Pandemic VII: Law firm essentials

So, what about law firms? What will the pandemic and its associated economic crisis do to private practitioners of law? Well, first we need to separate out the two law firm sectors: larger firms with mostly corporate and institutional clients, and smaller firms (including solos) with mostly individual and small-business clients.

Perhaps surprisingly to some, I’m not going to spend much time on large firms or the AmLaw 200. As a group, they have large full-time professional management teams, and they’re diversified enough that at least one or two of their revenue engines are still working even in this crisis. Most importantly, they have immense amounts of cushion: When the average partner at your firm takes home half a million a year, or twice that, or four times that, you don’t have existential concerns. You have profit-distribution issues, sure, and some challenges around shareholder expectations, but those are textbook examples of “nice problems to have.”

Maybe more to the point, there are plenty of people out there offering advice to this segment of the market and covering their challenges in detail, and I see no need to add to that. But smaller firms don’t get that level of attention (with some noteworthy exceptions), and speaking generally, their challenges are greater and more urgent. So I’ll focus the balance of my remarks on this sector, with occasional reference to larger firms insofar as it might be helpful.

The pattern of these posts so far has been to identify the existing fault lines in a given part of the legal economy and talk about how the pandemic has struck and caused irreparable damage along those fault lines. But the cracks in the law firm model is a subject I’ve been writing about here at Law21 for more than 10 years, and I don’t see much point in rehashing it now. Sometime next week, I’ll put together a collection of my posts advising how to build a better law firm model and post that for people to review if they like.

So the primary focus of this post will be: What can smaller law firms do, right now, to deal with the impact of this unprecedented global crisis? My advice is to focus on the absolute essentials, so what follows is going to be very stripped-down and basic. (Okay, it’s 3,000 words long, so it’s not that stripped down, but still.)

I’d suggest thinking of this challenge in terms of four concentric circles, moving from innermost to outermost, and dealing with each circle in turn — as you secure one, you can move out to the next one. If I could draw, I’d include an illustration of how the fourth circle bends back to support the previous three, but I have no such skills. so you’ll have to imagine it. Sorry.

First Circle: You. Nobody else’s welfare is more critical to address at the start of this process than you, the lawyer. Doesn’t matter if you’re a true solo, if you have a few partners and employees, or even if you’re in a mega-firm — you cannot serve clients or put out fires or do anything to help anyone else unless you have done what you can to solidify yourself. You, personally, are the cornerstone of you, professionally. Deal with yourself first.

It bears repeating: We are in a global pandemic. Millions of people worldwide are going to die from the COVID-19 virus in the next two years. The global economy is going to experience contractions and convulsions on a scale most of us have never seen. That’s reality, it’s horrific, and it intrudes on our consciousness overtly and covertly multiple times a day. It’s an ongoing trauma that distresses you and steals your peace of mind whether you notice it or not.

So even though your inbox is constantly pinging and people are calling or knocking at your door, even though your kids are at home and loudly protesting their online learning sessions — even though you feel like everybody needs a piece of you right now, call time out.

Take some foundational steps to secure your emotional, physical, and spiritual well-being. Get 30 minutes of exercise a day if permitted and possible, walking around your block or neighbourhood, ideally getting some sun and Vitamin D. Pray or meditate for 10 minutes once a day, morning or evening (or both, if you can). Avoid doomsurfing. Eat as well as you can; if you drink alcohol, cut back sharply. If you feel like crying, do it. If you have people nearby you can hug, do it, often.

This is not selfishness; this is solidifying the foundation of your personal and professional life, so that you have the capacity to do what else needs to be done. You’re a human being going through incredible stress — recognize, acknowledge, and accept that you will be buffeted and damaged by this storm. The strongest people are those who accept themselves as they are when they’re weakened and damaged, and then shore themselves up as needed.

Second Circle: Your Professional Dependents. I wish I could come up with a better term for this one, but my nomenclature skills have been among the first to desert me. I’m speaking here of the people whose livelihoods depend on or are in a substantial way affected by your law business. That would include employees like secretaries, law clerks, paralegals, receptionists, and associates; it could also include, in a more distant way, more independent players like junior partners or freelance researchers or the communications firm to whom you’ve outsourced your marketing.

Now, these people are not (in most cases) your children or blood relatives, and you’re not responsible for their lives. But they depend on the law business you run to support their own lives to a greater or lesser extent, and they’ve been worrying since the onset of this crisis whether you’re going to cut their pay, cut their hours, or cut them loose altogether. If you haven’t addressed them openly about this yet, today is not too late to do it.

