February 12, 2000
AMERICAN BAR ASSOCIATION
COMMISSION ON MULTIDISCIPLINARY PRACTICE
Good morning. Let me first thank you for allowing me to testify today. It is both an honor and a pleasure. My name is George Abbott, and I am the owner of Aras Enterprises, a small business that provides materials handling consulting & implementation services. I have long been active in the small business community. I have held leadership positions in several national organizations, including the National Family Business Council, the National Small Business Association and National Small Business United. I have served on several small business advisory councils including the Executive Committee of the National Advisory Council to the Small Business Administration. I also participated in all three White House Conferences on Small Business.
Small businesses are the backbone of our booming economy. They represent over 99 percent of all employers, employ 52 percent of private workers, provide the overwhelming majority of all new jobs, and account for 51 percent of private sector output. The small business sector also provides unprecedented opportunities to women and minorities. In recent years, members of both of these groups have been starting their own businesses at an accelerating rate. According to studies conducted by the U.S. Small Business Administration in 1998, over the last decade, the number of women-owned businesses increased 89 percent to an estimated 8.5 million, and the number of minority-owned businesses grew 168 percent. During that same period, the revenue generated by minority-owned businesses grew an astounding 343 percent. Internet spawned small business start-ups are enormous and are not a part of these statistics.
Of course, no two small businesses look the same. They range from the corner restaurant that cooks the best burger you ever ate, to the small used bookstore that has the out-of-print novel you’ve been looking for, to the high-tech start-up that delivers the video game that your kids can’t find elsewhere. But despite the many differences in the products and services they offer, I can tell you that every small business owner wants the best business advice he or she can find. Increasingly, the concept of multidisciplinary professional services is emerging as an important alternative to traditional firms that have advised the small business owner. Multidisciplinary firms offer three advantages that every small business owner desires: choice, convenience, and cost-effectiveness.
In today’s ever-changing business environment, small business owners are increasingly demanding the freedom to choose the arrangement that works best for them. For some small business owners, retaining individual law and accounting firms, financial planners, tax specialists, and the like will continue to make sense and work well. But for others, MDPs are an attractive option for purchasing business advisory services. Regardless of who a small business owner seeks advice from, the paramount issue in the selection process is trust.
Many small business owners have difficulty figuring out how they are going to fit everything they need to do into a day. The most obvious tasks – things like purchasing inventory and attending to customers – have to be juggled with meetings with financial planners, lawyers, accountants, maybe even a public relations specialist and an advertising expert. Add in the fact that such meetings often take place at firms all over town, with professionals who don’t necessarily know what the others are doing, and you can begin to appreciate the potential for headaches for the small business owner.
Take Michael Paul, for example. He is the owner of GolfZilla, a chain of franchised golf stores in the Washington, DC, area. Last summer, Mr. Paul wrote in the Wall Street Journal about some of the difficulties he encountered in obtaining professional advice for his business. When he started GolfZilla, Mr. Paul realized he required the services of numerous professionals, including a lawyer, to help him get started. But his choices were, as he put it, "hit or miss," because he didn’t know firsthand people who offered the services he needed. And even though he found some good advisors, they advice they gave him wasn’t coordinated in an effective manner.
By housing different professionals in one firm, an MDP could have provided Mr. Paul effective and coordinated advice. A team of professionals, working under the same roof, could have worked together to meet his needs. And Mr. Paul is not alone. I know that you have heard or will hear from numerous other small business owners who cite this convenience as a key reason for their support of multidisciplinary practices that include lawyers.
Obtaining coordinated advice from an MDP team also has the potential to benefit a small business’s workers. Whether they employ seven people or two hundred and seven, business owners have to make difficult decisions involving health care, disability and workers compensation plans, and often some kind of retirement plan. To help with such decisions, they could use legal assistance, tax advice, and perhaps the services of an insurance specialist and a human resources expert. If a small business owner could retain an MDP specializing in employee benefits matters, he or she could receive all the necessary advice from a coordinated source. And, with that advice in hand, a small business owner could offer the best possible menu of benefits for his employees, without breaking the back of his own business. I think any small business owner would welcome that opportunity.
