Make More Rain : productivity, expense control

RVs, Bananas and Recession-Proofing the Law Firm

Admin — Fri, 18 Jan 2008 08:00:52 GMT

It seems every year there are those who get in front of the press and claim that there is a looming recession that is about to envelop the country and if there is no action, the depths of it will surpass our worst fears.

This year is no exception. December retail sales were down 4%, unemployment is up to 5%, and, of course, RV sales are plummeting. Yes, according to several articles, the reduction of RV sales is an accurate forecaster of recession. I am sure Federal Reserver Chairman Ben Bernanke is keeping close tabs on this key indicator.

Larry Bodine doesn't just think we are headed for economic recession - he claims that we are already there. His reasons do not include RV sales:

Housing starts are down 24% from a year ago. The median sales price of existing single-family homes has been falling all year, according to the National Association of Realtors. A person's home is the largest single asset and the source of a sense of prosperity for most Americans.
The value of the dollar is near an all-time low [ ]. The dollar is worth the same as the Canadian Loonie currency.
The price of oil spiked at $100 per barrel on January 2 and has settled at an exorbitant $92 per barrel.
The US trade deficit widened sharply by 9.3% in November to a larger-than-expected $63.1 billion. The trade deficit has widened to its highest level in more than a year.
The "credit crunch" means that investment capital is difficult to obtain. Banks and investors become wary of lending funds to corporations, thereby driving up the price of debt products for borrowers. Citigroup, the nation's biggest bank, announced a stunning $10 billion fourth-quarter loss. The Kuwait Investment Authority -- a foreign country -- is expected to bail out Merrill Lynch with a $4 billion investment.
The cost of the war in Iraq over the past five years is now approaching a cumulative $500 billion, or about $100 billion per year on average.

Bodine isn't the only one (not by a long shot) ringing in the new recession. Bruce MacEwen has two posts in a row (The Upcoming Banana? and A Contrarian Bounce?) dedicated to the apparently imminent recession.

In The Upcoming Banana?, MacEwen has his own figures to back up the sure "banana" that is happening:

Morgan Stanley, Goldman Sachs and Merrill Lynch have issued "recession warnings."

The Economist's somewhat impish "R-word index," which counts how many times in a quarter the word appears in The New York Times and The Washington Post, and which accurately forecast the 1980, 1991, and 2001 recessions, is nearing a new peak.

Sullivan & Cromwell Chairman H. Rodgin Cohen said "It is hard to be an optimist," [of the outlook for M&A activity in 2008]. "With the markets where they are, it is going to be a tough year. The markets hate uncertainty, and we are in an uncertain time."

Gold and oil are both at or near all-time (inflation-adjusted) highs.

The front page of just one day's Wall Street Journal lists the following facts:

American Express drops 10% in one day after announcing increased write offs and delinquencies; Capital One, Master Card, and Discover also drop;

Retailers ranging from McDonald's to Tiffany report disappointing same-store sales;

The stock market has started 2008 with its worst year-opening slide in over 30 years; and

A Barron's roundtable questions whether the 25-year bull market is running out of gas.

The American Lawyer's most recent survey of law firm leaders (last month) was appropriately headined "Fog Advisory"—the outlook is unclear.

And, of course, Cadwalader laid off 35 finance attorneys.

With the 300 points the Dow Jones Industrial Average lost Thursday, we may be doing more than just talking ourselves into a recession. Tensions are certainly high. Jim Blasingame from the Memphis Commercial Appeal, however, has a remedy: Don't participate in the recession. Some of his ideas include eliminating operational inefficiencies, cutting costs, converting non-performing assets to cash, and pay more attention to receivables.

MacEwen, in A Contrarian Bounce? has one idea contrary to the above: Don't cut costs - invest:

Rather than tightening their belts, the aggressive firms apparently sensed opportunity and chose to invest in [SG&A, R&D and advertising] in hopes of a longer-run payoff, whereas during flush times they focused on operational efficiencies. In other words—although they always invested more than their peers in R&D—their strategy was to sacrifice short-term profits in bad times for the sake of longer-term advantage: And to more than make up the sacrifice when good times returned.

