Lessons Learned to Stay Afloat

Published March 26, 2013

One of my recent books, Growing Your Practice in Tough Times, talks about the lessons that law firms should have learned from the worst economic crisis since the Great Depression. Yet the volume of calls I get has convinced me that many firms still haven’t grasped the lessons they need to know in order to simply stay afloat in turbulent economic times. By way of review and re-emphasis, here are five lessons every firm should be putting to use today.

  • Firms can no longer be banks for their clients. Firm after firm has had to deal with financial crisis even as literally millions of dollars in receivables sit on their books. Stipulating payment rates and terms in the engagement agreement and then enforcing them is the best way for firms to survive a recession, and to prosper in an expansion.
  • Firms must budget for client matters. Budgets define successful business planning. Client involvement in the cost equation is here to stay, and smart firms will involve their clients in the budgeting process, get formal approval of the completed budget, and communicate constantly about how expenses are tracking.
  • Firms must have office space they can afford, with features that are most critical to operations, and that clients expect. With the virtual practice of law a viable option, physical locations become less important. Offices should be spaces that lawyers, clients and prospects are comfortable with, but affordability is preeminent.
  • Firms can no longer just take whatever clients are available, because trying to grow without a clear strategy is a recipe for disaster. Marketing can only be approached practically with a narrow focus that creates a profile of ideal clients and develops a strategy for communicating about services and capabilities this target, not everyone.
  • Firms cannot automatically raise rates. The billable hour may not be dead, but alternative billing is here to stay. Rather than setting price by a standard unit or result, billing alternatives focus on actions taken to benefit the client, beyond the time of how that value is applied. Choosing the right alternative has become a business matter for both the firm and the client. The casualty in the process is unilateral rate increases by the firm.

These lessons will improve the fundamentals of law firm economics. There’s no going back to the past “let the good times roll” mentality.

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Audience type: Administrators, Associates, Large Law Firms, Small Law Firms, Sole Practitioners