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It seems like money matters today more than ever. Even though the recession officially ended in June 2009, as reported by the National Bureau of Economic Research, law firms—like all businesses—remain concerned about the possibility of a further downturn. That anxiety is certainly understandable, but even during tough economic times, there are opportunities for growth.
Consider this: There have been nine recessions since 1948. Historically, the attenuation lasts approximately one year followed by four years of growth. Studies of leading industrial companies revealed that during the last recession, 40 percent of the companies fell from the top 25 percent, while a quarter of the companies rose from the bottom to join the top producers—and 15 percent of the companies came forward as new industry leaders. These same possibilities exist in the legal industry.
In fact, given those statistics, it is not surprising that right now profits are actually up for some law firms, even in this economic climate. So, what’s at the heart of their success? While money may make the world go around, these firms make sure that they are not simply going in circles.
One way to ensure a firm is steadily moving forward is to stop focusing on the problems and start creating solutions. A tried-and-true method that helps achieve that goal, and one that has proven successful for my firm, Akerman Senterfitt, is the effective use of practice group business plans. Whether for an individual, a small firm, a practice group, an industry group or a large firm, a business plan can and should add dollars to the bottom line.
A business plan, while useful for a variety of reasons, is a tool that can realize revenue growth and profitability. For example, at my firm the business plan leads the budgeting process. Then, the firm builds its expense budget to meet its revenues. Those firms that put the cart before the horse—i.e., by creating a budget based primarily on expenses alone—will invariably find it difficult to generate revenues to meet those expenses in tough economic times. For instance, a low-cost competitor that relies on volume to survive may find that the volume has disappeared, leaving the firm in a bind because it budgeted improperly. The lesson is that a well-constructed business plan needs to include key financial metrics. This will help to set goals for improving financial performance and prioritizing the allocation of resources. Building a budget based on practice group expectations makes good dollars and sense.In the words of Stanford economist Paul Romer, “A crisis is a terrible thing to waste.” So now is the time for law firms to be proactive in creating their own opportunities. It is a time when lawyers need to regroup, not retrench. To guide you in your efforts, be sure to avail yourself of the many practice management resources available from the LPM Section. By developing sound economic solutions, you and your law firm can succeed and profit in 2011 and beyond.
Andrea S. Hartley , Chair of the ABA Law Practice Management Section, is a bankruptcy shareholder in the Miami office of Akerman Senterfitt, where she specializes in complex business bankruptcy cases.