Other small business owners are struggling with the economy, too. Perhaps they could receive your services in exchange for theirs. Bartering seems to have fallen out of style in the past decade, but my firm couldn’t operate without trading services with other business owners. Rarely do I eat in a local restaurant without offering wills for the owner’s family in exchange for dining credits. You would be amazed how frequently my offer is accepted. Those credits come in handy when I need to conduct business meals, employee birthday lunches, and other events while operating on a budget. If a potential client can’t afford our fees, we always find out what they do and what they might be able to do for our firm. We currently have perfectly polished floors from a housekeeper in need of a divorce and new exterior lighting from an electrician in a legal bind. Money is tight for everyone. Bartering can help.
Evaluate, Don’t Eliminate
I think this motto can apply to many areas of your practice, but I want to focus on one expense that frequently gets reduced during tough times: marketing. When we opened, I determined how much I needed to spend on marketing after interviewing other firms, friends, and an advertising specialist. I set that budget to the side and I have refused to cut it. However, once quarterly I spend a solid afternoon evaluating how I’ve spent my firm’s money and where I’m seeing the most return. I review client intake forms to determine where I’m seeing results, I talk with staff about where they feel our marketing dollars are best spent, and I negotiate rates on everything from plastic cups with my logo to ads in my local paper. When things are down, you need to stay at the top. To do this, you can’t afford to cut your marketing back, but you must spend your money wisely and in a way that boosts the image of your firm and generates the type of business you need to meet your goals.
Do Less, Not More
Despite tons of great advice from mentors to the contrary, I did what almost all lawyers do when we open our doors: I took everything. The good cases, the bad cases, the cases I knew wouldn’t pay, and the cases that were outside my area of expertise. I didn’t do this because I thought it was good business sense, I did this out of panic that no other work would come in the door. So let me pass along the advice I should have heeded: Do less, not more.Work smarter, not harder. Refer out the cases you shouldn’t handle, and in return ask for those that you can handle with confidence. Contrary to what our instincts tell us, a down economy really is the perfect time to find your niche. Develop your area of expertise and stick to it. When you become known as the area expert, it’s much easier to increase your rates (and your referrals), but this will only happen if you narrow your practice and focus on the type of cases you need.
Negotiate Your Lease
Have you truly taken advantage of the poor real estate market to position your firm for future growth? Have you actively looked for distress situations to reduce your rent, purchase your own office, perhaps increase your income by subleasing to other solos, etc.?
If you are renting, this is the time to get aggressive with your landlord, as they are much more likely to offer incentives (renegotiating monthly rents, the length of a lease, offering a month free) than they will be when the economy improves. If you’re happy with your space, seriously consider a long-term lease where your rent is frozen. You’ll thank yourself in the future.
If you can afford to buy, it’s certainly a great time. Owning your own office is not only a great financial decision but can lead to other income opportunities such as space sharing, offering virtual office space, and more. The possibilities are endless if you can tolerate the risk of ownership in this economy.
Strike Employee Gold
If you can afford to hire, this economy is a job applicant gold mine. I don’t recommend a new hire unless you have the cash on hand to pay them for at least six months. If you do, and you know what you need, this is the perfect time. Even though you may pay less and offer fewer benefits than a larger firm, people need jobs. Treat them well in this economy, and you will develop a loyal employee that will last. You can attract candidates right now that you may have assumed impossible to obtain just a few years ago. A few tips on hiring in this economy:
Hire someone with different skills than yourself. You aren’t looking for your replacement. You’re looking to grow and diversify skills in your practice.
If you’re nervous about committing, consider hiring the person to do contract work first. This is a great way to test the waters with less financial and emotional commitment. The ABA has great resources to ensure contract work is performed in a manner that meets ethical requirements—be sure to review them.
So that you don’t feel you are wasting time on interviews, ask potential hires to put together a presentation on how they could generate business for the firm, ideas for improving client relations, and suggestions on making your small firm stand out in the community. This will give you a great opportunity to determine their enthusiasm and work ethic while also using the interviewing process to get some great ideas and insight to help move you forward regardless of which candidate you hire.
Don’t hire the first great applicant. It’s easy to be impressed, but you must be selective. This is an employer’s market—take advantage now.
When bringing in new employees, current employees can often get anxious about their role in the workplace. Use this as an opportunity to challenge them to review and revise processes in the office before training a new hire so that everyone can enjoy a more peaceful transition.
Balance the Books
This is not another tip on financial accounting. This is a suggestion about handling your personal finances to ensure your business thrives. When I opened my doors, I determined what I had to make in order to pay my bills and meet my essential needs at home. Years later, while I could certainly afford to give myself a raise, I have instead kept with that budget and reinvested in my business. Sure, I’ve craved a new car, a better vacation, and an updated wardrobe, but I’ve determined that if I can grow my business in this climate and take advantage of the down economy, we will truly be poised for great success when the tides change. Instead of more money for me, I purchased a larger office space and am renting to new attorneys. In return, I have great referral sources built in and steady rental income during the months when business is slower. It was a risk to reinvest, but one that has me closer to my goals and a lot less worried about making payroll!
By this time, most of us have grown more comfortable with the tough economy, and for the most part that’s not a bad thing. Just don’t become complacent. Review those ideas you had in late 2008 and make sure you’ve actually implemented them. Examine your business plan, don’t be complacent, and don’t rely on an improved economy to improve your business. The time to shine is when it’s upside down.