Investing rather than cutting costs is consistent with what the LexisNexis Economic Survey shows. For firms who retain earnings, recessions become opportunities to exploit the weak economy to its own advantage. The market starves for investors during economic troughs and those who can afford to invest will find great opportunities to expand. Those who choose to devour all profits in good times will be the ones struggling to keep the doors open in bad times.

It is like the politically corrected story of a brother and sister who decided to open different restaurants on the same city block. Both sold roughly the same type of food and catered to the lunch crowd. The brother was very outgoing. He always remembered his customers, greeted them happily when they entered the restaurant, came to their table to mingle with his customers, and was so liked that the place was packed all the time. The sister, on the other hand, was a quiet woman who merely went about running the restaurant and most customers never saw her. The restaurant often was practically empty and you sometimes wondered how the place was still open.

The brother's business soon failed. Though great at bringing in customers, he was a poor manager. His employees stole from him, he gave away food, and he rarely ever looked at the books. On the other hand, the sister's business grew because she kept a ledger, measured what items sold and which didn't, changed the menu to highlight items that sold better, guarded her margins and saved her money.

There is a lesson in this for law firms. I have seen many firms who have neglected their finances because the volume of business kept constant cash flow and hid structural deficiencies in their model. Does your firm give away food? Do you have attorneys well liked by their clients but under producing from a financial standpoint? Do you want to be the brother or the sister?

Firms that plan and measure performance are in a much better position to aggressively attack recessions and benefit from them. Investing in the expansion of your business is a sign of a strong company. Cutting costs is a sign of a failing one.

Don't misunderstand: you don't want to spend away your margins. Make sure there is a link between your spending and increased revenue. But don't necessarily look to cost cutting when the economy is on the downturn. As MacEwen notes, "[i]s it "risky" to increase operating expenses during a downturn? So it would seem. But the real risk may be in following the herd."

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

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Admin — Tue, 15 Jan 2008 22:57:21 GMT

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Managing Law Firm Health Care Cost

Admin — Thu, 28 Jun 2007 17:29:00 GMT

The health care plans offered to law firm employees and principals have to be competitive. As a people business, this isn’t an area you can shortchange. Nevertheless, we are talking big bucks, and health care cost needs to be managed. The Juris Law Firm Economic Survey conducted in 2006 found that across the board, 40 percent of midrange law firms do not competitively bid health care plans. Without competitive bidding, costs are not likely to ever decline. Your costs are going in the other direction—up! You can just about guarantee two-digit increases year after year.

As for the 40 percent of law firms who do not get competitive bids, my guess is that it is a matter of “out of sight/out of mind”. They don’t competitively bid simply because they never consider the issue until its renewal time. When that happens, it is too late. No one is going to let their plan lapse while they look for a better deal. If your health care plan renews each January, you need to be shopping in June. Have your HR person or Administrator put health care shopping on their calendar at least six months in advance of the renewal date for your existing policy. From experience I can tell you that shopping your plan, especially if you have not been doing so on a regular basis, will produce more partner income.

Secondly, don’t ignore the opportunity for savings through making small changes that will not significantly impact participating individuals. Small reductions in co-pays and deductibles add up to big overall dollars. The predominance of two-income families today means that people place their family coverage with the employer offering the lowest employee cost to add family coverage. That makes it prudent for you to require some employee contribution for family care.

Adding health care savings accounts, on the other hand, can increase benefits for the firm’s people without increasing the law firm’s health care cost. Only about 25 percent of law firms surveyed have made the effort to add health care savings accounts. One of the benefits of outsourcing payroll to ADP or other equivalent payroll providers is that they make handling things like health care savings accounts easy.

