By Cammie Hauser, Senior Practice Advisor
During these tough economic times, it is more important than ever to manage your money and the uses of it. Critical management is needed to ensure prosperity for some and survival for others. The lessons mentioned here do not happen automatically; they take an intentional focus that many entrepreneurs may forget if it is not a part of the way you manage your practice.
Lesson #1: Carefully evaluate the option of contingency versus hourly work (and the mix in your practice,) if you have a choice. Be creative in setting up financial agreements that may involve some sharing (attorney and client) in the costs invested upfront. You may utilize retainers and evergreen contracts to help everyone keep track of the progress of the case. Set realistic expectations for the client continuously and proactively.
Lesson #2: Consistently evaluate work-in-process. Assign and update values of all cases. Discuss with your team the estimates to complete. Are you willing to lose everything you have invested? What is your threshold for losses (time and costs) and chances of winning? Track which quarter the settlement is expected and be realistic.
Lesson #3: Know where your high value cases come from. You can accomplish this by tracking, reviewing and targeting them on a regular basis. Make sure the effort you put into marketing is paying off.
Lesson #4: Determine the basic overhead expenses that need to be covered on a monthly basis. Entrepreneurs should know what they need to break even then the worries about cash flow can be eased.
Lesson #5: Understand the key indicators for your practice. Average value per file, costs invested (identify a cap or percent of expected recovery,) revenue generated per FTE (full-time employee) are a few examples. Make sure that you consider your clients perspective; what do they consider a “win”?
Lesson #6: Have knowledge of your credit line, conditions needed to stay in compliance and stay close to your banker. Don’t assume that things will happen as they have before. Evaluate alternative banking and financing options before you need it.
Lesson #7: Communicate, communicate, and communicate. As location is to marketing, communication is to managing your financial resources in each case. Knowing the status of the case (in conjunction with your team,) explaining it to your client and making the best business decision will keep everyone aligned in reaching the best outcome.
Lesson #8: Consider value pricing strategies when feasible. Fortunately, this is an advanced skill which can be learned. Commit to learning more about it and try it with some of your cases.
Lesson #9: Delegate wherever possible. If this is not possible, seriously consider the caliber of your team. This is not the time to be an island. You need to know what is the highest and best use of your time and focus on those things.
Lesson #10: Consider the use of contractors or co-counsel if the case is too large, complex or out of your niche. Sharing costs, work and rewards is better than making poor business decisions that haunt you for months (or years) or bankrupt your firm.
This list is in no way comprehensive but it is a good start to see how you can improve operations and manage your practice at a higher level. My challenge is to take these concepts, apply them to your practice and then measure the results. You may be surprised!