By Glenn Gutek, Senior Practice Advisor
One of my favorite presidential quotes has been attributed to Harry Truman when he demanded, “give me a one handed economist!” In frustration he went on to explain that “every economist states…on the one hand, but on the other hand.” There is a part of every entrepreneur that wishes economics were an exact science, but we know economics resembles art.
It is clear that we have entered unchartered territory, and it is unclear how long it will take to find a familiar landscape in our current economy. So as the owner of a business that provides legal services, how do you navigate your way through this rough terrain? I wish I could offer a more scientific answer; however, allow me to outline 4 principles that you can employ to give you a great shot at thriving during this downturn.
Rigorously eliminate debt
At face value this principle would seem so obvious that it does not need to be stated. However, as a coach and consultant to law firms across the country I find that debt is the biggest threat a firm faces. For many firms the impact of the bad economy has not been fully felt in 2008. It may be wise to take profits from this year to eliminate debt in the practice or personal debt so that you can ease cash flow and stress in 2009.
In a strong economy lines of credit can allow cases to be financed, the practice aggressively marketed or increase technology. All of theses things should be done in a weak economy as well, just avoid the aggressive use of credit to make these happen. Most of all, avoid at all costs using the line of credit to support operational overhead. If this is necessary strongly consider the second principle.
Rigorously eliminate dead weight
Once again it would seem obvious that no matter what is happening in the economy carrying poor performers is a bad strategy. Yet a dramatic change in cash flow has a fascinating way of prompting us to reconsider what constitutes a “poor performer.” One of the most important changes in the current marketplace is the fact that there is a wealth of talent looking for a place to land.
As a coach and consultant I have had partners suggest that we should cut payroll 20% by reducing everyone to a four day work week. The tragedy of this strategy is that the only members of your team to endure this hardship are typically your weakest link. Don’t make staffing decisions with an ax, but with a scalpel. Be surgical in determining where you have the most replaceable skills. Now is the time to upgrade your expectations of how your team can perform.
Diversify the breadth of your referral sources
Chris Matthews ends his Sunday morning talk show with the statement, “now tell me something I don’t know!” Of course it is a great strategy to diversify your referral sources anytime. However, in a good economy it is not always necessary.
I have seen a few firms thrive with only 5-8 identifiable referral sources. When the economy changes these same referral sources are probably seeing some slow down in their business, agency or practice.
With their slow down, the possibilities to refer can slow down as well, and the impact for your practice can be huge. The only way to combat this would be to reach further and deeper into the marketplace and build bridges to diverse businesses, influencers, and colleagues.
Diversify the breadth of your value in the marketplace
For almost 20 years, Atticus® has been helping attorneys increase their value in the marketplace by moving from the technician to the entrepreneur. The entrepreneur understands that at a core level and change in the economy means there is a change in what the marketplace values. At the risk of being overly simplistic allow me to clarify the previous statement this way, the change from long term investment to short term cash can cause a change in the economy.
In a weak economy people are still buying goods and services. However, the buyer is assigning new values and re-assessing the priority of purchases. The entrepreneurial attorney must understand this change and creatively diversify their delivery of value in the marketplace. For some this may mean adding a new practice area. Others may need to identify the new set of needs their top clients are facing. The one thing that is universal, the role your firm is playing in the mind of your clients is changing. Be sure you know where the change is heading.