None of the news is good. A lot of it is downright scairy. If you haven’t kicked into a cost-cutting survival mode yet, you better start thinking about it. Take a look at just the bad news in the Rv business … in the last two days alone:
- MARY ESTHER, Fla. -- Leisure Tyme RV closed its doors today after 31 years in operation.
- Elkhart, Ind.-based Atwood, which designs and manufactures an array of products for recreational vehicles, has closed it’s West Union Iowa 120-employee plant, a year after closing one of its Elkhart plants which put 150 people out of work.
- BATESVILLE, Ind. -- Lee's RV Center filed for bankruptcy protection Feb. 12.
- LAUGHLIN, Nev. -- Laughlin, Nevada’s largest RV dealership, Paul Evert's RV Country, announced last month that they plan to close their doors by the end of April.
- GOSHEN –– Dutchmen laid off about 100 workers Friday.
- RIVERSIDE, Calif. -- Fleetwood RV closed its Riverside service center.
- STUART, Fla. -- Heron Run, a luxury motorcoach community planned near Vero Beach, Fla., announced last week that it had put its construction schedule on hold for at least six months.
- And on Monday? Over at Fleetwood the common stock now has a par value of only one penny. Folks, you can’t get much cheaper than that.
For manufacturers, it means they are holding on tighter than ever to their cash and that includes money available for settlements. You can expect prolonged delays in everything, if only to keep the money in their own pocket as long as they can. You can expect the usual tactics associated with more stalling and delay, and even more creative tactics as defense attorneys find themselves also trying to find ways to create more billable time themselves.
And what does it mean for consumer lawyers and their clients? More worry than ever over cash flow. You can expect the downward spiral of cash flow to tilt sharper down and fall even deeper. Many silk stocking law offices have already seen the defense side’s downward spiral cause layoffs to slash costs. Last week’s Law Journal had a front page article on the economics of large law firm layoffs and concluded the most cost-effective way for a firm to save money is to axe employees, the higher paid ones first.
For average consumer law firms, the crunch is real and ominous.
Firms deep into contingency fee agreements will face a killer cash crunch and already are. The “mill” firms who several years ago ramped up to “super size me” status are likely to find themselves in a supersize financial crunch just as easily as the small consumer law firm finds itself in a crunch of its own comparable size.
Switching to non contingency work is hard for all such firms, but vital if they are to survive to help consumers another day. If you haven’t started the switch yet, better start thinking about it real soon. The old saying about handling a blend of paying and contingent cases has never been truer and never more critical. It may be wish to consider throwing overboard the contingency model altogether for awhile and going to a blended "hybrid" fee model where the client pays a reduced hourly rate for your time as expended and the rest of your hourly rate is due at the end of the case, but watch your ethics requirements carefully.
Start looking to curb costs even deeper than you have been doing. Predictions are for the economy to be sour for most of the coming year, if we are lucky.
So how do you downsize and survive? There are competing thoughts. Here’s some.
Tactical reductions? Hiring freezes, reduce travel, budget cuts? That can help, but in many firms a lot of that has already been done. The economy isn’t getting better anytime soon so what’s next?
Across the board reductions in all expenses? Sure, it sounds fair but that can end up cutting too much in one place and not enough in another place.
Can continuous monitoring and improvement of expenses be enough? Sounds good but you can find yourself bogged down in penny sized details that take dollar sized amounts of time and that’s not cost effective either. You can’t ignore it, but you can’t let it be the only thing you do either.
Trim back your geographic service area? It’s obvious but often overlooked. Don’t take contingent cases on when they are 250 miles away in a courthouse that will cost you a whole day’s time for every single thing that happens. Redefine your marketplace to service the area that is most cost-effective for you.
Redefine your practice? Just because you’ve only handled one kind of case for the last ten years does not mean it’s all you can (or should) do. In this economy, you have to look outside of the box to find other areas of related and sometimes unrelated legal needs that you can help consumers fill. It’ll take time to develop a new practice area, but in this economy you may have more time than you think. And even if you don’t have the spare time, you better do it anyway or you may end up with a lot more spare time than you want. The real problem? Opening a new practice area may take time to define and then build up and you have to survive the short term crunch right now. You need improvement now and not a year from now. That’ll be too late. Find a practice area that complements what you do now. One that is a natural extension of your current practice.
