Practice Management

I have spoken to, read posts from, and have shared emails with lawyers all over the country that are vitally concerned about the so-called liquidity crises.  My advice is do not be.

Want a new car, want to sell your house, or want to make other changes in your life?  Wait.  No too long, but wait.

When I was a young attorney trying to grow a large firm, I use to to bemoan the fact that law firms were not treated like other business, such as distribution businesses or retail businesses or manufacturing businesses, when it came to funding.  Law firms do not have floor planning, factoring, inventory financing, and the like.

Today, I realize that law firms are not like these other businesses, and when you try to finance them as such you will fail.  It is all by and large unnecessary debt.  This not only goes for the loans you make, but the leases you enter into to, the employees you take on, and the trappings of wealth you insist upon.  They are all liabilities.

Right after I went into practice for myself, I visited a farm outside of Texarkana, Texas.  I remember the farmer removing his hat, wiping his forehead with a handkerchief, and asking, "We sure could use some rain, couldn't we."  I said, "We sure could".  But, I was really asking myself if a lawyer every really needs rain, at least on the scale hoped for by the farmer.  No, the farmer needed rain.  I understood that.  His livelihood depended on it.  I, as a lawyer, did not need rain.  I obviously needed to be a better rainmaker from a practice marketing standpoint, but not rain.

I wished I understood what I was telling myself then related to many things.  One is that lawyers do not need floor planning, factoring, or really equipment leases like most larger businesses that have to buy large quantities of product to distribute or fabricate.   A car dealer might have a liquidity crises when he cannot increase or delay his floor planning.  A car dealer gets his floor planning, buys a bunch of cars he cannot sell, and he has a big, big problem.

No such thing exists for the lawyer.  Or, at least it should not.  Lawyers should be relying on client financing.  You charge a good fee and, hopefully in most cases, you get all or a good of that fee up front, or at least in escrow.

It is really about doing two things.  First, it is about keeping your debt and overhead at a minimum.  Second, it is about paying some attention to reducing the time it takes you to get paid when you retain a client.  If business or referrals fall off for a while, you need to be able to reduce down to accommodate the slow down.  So what if you have to eat beans and cornbread for a while.  If your business or referrals increase it needs to be for the right reasons and not because you have gotten loose with these rules.  Then you get to reap the benefits.

That is the beauty of the Third Wave practice of law, it allows you to operate off of cheap, reliable client financing.  Not expensive, difficult to pay back, interest-based financing.