Practice Management

A credit crunch is keenly visible to a law firm.  Things start going bad for vendors and landlords and cell phone companies, and gas companies, and utilities, and banks, and employees, and most everybody around you.  The crunch is not so dramatic as it might appear on TV, but it is real.  The result is that everybody starts fighting for survival in a way, and you as the owner or operator of a law firm start to get pinched.  Companies and creditors start to gouge.  Hidden fees and terms start to increase.  There are surprises around every corner.  Deceit becomes a trend. And, it is all mostly because everybody needs more money to survive.  So, employees demand more.  Landlords find interesting ways to increase their take by folding things into cam charges.  Banks increase interest rates for any number of reasons.  It is not only a real mess, but it can be financially deadly if you are not careful.  It can take the joy out of business, and it is certainly is not pretty.

The only real benefit to lawyers is that all of this ungodliness in the market is that people and companies and creditors and the government and insurance companies eventually start to recoil from all of this bamboozling, swindling, finagling, diddling, flimflamning, and suckering, and the litigation starts to fly.

The problem with the so-called "free market" is that it is not free.  It is greed.  It might be rather tame when it is fat and happy, but it can be a bear (pun intended) when it is not.

The picture does not look pretty.  George Soros recently started sounding alarms and referred to our economy as the "supperbubble".  Warren Buffett has started warning us, as has the FED, and Congress, and the President in his own way.

While waiting for the increase in litigation and dispute resolution to make its way to your desk, however, the question is how to you avoid the credit crunch yourself?

The first step to avoiding the credit crunch is to avoid credit.  If you do not have it, it cannot be used against you.

The second step is to realize that more things than credit cards represent debt.  The obligation for wages represent debt.  Leases on office space represent debt.  Cell phone bills represent debt.  Gas cards represent debt.

The third step is to eliminate as much of these debts as is possible, and to stabilize the ones you cannot.  Get rid of staff, get rid of leases, get rid of the commute to and from work if possible, and convert to low cost phone services like VoIP.  You need to maximize the utility of those things for which you are left paying.  For example, if you already get broadband at home to watch TV an play on the net, you need to utilize that costs for your office as well.  Then by moving your operation home, you might not be able to eliminate a mortgage payment, but you will eliminate outside rent and your house payment is hopefully fixed so that the mortgage company cannot screw with it.

The fourth step is to take a serious and critical look at every costs, no matter how small, and try to figure out how to eliminate it.  Again, nothing is too small.  If you are running through paper and pens, figure out how to stop it.

The transition not only lets you survive the credit crunch, but it allows you to thrive afterward.  The truth of the matter is that sometimes it is hard to start at zero when you have gone through a rough patch, but you can recover quickly from zero.  What you likely cannot overcome is coming from less than zero.  You should not have to work hard and earn much just to dig your way up to ground level.  But, that is what happens when market goes south and you do not eliminate credit.  Those losses do not become a lack of earnings, they become debts that you have to pay and catch up later.  It puts you at a disadvantage.

So, take this time to take stock, to tighten your belt, to cut cost to the bone, and to learn to work without all of the staff and accouterments with which you have grown accustom financing.