Can you slash deep pocket “structural” cost reductions? You have to. The only way to make big number savings is to go after the big number expenses. It’s hateful and hurtful and agonizing, but the big ticket items in your budget have to be the first things you look at when you want to cut your costs. They are the “structural” costs to any business, law firms included. The obvious front line items are the people in the building and the building itself. Neither will be easy to do. Many businesses cut everything everywhere but not here when the truth is there is little choice. Everything else in a business is tactical and only involves relatively modest numbers in the budget. If your business is driving toward immediate trouble at 90 miles per hour, you don’t turn the steering wheel a little bit, you have to yank it to a hard side angle. If your trouble is further away, you have time to fine tune your steering somewhat, but you still better start steering your car right or you’ll end up wrapped around an economic tree. First thing you have to do is see where your own economic roadblock is waiting for you…just how far down the road can you go at the current rate before you hit the end? Okay, now start working backwards to figure out how to avoid it. Put a cost-cutting plan in place now and start implementing it now. Whether you start with big costs now or little ones all depends on how much road surface you have left in front of you.
Bottom line is that everyone around us is saying that the economy is looking worse and worse. You need to be very aggressive about cost cutting and efficiency building. And you need to do it quick. Streamline and reduce your structural costs, and change for practice model.
Where do you start?
First, you have to know where you are. Assess your assets. Know your budget and income stream predictions.
Second, forget about trying to cut costs by 10% because that probably won’t be enough in this economy. It won’t be easy, sure, but you have to shoot for at least 20% and some law firms will have to go even deeper. Still, this is reality and the sooner you start facing it the sooner you can start worrying less and the sooner your chances for survival and success will improve.
Third, look at everything. The usual belt-tightening isn’t going to work because this isn’t the usual economic downturn. Simple salary freezing or travel cost cutting and budget reductions won’t tame this monster. You will have to look at structural cuts and restructuring for survival. There are major items that drive a law firm’s costs and those big ticket items are the first place to start to get the biggest and fastest results.
Fourth, dump what doesn’t profit. Jay Foonberg once said that every lawyer should fire his worst clients once a year. You can’t wait that long. Any non-paying client is one whose case has to be reconsidered. Keep the good and throw overboard the mediocre and the bad. In this economy you can’t afford to spend your time on cases that either won’t pay enough or won’t pay it fast enough. That means two things. #1, make sure a target defendant is economically viable before you take on that new case. #2, viable defendants are fighting harder and longer so ou should think long and hard before you take on a fight that will require you to outlast a defendant whose pockets are deeper than you or your client. Tilting at windmills may be fun, but this economy is not the time or the place to be doing it.
Fifth, do it all. Cutting costs in one area will yield savings at a different rate and point in time than cost cutting efforts in a different area. You have to do it all to maximize savings right now and next week and next month and next quarter and next year. And you have to start now.
- MARY ESTHER, Fla. -- Leisure Tyme RV closed its doors today after 31 years in operation.
- Elkhart, Ind.-based Atwood, which designs and manufactures an array of products for recreational vehicles, has closed it’s West Union Iowa 120-employee plant, a year after closing one of its Elkhart plants which put 150 people out of work.
- BATESVILLE, Ind. -- Lee's RV Center filed for bankruptcy protection Feb. 12.
- LAUGHLIN, Nev. -- Laughlin, Nevada’s largest RV dealership, Paul Evert's RV Country, announced last month that they plan to close their doors by the end of April.
- GOSHEN –– Dutchmen laid off about 100 workers Friday.
- RIVERSIDE, Calif. -- Fleetwood RV closed its Riverside service center.
- STUART, Fla. -- Heron Run, a luxury motorcoach community planned near Vero Beach, Fla., announced last week that it had put its construction schedule on hold for at least six months.
- And on Monday? Over at Fleetwood the common stock now has a par value of only one penny. Folks, you can’t get much cheaper than that.
For manufacturers, it means they are holding on tighter than ever to their cash and that includes money available for settlements. You can expect prolonged delays in everything, if only to keep the money in their own pocket as long as they can. You can expect the usual tactics associated with more stalling and delay, and even more creative tactics as defense attorneys find themselves also trying to find ways to create more billable time themselves.
And what does it mean for consumer lawyers and their clients? More worry than ever over cash flow. You can expect the downward spiral of cash flow to tilt sharper down and fall even deeper. Many silk stocking law offices have already seen the defense side’s downward spiral cause layoffs to slash costs. Last week’s Law Journal had a front page article on the economics of large law firm layoffs and concluded the most cost-effective way for a firm to save money is to axe employees, the higher paid ones first.
For average consumer law firms, the crunch is real and ominous.
Firms deep into contingency fee agreements will face a killer cash crunch and already are. The “mill” firms who several years ago ramped up to “super size me” status are likely to find themselves in a supersize financial crunch just as easily as the small consumer law firm finds itself in a crunch of its own comparable size.
Switching to non contingency work is hard for all such firms, but vital if they are to survive to help consumers another day. If you haven’t started the switch yet, better start thinking about it real soon. The old saying about handling a blend of paying and contingent cases has never been truer and never more critical. It may be wish to consider throwing overboard the contingency model altogether for awhile and going to a blended "hybrid" fee model where the client pays a reduced hourly rate for your time as expended and the rest of your hourly rate is due at the end of the case, but watch your ethics requirements carefully.