Law firm surveys like the annual Juris Law Firm Economic Survey provide a blueprint for things you can do to improve financial performance and better control expenses like health care. They do that by shedding light on what others are doing. With that in mind, let me remind readers that Juris’ current survey will be put to bed after June 30. You still have a few days to participate. If you do, you will automatically receive a free copy of the survey when published. That is a $495 savings, but the ideas you will pick up to improve financial performance within your firm will be the big payoff. Ask your accounting person or administrator to complete the survey today by going to http://www.jurisinsight.com/2006survey.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Cost-Cutting Tips for the Law Firm

Admin — Thu, 28 Dec 2006 19:53:16 GMT

Every law firm should be smart about managing cost and the following tips will help you do so.

FOR FURTHER INFORMATION, CONTACT JURIS AT (877) 377.3740 OR INFO@JURIS.COM

Don’t fall for volume discounts to buy more than what you need. The vendor wants to unload tons of inventory on your back. If you buy more than you need, chances are you’ll waste more, and waste almost always wipes out volume discounts.
Avoid long-term commitments (leases, etc.) as much as possible, most especially on products and services that are marked by a deflationary trend. The provider will offer you discounts to sign up for two or three years on telecommunications, office equipment, software, etc. The price of these technologies tends to keep falling as a result of Moore’s Law. By “staying short,” you can typically reduce costs.
Be smart about office space. It’s good to be a little squeezed. So squeeze first before expanding into new space.
Treat technology expenses as normal ongoing expenses instead of periodic capital purchases. Buy a little bit every month. You’ll smooth out your cash flow, keep your technology more current, and probably lower your costs too.
Renegotiate your health care insurance as often as you can stand and don’t do it at renewal time. Also, look at co-pays, deductibles and penalties for unhealthy behavior (e.g., smoking) and offer flexible spending plans.
If you have uneven cash flow, you might be dipping into credit lines often. Credit lines also tend to come with fees attached whether you use them or not. It pays to review your banking agreements to ensure interest rates are competitive and to look carefully at bank fees. You can usually negotiate better rates.
Always compare unit costs and terms from current vendors to the competition. First, rank your overhead line items from high to low. Start at the top to avoid spending two weeks lowering the cost of pencils to save eleven dollars per partner. Next, look at material costs from non-critical vendor relationships (e.g., office supplies) where there is lots of competition and service really isn’t an issue…just price. Simply call and say, “Give me a better price or I’m outta here.” There are plenty of third-party outfits that will audit bills for accuracy, compliance with terms, and to compare your costs to the competition. As you move into more complex vendor relationships such as a software provider or your health care provider, you must take more account of quality of service and whether the vendor is delivering on their promises. For these relationships, it might save more to simply work together to improve the level of service as opposed to going to the lowest bidder. Service providers want to do more for you…find out how far they will go.
Make people ask for things, including reports. Lots of supplies and paper get wasted when they are automatically distributed and people don’t actually use them. It’s helpful to periodically check by shutting off supply.
Budget and compare budget to actual. Compare both aggregate dollars and unit costs.
Let the finance team have the internal goal to bring down the overhead rate. If you do have profit center reporting, don’t get obsessed about allocating overhead costs. Just use a standard overhead rate for everyone and then task the finance team with the job of beating the rate while maintaining the quality and culture demanded by the firm.
Don’t ever cut out the coffee.

While managing cost is important, cost-cutting campaigns will not move a law firm into the category of a top performer. If you want to increase profitability, you need to concentrate on increasing revenue rather than becoming obsessed about reducing expenses. You should pursue business development as well as opportunities to increase productivity, increase the firm’s effective rate, and improve realization. Eliminating amenities, degrading facilities, reducing personnel, holding back on salary increases, and reducing administrative staff is likely to cause more harm than gain.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Health Care Costs in Midsized Law Firms

Admin — Thu, 31 Aug 2006 17:15:45 GMT

Recently Juris, Inc. asked midsized law firms about health insurance—155 firms responded to those questions.

Respondents reported an annual inflation rate of 10 percent for health care costs. Considering employee compensation accounts for 60 percent to 80 percent of firm operating expenses, a 10 percent yearly rate increase will eat away partner income pretty quickly.

