General Practice, Solo & Small Firm Division

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Practice Area Newsletter

American Bar Association - Defending Liberty, Pursuing Justice

Summer 2009

Vol. 5, No. 4

Family Law

 

The Top 12 Ways to Cut Costs and Survive the Downturn

The economic downturn seems to be affecting nearly every industry, and family-law firms are no exception. MSN Money reported in January that couples might have to find a way to tolerate staying together in this economy because they simply cannot afford to get a divorce. Another issue is that law firms may no longer be able to rely on their bankers for lines of credit. Law Biz Blog ( www.lawbizblog.com) reports that banks are expected to be more cautious than usual and may begin to charge higher interest rates. So, where does all this bad news leave you? It means, of course, that you must cut costs like everyone else.

Let’s look at the top 12 ways to reduce your operating budget now.

1. Cut staff. No one wants to think about laying anyone off, but the truth is that staff is a law firm’s number one expense. American Lawyer reports that in an almost unprecedented turn, many of the largest New York firms have begun to lay off attorneys. Cadwalader, Wickersham & Taft laid off 96 lawyers last year; Clifford Chance let 80 go early this year; White & Case said goodbye to 70 associates; and the list goes on. It is time to ask yourself the hard questions: do you truly need all your staff? Do you have any employees whose performance is disappointing? Is everyone busy, or can a part-time position be eliminated and the tasks assigned to a full-time employee? If you have hourly employees, can you reduce their hours?

Some firms make the mistake of laying off employees, only to hire them back as soon as the firm has a couple of good months. Be careful. If the bottom drops out again, letting employees go a second time will have an extremely negative impact on remaining staff. It is best to let people move on and find stable employment elsewhere. Only bring back permanent employees when you feel confident you can afford to keep them long term.

2. Renegotiate your lease. Landlords are struggling in this economy too, which makes it a perfect time to get a great deal on your lease. If you agree to commit to a few more years, your landlord is likely to extend your lease at a lower rate. It is a win-win situation for both of you. Locking into a longer-term lease gives your landlord some leverage with lenders. Besides your lease term, are there other provisions that you would like to renegotiate? If so, now is the perfect time.

3. Eliminate unnecessary equipment. We tend to grow accustomed to the equipment we see every day without thinking about whether we actually need it. As staff shrinks, the need for office equipment shrinks as well. Save some real money by keeping only the equipment you use regularly. Do you really need all those phone lines? Is every leased copy and fax machine constantly busy? If not, get rid of the extraneous items.

4. Require employee contributions for health coverage. Although many firms throughout the country pay 100 percent of employee health insurance, a large number of firms do not, including large New York firms. At first, it may be a shock for employees to have some funds withheld from their paychecks for insurance coverage, but they will eventually get used to it. Paying 100 percent as an employer is not customary in many areas, and it certainly is not mandatory.

5. Eliminate your 401(k) matching program. According to U.S. News & World Report, numerous companies, including General Motors, have eliminated these programs. Contributions to 401(k) plans were largely eliminated during the last recession and reinstated when the economy improved. The bottom line is that employer 401(k) matching is not required or permanent.

6. Outsource IT tasks. In my firm, we have found that IT is one of the quickest ways to streamline staffing costs. Though it can be difficult to find one person to efficiently run a help desk and provide network support, an outsourced firm can provide both for less money. Sometimes an hourly employee will make better use of time, completing tasks quickly rather than stretching them out throughout the day. You might even discover that when you shift to an hourly consultant, the number of hours required to take care of your IT needs is a fraction of the time your full-timer spent on the job. Perhaps your full-timer has been assisting staffers with tasks that they can perform themselves. Although this work may be helpful, it may not be necessary. Even if you do require an on-site IT technician, you can use lower-paid staff for less complicated tasks, saving higher-paid personnel for the work that really matters.

7. Outsource other projects. If you require copywriting for marketing, print design, online design, or any number of other services, an enormous array of freelancers around the world will do the work for very reasonable prices. You can find these providers on websites, such as Elance.com, Guru.com, Crowdspring.com, and 99designs.com. We found a firm in India to do a web-coding project for $500. It was quoted at $10,000+ in the United States, and we have been using all sorts of services through these websites very successfully for years. Of course, you need to pay attention to the portfolios of the providers, as some freelancers are not as qualified as they profess. Choose carefully, and many talented and reliable professionals are available to work for your firm at prices substantially less than the cost of a large firm or full-time employee.

8. Use a telephone/Internet broker. My firm’s broker cut our telephone bills in half. These brokers are similar to mortgage brokers. They become your agent for comparing and contrasting companies that provide dial tones in your area. Then they request bids for your telephone, Internet, and conferencing business. If a package deal with one company is not the most cost-effective for you, the broker can bundle your deal with several providers. In other words, you get the most economical services available to you, and the companies you choose pay the broker’s commission.

9. Use a media broker. Similar to the telephone/ Internet broker, a media broker purchases advertising for you. If you spend any of your budget on ads, a broker definitely beats doing it yourself. Media brokers have relationships with the media and sometimes get discounts that can be passed on to you. They are experts on your demographic, and they know the territory—exactly when and where to reach your target audience. Most of them will put together a media plan for you for free and then purchase the advertising in several different outlets for you.

If you buy it yourself, you have to call each media outlet individually because they are only interested in selling you space or time in one place. With a broker, you need not deal with salespeople at all. Your broker is invested in buying time and space from a variety of outlets that best suit your needs. These brokers earn their commissions from the media outlets, and some of them are even willing to return a percentage of that commission to you. In the current economy, everything is negotiable.

10. Extend the lifespan of your equipment. Computers no longer become obsolete as quickly as they did a few years ago, so no need to replace equipment as often. Keep your hardware as long as possible, and you will save considerably. Instead, spend money on maintaining your equipment to keep it functioning optimally.

11. Buy used furniture, art, and equipment when businesses close. When my firm moved into our current location, a consulting firm was in the process of liquidating its office. We purchased all of that firm’s paintings for a fraction of the original cost, furnishing our office with beautiful artwork, and no one was the wiser. If you need more furniture, artwork, or equipment, do not automatically buy brand new. Many used items are in like-new condition, and the savings to your firm can be substantial.

12. Move employees from full-time to part-time status. Some employers are requiring across-the-board reductions in employee hours. Some are moving full-time employees to part-time status to reduce benefits. Health-care costs are astronomical, and the numbers are expected to rise. Even if your employees contribute to their premiums, insurance costs are among your highest expenditures. As a last resort, consider putting some full-time employees on part-time status. This is certainly not for the faint of heart, but if it comes down to reducing your costs or closing your doors, eliminating the cost of benefits may be a viable recourse. Be careful to check your state laws as you explore this aggressive cost-cutting approach.

A few simple adjustments may save a substantial amount of money. You could discover, for example, that lowering your telephone, rent, and media costs alone is enough to allow you to keep all of your employees. Continue to look for hidden expenditures and areas in which you can slice and reduce. It is the best way through the perils of a difficult economy.

Lee S. Rosen practices family law in Raleigh, Durham, and Charlotte, North Carolina. His firm’s website is Rosen.com. He blogs on practice management at DivorceDiscourse.com.

© Copyright 2009, American Bar Association.