your file to make sure it’s clean and not susceptible of negligence claims, make one last effort to collect by telling the client he has to pay what is owed within 7 days or you will file a motion to withdraw because the client has not honored his agreement commitments, and then be sure you are far enough away from trial to have sucha motion granted.
Bottom line, however, while you are taking care of your client, you must take care of yourself! If, while focusing attention on the client’s issues, you ignore your own billings and accounts receivable, you will lose the respect of the client, you will not get paid the full amount owed to you, and you will not get more referrals from this client. Lawyer Beware!
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Put a “positive spin” on the description of your services. I have been saying this for many years in the context of preparing your billing statements for work done for clients.
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See the latest edition (March 3rd) of our newsletter featuring a discussion about the safety of IOLTA funds and the responsibility of lawyers for the failure of banks holding their accounts.
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