Only 35 percent of respondents indicated that they have raised co-pays to manage costs. Only 59 percent indicated that they had competitively bid their health care program.

Inflation in employee health care is presenting a real cost-management challenge to all businesses. Midsized law firms may forgo efforts to negotiate lower rates due to a feeling that they do not have the necessary critical mass for negotiating leverage. That is wrong. You can lower rates or avoid double-digit increases by shopping around, especially if you are willing to accept higher co-pays or deductibles.

Start shopping six months before your renewal date. When it’s renewal time, it is too late to shop.

Firms reported an average health insurance premium of $594 per employee. Over half of the reporting firms have cafeteria plans, and only 10 percent have fitness and wellness programs.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Alternatives for Law Firm Remote Access

Admin — Fri, 18 Aug 2006 17:24:00 GMT

By Guest Author Barry Lancaster: Juris, Inc. Senior Director of Client Services

Citrix® technology has been used by law firms as an effective method of providing legal professionals and administrative staff with remote access. The question is, “Are newer technologies making Citrix obsolete?”

Virtual Private Networks, VPNs, now allow firms to set up secure direct access to their network over the Web. For “office-like performance,” VPNs require a broadband Internet connection. What is different today is that home Internet users and law firm branch offices now have broadband access. Likewise, most hotels offer broadband services. Many towns and coffee shops offer free broadband services. In addition to broadband access, dedicated phone line connections between law firm branches and the firm’s main office are now moderately priced and provide even better data transfer quality. Today, if you are working from home, on the road, or in a branch office, quality high-speed connections are now readily available and inexpensive. That high-speed accessibility for users outside the office has made the VPN approach an alternative to Citrix.

In addition to the direct network connection alternative using VPN technology, there are a growing number of developments making Citrix less essential. An increasing number of the applications used by law firms now offer a browser version, for example. Smart Client technology (under Microsoft® .NET) and similar new technologies coming from the browser side of the fence are starting to show up in law firms. These Smart Client products are designed for easy direct access over the Web. Smart Client applications (including, for example, the Juris, Inc.’s attorney dashboard application, MyJuris®) use security services to protect data, providing full confidentiality over the Web.

There are advantages and disadvantages to the various technologies, including Citrix. However, changes in connection speeds and software designs make it appropriate for you to re-evaluate Citrix on a recurring basis. Depending on your particular circumstances, you may find that you can improve office-like performance for your traveling and remote team members while also lowering IT-related cost.

Lower cost is always nice, but it is the potential for productivity gains that should drive your decision.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

The Law Firm's Web Site Has Become the Manager of First Impressions

Admin — Thu, 17 Aug 2006 17:53:00 GMT

We have thought of the firm’s receptionist as the manager of first impressions. Not any more. Times have changed and now prospective clients and job candidates first visit the firm's Web site. Today you may have clients who have never visited your office but who do go to your Web site.

I had the occasion yesterday to again visit a number of law firm Web sites. There must be a super law firm Web site designer somewhere who has decreed that all law firm sites must look alike. Most do include their areas of practice and serve as a "who’s who" list if you need to spell a non-letterhead partner’s name. Many law firms have a Web site for the sole reason that everyone has one. “We have a Web site. That job is done. Now let’s get back to lawyering”. If that sounds like your law firm, you haven’t been listening. Web sites are now the No.1 marketing tool for law firms.

Increasingly, prospective clients go to your Web site first and, depending on their experience, you may never hear them. Where do you think prospective new hires and prospective laterals go first? When is the last time you spent time surfing your own Web site? What would your reaction be if you were a prospective client or a talent candidate? Suppose you were looking for a new law firm. Does your firm show up in a Google search? Try it! Search using search words that a prospective client might use.

Law firms aren’t alone. Michelle Golden noted that business-to-business blogs are far behind the marketing Web sites of business-to-consumer sites. As she noted in the post on her blog Golden Practices, law firms can learn a lot from business-to-consumer sites. Her post is worth your attention.

