The lockdown has been a shock to business. People are predicting the worst downturn in the economy in 300 years. If firms are to survive, what steps can they take? Here’s a start with a few suggestions:
I’ll explore them in a bit more depth below. But before-hand just some advice. Please do not expect that things will go back to how they were. One of the biggest changes I expect will be to the way that people think. That is your clients, your staff and indeed even the owners of businesses. No-one knows what the new ‘normal’ will be but there seems general acceptance that it will be different from how things were before. Emergencies tend to accelerate change and that has certainly been the case this time.
I’ll just pick out a few:
Property - I’ve spoken with several firms who have told me they will be considering how much space they need to rent. For most firms this is one of the big 3 overheads (along with the PII premium and salaries). Firms have been forced to ‘work from home’ and discovered that flexible working can operate OK. So why pay for so much property? How will social distancing impact the space requirements?
Salaries – if you allow more flexible working, so that staff do not need to travel in to work every day, then that helps them with a better work/life balance, but also means they save on the travel costs. In effect a salary increase at no additional expense to you. A potential genuine win win. On the flip side, support staff who are just typing, might be looked at as a luxury. You might have found a way to operate without them during this time with some decisions coming up about retaining the roles. You could always consider upskilling them to paralegals if the potential is there – both staff aptitude and nature and volume of work.
Cloud-based Case Management System – if you are not already using one, this might now have gone up the agenda. It would unlock your potential to work remotely through one unified system and drive through improvements to your operating, reporting and managerial practices and savings in the cost of production.
Paper, Post, DX etc – old methods of communicating, often slower and more expensive than electronic methods. I see less and less people using DX, and more usage of electronic means of communications. I had the owner of one firm tell me a couple of weeks ago “Ingemar, if you had told me before that I should go paperless I would have shut you down. Now, all my arguments are shown to be worthless. What use is a paper file to me in the office when I’m at home or somewhere else?”.
PII Premiums – sorry, word on the street is that they are likely to be even more difficult to get and premiums are likely to increase by 13-15%.
How you produce your work
Lawyers are traditionally slow to change. I have the privilege of working with a lot of new firms. They have the opportunity to challenge the way things used to be done in their old firms. Necessity is the mother of invention and war an engine for change. We could substitute today ‘crisis’ for the word ‘war’. The effect has been the same. I don’t think that the changes are completely novel. Some, indeed many, solicitors were using the methods already, but this crisis has now driven the majority of lawyers to do so. Here I’m referring to video conferencing instead of face to face meetings saving everyone travel time, remote court hearings, conference calls, electronic signature of documents, working from home, flexible hours (more suitable to staff and perhaps even clients). With that comes a need for similarly flexible systems for people to use in the cloud, not just for producing work, but for capturing data, measuring and reporting on key drivers for the business. A move towards measuring output rather than input.
How you deliver client care
Clients will expect things to be done differently. They measure you on your service delivery and compare you against other service they experience – not on your legal knowledge, as most are not legal experts. Generally, the Legal Profession has been behind the curve. In our private lives we are all communicating via social media and it’s all instantaneous, video etc. There’s little new that has happened during the lockdown. Some firms were doing things differently already. What has changed is that the rest have been forced to address this. Clients have become used to you ‘meeting’ them via phone, video and conference calls, using emails instead of paper letters, electronic signatures instead of wet signatures through the post with all the delay that that causes. If you haven’t been doing this, your competitors have. If you try to go back to the old way of doing things, I suspect that client will vote with their feet. Flexible hours – to suit your clients’ needs, not the needs of opening and closing a physical office.
Again, the rules haven’t changed in any significant way – just perhaps the way that they are applied. There has been some gradual movement towards more modern ways of doing things – again around remote working. These methods were there before but now might be more widely adopted. An example might be using a recorded facetime chat to screen capture and record AML ID verification: the client chatting to you and holding up their passport next to their face to verify ID. Saves them having to travel to the office or ‘send in’ their passport as some do. The COLP’s obligation to ensure that the practice is on a sure footing is very much to the fore now and will remain so over the next 12 months. Being able to check remotely that remote working staff are still doing compliance will also present challenges. Cloud based systems with robust procedures and reporting will be important.
Business Continuity & Disaster Recovery Plans
These are certainly centre stage now! Please take the time to revisit your risk registers and policies, define all the different categories of risk, to the firm, at the practice area level and matter level, then weight them, decide what should happen if they are high or medium and then give clear guidance to staff and enforce it. Review your Business Continuity & Disaster Recovery Plans in the light of your experience during this crisis. Learn from things that went well and what didn’t go well, construct a plan to plug those gaps and then try to imagine what else could happen, so you’re not writing a plan for the last crisis, but one that might be useful in the future. Remember, improvements to hedge one risk can raise their own issues. Nothing will be perfect, but good enough is good enough. Perfection is the enemy of production.
Staff Working Conditions
I am not an employment lawyer. There will be lots of advice out there, predicated to a degree on guidance from the government. There is sure to be a need to do provide a safe working environment, issue clear guidance and be seen to try to enforce it. The last thing you want is to be fighting claims from staff whilst trying to get your business back on a financial even keel. But this all has to be balanced against the need to be able to make a profit from the business. Otherwise it’s pointless as there won’t be a business.
Getting New Work
Do you know where your work comes from? So often I find that firms do not track this data. The best case management systems will have a build in ability to report on this. However, you can only report on data you have collected. For me this is essential data for managing your business. If you don’t currently gather that data, I suggest you devise a method for doing so from now on. This is almost an aside, albeit an important one. If you don’t have work, you have no business. The lockdown has starved many businesses of new work. I suggest you review how you have got work before the lockdown, how you think the near to medium future will affect work acquisition and then devise a strategy for getting work in. Generally, I am against taking out a business loan unless it funds an increase in profit. Financing robust method(s) for acquiring new revenue streams is one of the legitimate things I would suggest justifying taking out this loan. Here is a link to the government website about these loans: https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan. We can suggest some options for law firms wishing to explore this further. Feel free to contact us. [email protected] or 07887 524507.
What do you actually want?
It’s worth taking a moment to think about this. Listening to a recent interview of a specialist in M&A in the legal sector, he expected that as we come out of the lockdown there are likely to be a lot of opportunities as older law firm owners decide that they’ve had enough. There are a lot of firms where the ownership are in their 60s or older. A fair proportion may not have the energy or will to take their firm through the revolution in working practices that is happening apace. Other firms will have problems over cashflow. So, there are 3 options: carry on as you are; be a predator; be prey. Each choice is completely valid – so long as you’ve had a good look at what you want and what you can realistically achieve. If you want to be a predator then think clearly what you are and where you want to be. Define what you’re looking for and why. Consider carefully the resources you will need to make the acquisition work. If you want to sell your practice, then start by getting your house in order. Archive out rubbish, clear up balances. Get rid of stored paper files that should have been shredded ages ago. Find all the contract and lease documents. Take advice on what you might be able to get. Sorry to write this, but normally there is no value in a law firm (unless it has recurring income, which is rare, or a good quality will bank). Instead it is a question for the owners of getting rid of liabilities: run off (normally about 2.5 or 3 times annual PII premium), leases, staff costs, redundancy liabilities, overdrafts & debts. There will be deals to be done.
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Just a few thoughts. Remember – wherever there is change there is opportunity!
What do you think? What other aspects should businesses consider?