Professional Services Accounting ARTICLE -
In A Down Economy, Think Long Term

Target Audience: Legal Professionals, Professional Service Firms, Law Firm Partners, Managing Partners

As law firms deal with the impact of the economic downturn, a natural reaction may be to hunker down and wait out the financial storm. But it’s during adverse economic times that firms have the opportunity to take stock and strengthen their internal functions. Let’s look at strategies you can use to make the best of a difficult situation and put your firm in a strong position when things improve.

Find the Upsides in A Downturn

Attempting to ramp up business in a down economy may seem futile. But one upside of an economic downturn is that you’ll likely have more time to devote to business development.

Begin by implementing a formal client development program or breathing new life into an existing one. The program should employ specific methods for identifying potential new clients, such as cultivating relationships with your top 10 to 20 prospects through one-on-one meetings and networking activities. Even if these efforts don’t pay off now, they can put you in an excellent position when the economy turns around.

Of course it’s usually easier and less expensive to cross-sell services to an existing client than land business from a new client. So be sure to invest time in enhancing your existing client relationships by learning the ins and outs of their businesses to better assess their legal needs and provide them with more customized service.

To help you determine whether your firm’s time and money are being well spent and where strategic adjustments are needed, document the revenue generated and measure client satisfaction.

Lay Off On Layoffs

You may be tempted to deal with a slowdown in new business by reducing the number of your associates or instituting a hiring freeze. But these strategies can result in a future shortage of midlevel associates — lawyers who are critical to workflow and profitability.

Rather than base your hiring and firing decisions solely on immediate circumstances, consider what your firm’s staffing needs will be in the next five to 10 years. Before cutting staff, consider relocating associates from practice groups with low demand to ones that are busier.

Thaw Out Frozen Rates

You may think now isn’t a good time to increase your rates, particularly when you’re trying to retain clients. Think again. Are your clients freezing their prices? It’s unlikely. Are your competitors freezing theirs? Probably not. Costs will be increasing all around you, so why shouldn’t your rates reflect those increases?

If you want to provide your clients with discounts or savings, consider eliminating some of the peripheral costs you pass along to them, such as telephone, fax and paper costs. Or as an act of good faith, you could temporarily freeze rates for key clients who are especially hard hit by the economy.

Capitalize On the Conditions

Practice areas such as intellectual property, litigation, restructuring and bankruptcy typically remain stable during harsh economic times. So focus on opportunities in these areas, particularly those that might arise as a result of the recession itself. For example, a company seeking cash to buy a distressed business will need appropriate counsel. Similarly, during difficult times, more contracts may be broken, leading to a surge in need for litigation services.

On the other hand, transactional practice areas such as mergers and acquisitions and private equity work tend to stall. Investing in these countercyclical practices through lateral hires and cross-training can help you manage both sides of the cycle.

Remember That This Too Shall Pass

The down economy won’t last forever. But until it improves, you must prepare by uncovering hidden opportunities and planning for what may lie ahead.

FEELEY & DRISCOLL, P.C., an accounting and business consulting firm, has offices in Boston, Massachusetts and Nashua, New Hampshire. For more than thirty years, Feeley & Driscoll has provided businesses with auditing, accounting, forensic accounting, income tax planning, estate tax planning and management consulting services. Serving a variety of industries, including construction, manufacturing, healthcare, architects and engineers, and professional services, biotechnology, and information technology. Feeley & Driscoll is committed to helping clients grow their businesses profitably.

Find out how our expertise in professional services accounting can add value to your business. Email us or call us at 1 (888) 875-9770.

related links

Specialized Professional Services

Litigation & Forensic Accounting

Law Firms

Specialized Law Firm Services

Law Firm Newsletter Archive

Tax and Business Updates