Law firm Web sites warrant more investment. They need more depth and richness. Most of all, they need the constant attention of someone in the law firm. Law firms spend a lot on their facilities to convey the firm’s desired image. Today, it’s the Web site that greets visitors first.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Firm Hardware Strategies for Law Firms

Admin — Fri, 11 Aug 2006 17:24:00 GMT

By Guest Author Barry Lancaster, Juris, Inc. Senior Director of Client Services

In today’s environment, computers and technology are a vital part to the operation of a law firm. Law firms need to develop a long-term strategy to maintain their level of technology in the practice. This article focuses on developing a strategy to maintain hardware such as computers and servers.

We recommend that computers and servers be replaced every three years. This is a common practice among many top technology firms who, likewise, follow the accounting practice depreciating computer purchases over 3 years. New innovations in technology continue to make older purchases out of date. The day-to-day use of computers in an office environment also wears on equipment. After three years of usage, the reliability of a desktop computer or server drops. Also, new software is usually designed and regularly updated to use the resources available on current technologies. So software updates can also make older technology purchases obsolete.

Just like purchasing a car, there is a key decision you must make when purchasing new PC equipment: Do I lease or purchase my equipment? During my previous experience with Accenture in support of large consulting engagements with over 50 consultants, I have had to cost benefit leasing equipment versus buying equipment. I found that it was cheaper to buy the equipment versus leasing the equipment if the leasing terms were greater than a year. Leasing, however, can be beneficial in the management of cash flow by spreading the cost over the life of the equipment.

The leasing company we used was responsive and provided good service. However, regardless of what leasing company is used, there are two things you need to be aware of.

1. Accessories: When we had to return equipment, we had to pay a high premium for missing accessories such as network cards. In today’s computers, these items are built into the motherboard so it is less likely you will have to order accessories.

2. Length of the lease: We were on a three year lease. Due to circumstances at the time, we went over the three years and had to continue to pay the rent in accordance with the lease terms. At the end of the day, our cost to lease was higher than anticipated and significantly above the aggregate value of the equipment and related cost of money.
Remembering these two factors will help you contain the costs of your lease.

Leasing may be the best alternative for a small firm to “smooth” technology costs over three years. A monthly payment instead of one large “investment” every 3 years can be easier on cash flow. Larger firms should consider a strategy to stagger purchases on a yearly basis. Every year, refresh one-third of your equipment. This lessens disruptions of having to swap out equipment for 60 employees at one time. Your technology purchases become a yearly cost that you plan for.

When purchasing equipment, one important decision is whether or not you should purchase an extended warranty. Offices without an on-site technology resource to service any computer hardware issues should buy extended warranties that cover the time frame you expect to use the computer. This puts the burden on the manufacturer to correct equipment issues. I supported a project of 70 consultants with an on-site technology resource and I still purchased the extended warranty. We did not carry spare motherboards or hard drives, so it was more convenient to support the computers through the extended warranty. I found the extra money spent on the extended warranty was worth it

At Juris, Inc., we are a technology company. Having up-to-date technology to support our client base is important to us. The practices outlined in this article are the practices we employ for our company. Law firms specialize in law, not in technology. However, they have the same need for a sound strategy for managing technology purchases. Law firms are responsible for servicing clients and should use technology to increase the efficiency and quality of the firm’s services.

Review recommendations in this article and develop a strategy that makes sense for you. Whether you are a large or small firm, you should have a capital budget to plan for technology expenses. We have discussed PC equipment in this article. Your capital plan should be all inclusive of printers, fax machines, copiers and phone equipment. Any recurring costs for services should also be budgeted in the plan.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Law Firm Symposium to Unlock the Power of Benchmarking

Admin — Thu, 10 Aug 2006 17:22:24 GMT

Benchmarking can catapult a law firm to a new level of performance, on a track toward continuous improvement. Athletes understand. Measurement improves performance. That is why they carefully study the performance of others. Exactly how important is it? A recent Juris, Inc. survey of midsized law firms disclosed that the top performing 25 percent of firms earn ten times the per partner income of the bottom 25 percent

A ten-fold difference in per partner income is good reason to attend the Legal Benchmarking Symposium to be held in Nashville, Tenn. on September 20, 2006. The event is sponsored by Juris, Inc. and PricewaterhouseCoopers and is hosted by Redwood Analytics. Space is limited, so you need to register without delay. Use the promo code “JURIS” to take advantage of the free registration.