Effective and coordinated advice is especially important when it comes to e-commerce. As you all know, the growth of the Internet and e-commerce has been widely touted as a major cause of the current economic expansion. Every day, new e-companies spring up and go public. While most of these companies are small businesses, they are doing business all over the country, indeed, all over the world. A small firm in Palo Alto, California, can easily sell its products to customers in New York, Miami, Paris, or Indonesia. The tax and legal implications of this are daunting, especially as government officials at the state, federal, and even international level try to figure out just how to regulate and tax these companies in a fair manner. That firm in Palo Alto may have to wade through a thicket of differing regulations and tax structures in every state in which he does business, not to mention those at the federal level. I don’t have to tell you that the prospect of having to know, and comply with all of these requirements is mind boggling.
By using an MDP, that little start-up in Palo Alto would be able to receive advice from professionals who not only specialize in state and federal regulations and tax issues, but also experts in graphic design, web site creation, on-line advertising and other key elements of becoming a successful on-line business. And they would all be working together to provide a comprehensive and coordinated business plan for their client. Time and profits would be maximized, benefiting not just one business, but the entire high-tech industry. These companies, which are now such an important part of the economy, must have the tools they need to succeed and grow. MDPs should be one of those tools.
Another major benefit MDPs offer small businesses is cost-effectiveness. To put it bluntly, small businesses do not have money to throw around. Start-up and operating costs are high, and many small businesses live on a day to day, or at least month to month, basis. Hiring separate professionals for advice is expensive. Having to hire separate firms means no volume discounts or package pricing. In addition, a small business owner who has to bring each professional up to speed on what others are doing can’t spend his time running his business.
In my own case, I recently sold a small manufacturing company. Like most small business owners in this situation I had to look to several different professional disciplines for advice because no one firm could provide all the assistance that I needed to conclude this sale. Of the time I spent working with the outside professionals on this sale, over 60% of it was in "ping ponging" back and forth among them. To be sure there were additional costs incurred due to this, but more importantly, I lost a lot of time which is a small business owners most precious commodity.
Members of the Commission, I want you to know that I understand and respect the concerns that have been voiced about MDPs. The legal profession is rightly proud of its history of integrity and independence. You have been charged by the ABA to protect those values, and I applaud you for it. Small business owners appreciate the independent professional advice they get from their lawyers, rely on the promise that their lawyers will keep their confidences, and expect their lawyers to remain loyal to them-things that they also expect from their other professional advisers. I would not like to see these values lost in an integrated firm, and do not think that they have to be.
Keeping values constant does not require that the form of the business unit remain unchanged. The current rules that say where and how a lawyer can practice are simply out of date, and they don’t reflect the reality of today’s business problems, which are complex and multi-faceted. In the small business world, we have a saying -- the customer comes first. Isn’t it time for the legal profession to adopt that motto as well? Shouldn’t the bar be asking how can it provide clients with what they want and need? I can tell you that most small business owners, myself included, don’t care what their lawyer’s office looks like or who his or her colleagues are. They just want and need sound, coordinated, reasonably-priced advice from professionals they can trust.
Many small businesses go without proper advise due to the perceived cost, the inconvenience of trying to, and in some cases the inability to, integrate the input from these advisers, and the feeling that they have no control over the costs that they will incur. This situation could be remedied with the availability of MDPs.
Let me make one final point. MDPs won’t just benefit us. They would benefit lawyers, as well. Many people are, to put it mildly, intimidated by lawyers and don’t really understand how a lawyer might assist them. By allowing lawyers to participate in MDPs, the profession could demonstrate that it recognizes the realities of today’s business environment and the needs of business owners. People would stop thinking lawyers work in ivory towers, oblivious to the world around them. It’s a win-win situation.
Thank you again for letting me speak today on behalf of the small business owners of America. The bar has a golden opportunity to show that it not only hears the concerns of the business community, but that it is willing to address them. MDPs would be a valuable tool to small business owners, one that would provide the choice, the convenience, and the cost-effectiveness that are such an important part of success in today’s economy. I urge the Commission not to pass up this opportunity to help us all move into the 21 st century economy. In closing, I have borrowed some appropriate words from an old Oakridge Boys song; "you can’t look forward to tomorrow and still hang on to yesterday."
Thank you very much.