You might not have any bad news at all, of course. The nature of your law business might be such that you’re swamped with client inquiries and billable work, and if so, great — your challenge here will be getting the productivity and performance you need from people who also are deeply stressed by the crisis and who might have family members or close friends in hospital. But even then, many clients will not be in a position to pay you in full or on time. And in all other cases, there simply won’t be as much work as you’ve had in the past.

Opinions will differ here, and the right call will always depend on your particular circumstances. But generally, I believe that you should do whatever you can to shelter these people from the storm and absorb at least some of its fury. Keep them on payroll as long as you can; if you must reduce their pay, cut it by less than what you expect your own earnings to suffer; if you absolutely must lay them off, help them access all available government subsidies for people in their situation. Look after them as best as you reasonably can.

Don’t go about this process by yourself and then announce your decisions to them — get them involved, in one-on-one conversations (you almost certainly can’t do it in person, but a video call is far preferable to a phone conversation here). Be honest and transparent about the situation, ask them to be equally open about their own needs and situations, and talk it all out. Help them determine the nature, timing, and length of any reductions you need to make. Give them agency in this process — they deserve it.

Equally importantly, if you do need to cut back or even cut out their contribution, check in on them regularly to the extent possible. Ask how they are, how their family is doing, do they have relatives who are ill or quarantined, is there anything they need that you can help them with? In many cases, these people will be more vulnerable than you are and they live closer to the edge. Make sure they know that if the edge gets too close, they can call on you.

Obviously there are retention and recruitment advantages to behaving in this manner — you’ll earn unquantifiable amounts of loyalty and positive word of mouth by being a great boss in this crisis.  But the reason you’re doing it is simply because that’s what good people do — what leaders do — in a crisis when others look to them and rely on them for guidance and assistance and strength.

Third Circle: Your Clients. I suppose that this is functionally the same as saying “Your Business,” because looking after one means looking after the other. But clients and your relationships with them are the heart and soul of your law business, and you should start there.

Right now is when you should be doubling down on your most important client relationships. Reach out to these clients (or if it’s a business or organization, the key contact(s) within the client) and ask, first of all, “How are you?” And mean it. And listen closely to the answer. This one action alone will set you apart from most people in the client’s professional life, and maybe quite a few on the personal side. (If you have numerous clients of roughly equal value, send these questions in an email and ask those who can or wish to reply.)

Then ask, “How can I help you? And I don’t just mean with legal problems — what’s really worrying you? What’s heaviest on your mind? Maybe I can find someone to help.” Or better again, depending on how the client has answered the previous question, say, “I think I can help you with that situation.” It’s more effective to offer specific assistance than ask about general needs.

I want to emphasize the part about “not just legal.” Most clients, if their lawyer offers to help, will assume “legal help” is meant, and they will probably imagine a very narrow range of activities and say no, I’m fine. But as access-to-justice studies have shown us, people often don’t know that a given problem has a legal angle and a legal solution. So ask, open-ended, what’s causing you anxiety or concern? And even if their worries have no legal angles, maybe you know someone who can help them anyway.

In a crisis like this, we remember the people who didn’t wait for us to call them — they reached out to us, they genuinely inquired after our welfare, they offered to do anything to help, and they were sincere. That’s how you further secure and deepen your client relationships — that’s platinum currency. Clients generally stay put in a crisis. But whether they stay afterwards depends on what firms do during it.

There are two other obvious benefits here. One is that it’s an opportunity to ask about which ongoing or upcoming legal matters can be put aside or adjusted in light of the crisis, and that will help you triage and prioritize your own to-do list, which you absolutely need to do. But the other, and more important one, is that it helps generate payable activity. And that brings us to the fourth circle.

Fourth Circle: Cash. I’ve left this category for last because logistically and chronologically, it’s the last item to be looked after — but in terms of importance, it might as well be first. You need to get money flowing into your firm, as soon as possible, with some degree of regularity or predictability. You might be in great emotional health and in the running for  “Boss of the Year” and the apple of your clients’ eye — but if your firm runs out of cash, none of that matters.

I want to be clear about just how difficult it might prove to be to get cash into your firm. The economy is in ruins. Real unemployment is certainly in double digits, with some estimates suggesting 20% or 30% in the second quarter. Nearly 10 million Americans filed for unemployment benefits in the space of two weeks. Governments are providing benefits to many laid-off workers, but that money is mostly going to food and rent. Few small businesses are essential and most have closed. There’s a lot of law firms out there representing restaurants and dry cleaners and landscape companies and the like, and these businesses are on life support.