Start looking to curb costs even deeper than you have been doing. Predictions are for the economy to be sour for most of the coming year, if we are lucky.
So how do you downsize and survive? There are competing thoughts. Here’s some.
Tactical reductions? Hiring freezes, reduce travel, budget cuts? That can help, but in many firms a lot of that has already been done. The economy isn’t getting better anytime soon so what’s next?
Across the board reductions in all expenses? Sure, it sounds fair but that can end up cutting too much in one place and not enough in another place.
Can continuous monitoring and improvement of expenses be enough? Sounds good but you can find yourself bogged down in penny sized details that take dollar sized amounts of time and that’s not cost effective either. You can’t ignore it, but you can’t let it be the only thing you do either.
Trim back your geographic service area? It’s obvious but often overlooked. Don’t take contingent cases on when they are 250 miles away in a courthouse that will cost you a whole day’s time for every single thing that happens. Redefine your marketplace to service the area that is most cost-effective for you.
Redefine your practice? Just because you’ve only handled one kind of case for the last ten years does not mean it’s all you can (or should) do. In this economy, you have to look outside of the box to find other areas of related and sometimes unrelated legal needs that you can help consumers fill. It’ll take time to develop a new practice area, but in this economy you may have more time than you think. And even if you don’t have the spare time, you better do it anyway or you may end up with a lot more spare time than you want. The real problem? Opening a new practice area may take time to define and then build up and you have to survive the short term crunch right now. You need improvement now and not a year from now. That’ll be too late. Find a practice area that complements what you do now. One that is a natural extension of your current practice.
Can you slash deep pocket “structural” cost reductions? You have to. The only way to make big number savings is to go after the big number expenses. It’s hateful and hurtful and agonizing, but the big ticket items in your budget have to be the first things you look at when you want to cut your costs. They are the “structural” costs to any business, law firms included. The obvious front line items are the people in the building and the building itself. Neither will be easy to do. Many businesses cut everything everywhere but not here when the truth is there is little choice. Everything else in a business is tactical and only involves relatively modest numbers in the budget. If your business is driving toward immediate trouble at 90 miles per hour, you don’t turn the steering wheel a little bit, you have to yank it to a hard side angle. If your trouble is further away, you have time to fine tune your steering somewhat, but you still better start steering your car right or you’ll end up wrapped around an economic tree. First thing you have to do is see where your own economic roadblock is waiting for you…just how far down the road can you go at the current rate before you hit the end? Okay, now start working backwards to figure out how to avoid it. Put a cost-cutting plan in place now and start implementing it now. Whether you start with big costs now or little ones all depends on how much road surface you have left in front of you.
Bottom line is that everyone around us is saying that the economy is looking worse and worse. You need to be very aggressive about cost cutting and efficiency building. And you need to do it quick. Streamline and reduce your structural costs, and change for practice model.
Where do you start?
First, you have to know where you are. Assess your assets. Know your budget and income stream predictions.
Second, forget about trying to cut costs by 10% because that probably won’t be enough in this economy. It won’t be easy, sure, but you have to shoot for at least 20% and some law firms will have to go even deeper. Still, this is reality and the sooner you start facing it the sooner you can start worrying less and the sooner your chances for survival and success will improve.
Third, look at everything. The usual belt-tightening isn’t going to work because this isn’t the usual economic downturn. Simple salary freezing or travel cost cutting and budget reductions won’t tame this monster. You will have to look at structural cuts and restructuring for survival. There are major items that drive a law firm’s costs and those big ticket items are the first place to start to get the biggest and fastest results.
Fourth, dump what doesn’t profit. Jay Foonberg once said that every lawyer should fire his worst clients once a year. You can’t wait that long. Any non-paying client is one whose case has to be reconsidered. Keep the good and throw overboard the mediocre and the bad. In this economy you can’t afford to spend your time on cases that either won’t pay enough or won’t pay it fast enough. That means two things. #1, make sure a target defendant is economically viable before you take on that new case. #2, viable defendants are fighting harder and longer so ou should think long and hard before you take on a fight that will require you to outlast a defendant whose pockets are deeper than you or your client. Tilting at windmills may be fun, but this economy is not the time or the place to be doing it.
Fifth, do it all. Cutting costs in one area will yield savings at a different rate and point in time than cost cutting efforts in a different area. You have to do it all to maximize savings right now and next week and next month and next quarter and next year. And you have to start now.
Ron Burdge
http://www.thelawcoach.com/
http://www.thelawcoach.com/
Helping Consumer Lawyers Since 1978