The symposium is not focused on one particular survey. Its objective is to help law firms take full advantage of the power of legal surveys. It deals with how to get the most benefit from the benchmarking data your firm receives from any survey in which it participates. There will be numerous survey vendors at this conference sharing survey information and their insight on benchmarking. The venue provides an opportunity for firms to engage in interactive conversations on the best benchmarking practices.

Key Benefits

Leading survey providers share best practices and evolving trends
Roundtable breakout sessions with industry experts on benchmarking and methodologies
Ability to voice your feedback and share ideas to drive change in the industry.

Who Should Attend:

Management Partners, Chief Operating Officers & Executive Directors
Chief Financial Officers, Controllers, Finance Directors, & Financial Analysts

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

High Performing Law Firms Spend More

Admin — Fri, 04 Aug 2006 17:02:02 GMT

The most profitable firms don’t have the lowest cost structure. That was one of the findings from a recent Juris, Inc. survey. Top performing firms had higher per-head operating expenses and a higher ratio of non-fee earners to fee earners. Full survey details will become available later this month.

The findings provide more evidence that it pays to focus on revenue rather than cost reduction. That is not to say that profitable firms spend recklessly. While costs per head are higher, the firm’s total cost as a percentage of revenue was lower due to higher revenue per partner and per head.

Cost cutting campaigns will not move a law firm into the category of a top performer. If you want to increase profitability, you need to concentrate on increasing revenue rather than focusing attention on reducing expenses. You should pursue business development as well as opportunities to increase productivity, effective rate, and realization. Eliminating amenities, downgrading facilities, reducing personnel, holding back on salary increases, and reducing administrative staff is likely to cause more harm than gain.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Take Advantage of Competition to Lower Law Firm Communication Expense

Admin — Tue, 18 Jul 2006 17:43:29 GMT

There are some law firm expenses that can be lowered just by calling your existing vendor and asking for a lower price. Usually you can lower the cost further by changing vendors—vendors, I might add, that are virtually indistinguishable. Your phone service and other communication cost are at the top of that list.

If you haven’t re-negotiated for these services lately, do it now. With cutthroat competition in the communication industries, law firms can lower cost every time they return to the negotiating table.

Most providers require you to sign up for a certain amount of time for the best rates, but contracts beyond two years (three years absolute max) should be avoided. Some contracts now pass the savings to you if the vendor subsequently reduces their prices. In the cell phone industry, vendors start offering more minutes for the same price. Ask for that deal.

Regarding contract expiration or anniversary dates, vendors do not tell you when the minimum term has expired. Many count on their customers forgetting about the date so that the vendor can continue to charge older (higher) prices. Smart customers track contract dates and go back to the market with every opportunity.

Changing providers is no longer difficult, but you can get big savings without changing vendors. Don’t wait for your minimum period to expire. Simply tell the vendor’s representative that you are going to start shopping for lower rates unless they upgrade your current contract to give you more competitive rates now. That conversation will open negotiations for lower costs and a contract term renewal.

Communication cost can be significant in a midsized law firm. Look for opportunities to consolidate your wireless, long distance, high speed services, etc. under a single vendor who will give you the best price based on the consolidated volume. Firms with multiple locations may find it cost effective to connect those locations through dedicated links, eliminating long distance charges and providing clients with a single phone number for reaching attorneys and staff regardless of location. In addition, voice-over IP has reached a level of quality that is nearly indistinguishable from traditional voice services. For firms with heavy long-distance traffic, moving to voice-over IP may be worth it. At a minimum, begin experimenting with voice-over IP to determine its suitability in your environment.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.