Plan ahead with these small law firm recession tips

As of late as December 2019, some experts still predicted that an economic dip wouldn’t hit in 202o. As of March, we all knew better. Now that businesses have begun to assess their pandemic losses and reopen, business owners need to plan strategically for a coming recession. These small law firm recession tips will help you make some wise choices as you look ahead:

Prepare for Possibilities

Law.com counsels lawyers to prepare for the possibility of three different types of recessions: V-shaped, U-shaped and L-shaped. The latter would feature a much longer plateau and recovery period than the first two. We don’t yet know just how intense of a correction the market will make, so wise business owners will keep a close eye on changes.

In that piece, Hugh A. Simons suggests (paraphrased below):

“Law firm leaders don’t need to take a stance on the ultimate shape of this recession. They can let it reveal itself over time. However, they need to do three things now:

  • Firstly, support clients in their immediate difficulties

  • Secondly, they need to be ready with targeted initiatives to stoke demand

  • Thirdly, there are set of capacity and cost issues to address now so as to be able to act quickly and decisively as events unfold”

In short, provide great service to existing clients, work now to create demand for new clients and create a strategic operating plan that supports efficiency and capacity for measured growth.

Rein in Costs

Legal industry expert Lee Rosen notes that many lawyers make the mistake of over-leveraging their firms, which can lead to financial distress during a recession. He paints a bleak picture as a cautionary tale:

“Being highly leveraged when a recession hits is the most dangerous place to be. Owing a bank and a landlord, running fast and loose on overdue payables, and living on your credit cards is death when the music stops.

The optimistic, positive, leveraged lawyer is the lawyer who gets blindsided, responds slowly, and ends up eating out of the dumpster behind the supermarket. They’ll sell off your leather furniture and fancy artwork and you won’t even be invited to the auction.”

Find ways now to reduce expenses and limit overhead. Real estate often takes a huge chunk of a law firm’s operating budget. Look for alternatives to traditional offices, such as shared office spaces. If you already own or lease a large office space, consider cutting costs by taking on tenants under a sublease.

Other places to reduce expenses include reducing staff, hiring only contract staff and reviewing technology investments to retain only those that improve your ability to serve clients effectively and efficiently.

Sharpen Your Niche

As we have noted in past blogs, some practice areas will enjoy increased demand for legal services as a result of both the pandemic and a recession. These include:

  • Bankruptcy
  • Foreclosure and real estate
  • Environmental law
  • Civil litigation
  • Health care law
  • Employment law
  • Intellectual property
  • Privacy and data
  • E-discovery

If you already offer services in these areas, increase your marketing and networking efforts around them. If not, consider whether they fit into your existing suite of services.

Strengthen Your Network

A recession is not the time to hide under a rock. While you do need to focus and target your business efforts toward activities that generate revenue, ignoring your networking efforts will result in isolation and limited client pipelines. During a recession:

  • Reach out to your existing network and let them know you are taking on new clients. Be specific about the services you offer.
  • Find ways to collaborate with other lawyers and cross-market services.
  • Build your brand, network and reputation online.
  • Use social media, such as LinkedIn, to seek introductions and leverage existing relationships.
  • Seek out in-person opportunities to connect, including associations, shared office spaces, professional development courses, networking events and more.

Not only will a strong network support your business development efforts, but surrounding yourself with like-minded people will help you remain optimistic during challenging times. As a business owner, that professional and social support can make a world of difference.

Looking for ways to connect with the Denver legal community? Learn more about LawBank’s established network of lawyers.