Law firms must adapt to survive lockdown
Three weeks into my ‘5K to Couch’ program and, according to my training schedule, I should be slumped in the lounge in my PJ’s eating Maltesers and binge-watching BBC Box Sets by now.
Darwin said it’s not the fittest of a species that survives but those most able to adapt. Thankfully, I’m adapting to couch-potatoism quite well so far.
We’ve all had times when we’ve longed for the world to stand still for a moment while we catch up. As I sit here, in voluntary confinement, you could argue it just has. This has got me thinking about the dynamics now at play in the legal sector and how law firms must adapt in order to survive the lockdown and prepare themselves to thrive again as the economic storm clouds start to lift.
So, here are a few observations that I hope will provide some food for thought – and maybe a welcome diversion from home-teaching stir-crazy pupils.
CASH IS BETTER IN YOUR BANK ACCOUNT THAN ANYONE ELSE’S The financial impact of this lockdown is putting the cash reserves of every law firm in the country under enormous strain. This will lead to much greater focus on what might be termed business housekeeping. Why, for example, should we work on credit for three months, render a bill and then wait three months to be paid? As a profession, we do, and arguably should, bend over backwards to support clients who, through no fault of their own, fall on hard times. And we do, and arguably should, provide pro bono support to socially responsible projects. None of this should stop. But this lockdown is telling us that we should be tightening our standard engagement procedures (asking for fees up front where appropriate), collecting our debtors more assiduously, revising our cash flow forecasts more regularly and scrutinising our revenue and capital expenditure like never before. Successful law firms trade rather than cut their way out of a downturn. Having cash in the bank gives a firm the breathing space it needs to be able to do this. It may be a truism that it is a lack of cash, not a lack of profit, that kills businesses, but it is a truism worth remembering.
DIGITAL COMMUNICATION IS HERE TO STAY This lockdown is teaching us just how important and valuable regular communication is with staff, clients, suppliers and business friends. Whilst video calls will never achieve the impact of a face-to-face meeting, it has been enlightening to discover how close they can get. Not only are they vastly cheaper than spending days travelling round the country, but they are so much easier to arrange and have a directness and intimacy all of their own. Things seem to get decided quicker too. This lockdown may be the nudge we need to make video communication a more normal part of our working life. On a wider front, we are seeing clear evidence that law firms who are geared up to operate on a fully digital and paperless basis are gaining a strong competitive advantage over those that aren’t. Another important lesson for the future.
NECESSITY IS THE MOTHER OF INVENTION This lockdown presents an important opportunity to review what products we all wish to continue selling and to whom and at what price. Working with law firms across the UK, we know these discussions are taking place and this current hiatus is accelerating the decision making. We know of many firms looking to divest product lines, move into new markets and revise their market proposition for clients. More significantly, we are aware of firms that are reassessing their business structure, and indeed their regulator, to see if they can take advantage of the widening regulatory landscape. It is bringing into sharp focus the cost and constraints of regulation, the cost and availability of mandatory insurances and the fundamentals of reserved and non-reserved legal activity. It may be simplistic to say it, but necessity is proving to be the mother of invention and the innovators are testing just how far they can push the boundaries in the pursuit of the most productive operating model. Decisions of this magnitude are far from easy and the ramifications of bad judgment calls can be significant, so this is a time for cool heads and expert advice.
BEWARE OF INSTITUTIONS BEARING GIFTS Much has already been written about the support the Government and the banks are pouring into the UK economy and The Law Society and SRA are providing much needed interpretation and guidance via their websites. All we would add is that, for law firms feeling pressured into seeking additional funding, you may find our Five Golden Rules of Business Funding at oconnors.law/five-golden-rules-of-business-funding a useful checklist.
IF CASH IS KING, LEADERSHIP IS THE PATIENT HEIR Managing a law firm during a crisis is tough and leading a law firm during a crisis is even tougher. Buying time to think clearly and make the right judgment calls defines the outcome. The best law firm leaders have an ability to spot emerging challenges and opportunities before anyone else, to inspire confidence and bring out the best in others. We are seeing a growing willingness on the part of these leaders to share their knowledge and experience, confidentially, with leaders in other firms. This should give us all optimism for the future health of our profession.