The average law firm bills clients for work roughly within 30 days of performance, and it gets paid roughly an average of 90 days later. Any unpaid invoices for work done since the start of the year are very likely sitting at the bottom of the pile of bills on your clients’ kitchen tables, and will be for some time to come. That suggests there’s a four-to-six-month gap coming up in your cashflow, and few firms can endure that without significant damage, or worse.

So you should think about doing two things. One is to speed up the process by which you get paid. If you don’t have electronic payments or credit card payments or other online payment systems set up, well, a pandemic is really not a great time to do it. But you need to shorten the turnaround time and lessen the hassle of getting client money into your bank. Find an online payment provider that works with the legal profession to set you up. I’ve heard good things about LawPay, and I’m sure Clio would be happy to help. If you’re really stuck, call your nearest bar association or practice advisor and ask them to help.

The other is connected with those client conversations I mentioned. Near the end of those discussions, raise the matter of payments. You are running a business and you have every right and every necessity to broach the subject with clients, awkward as it might make you feel. But there are ways to make it easier. Here’s my suggestion.

Offer your clients a “crisis billing arrangement.” For any matters arising in any way out of the pandemic and recession, your firm will bill no hours — instead, the client will pay a special monthly “pandemic flat rate,” on the lower end of your billing scale, with a unique billing code that all timekeepers can use for these matters.

You can, if you wish, apply this rate to everything you do for every client, but you don’t need to. If you’re working on a pre-existing matter for the client, or on a matter separate and apart from the crisis, you can specify that the usual billing and rates apply — but everything else is done under the “emergency arrangement,” paid automatically online on the first of every month directly to your bank.

I suggest that you not try to set limits on the amount of work you’ll do under the pandemic flat rate — that could blunt its effectiveness and put a chill on the conversation. Instead, tell the client that some months will be busier and others will be lighter and they’ll even out over time — but if unexpectedly, the amount of work starts heavy and gets heavier than anticipated, you’ll call the client back and raise it and talk about adjusting the rate to reflect the extensive good work you’re doing. (And if the work starts light and gets lighter, call the client and reduce the amount unilaterally.)

There are two broad reasons to do this. One, of course, is that it gets cash in the door, every month, at a vastly accelerated rate — you have guaranteed income and you can plan out your own payments accordingly. It also makes timekeeping and billing much easier, especially with most lawyers working from home, where they tend to docket less frequently anyway. For all you know, both clients and lawyers might prefer this method and will keep it even after the crisis ends, in which case your cashflow situation steadies permanently.

And the other reason is that it strengthens the client relationship through honesty and openness — you treated the client like an adult who understands very well how difficult life is for everyone.  And when you set a lower-than-normal rate, it shows the client that you’re not out to make money off this crisis or bleed the client at a time when it’s also running short on cash (as everyone is) — you’re only looking to keep the wheels turning so that everyone can get through this in one piece.

= = = = = = = = = = =

This was a great many words to say a fairly straightforward thing: In a crisis, you learn very quickly what really matters. To my mind, what matters to your law business are:

  • you, the lawyer;
  • the people who depend on you;
  • the clients on whom you depend; and
  • the cash that keeps your business breathing.

Your bandwidth and your window of attention have probably gotten much smaller lately. I know mine have. So I want to urge you against undertaking massive renovations to your law firm business model at this time. My previous posts about the court system and the lawyer formation process both emphasized short-term triage activities before turning to big-picture issues. But complex legal systems have many stakeholders who can lend a hand. You have very few.

So focus on the essentials. Take care of yourself and those close to you. Stay in touch with your clients and do as much as you can for them. Ensure a steady flow of cash into your business so that it can live to serve another day. And at the end of each day, be at peace that you’ve done what you could as a lawyer, and be with your family and support network. We’re all in this together. And together is how we’ll all get out of it.



2 Comments

  1. ALEXANDAR PAVLOV

    This is a great article. I did many of these things when I had my own office as a public notary in Bulgaria in completely different reality. The corruption there is a phenomenal and this is an ongoing crisis for many reasons. I am 5 years in Canada but still I have a lot of memories from Bulgaria. I tried to convince the clients to follow the law and they did not listen.
    Thank you very much for sharing these articles. I read all of them.

  2. Mark Blumberg

    Very helpful article. So much change in such a short period of time. Out of this terrible situation there are some small silver linings. What could not be done is now done everyday. Virtual work. Filings by email. Witnessing wills by video. People who were not ‘worthy’ of a liveable wage are now heroes. Hopefully we will see a more just world in the future. Keep safe.


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