This is the first of a four-part series that examines possible strategies and tactics to prepare your law firm now for the next recession. Some of them also can produce good results now — even without an economic downturn.
The experiences of law firms in responding to the Great Recession of 2008-2012 provide some interesting case studies in financial management in a crisis. Some law firms were very successful — in fact improving their profitability even as fee revenues fell sharply. Others muddled through. Still others failed.
Although reflection on recent events is worthwhile and can be highly instructive for any law firm, it is not to soon to consider how to "recession-proof" your law firm. For some firms, "recession-proofing" against the next recession might involve some radically different behaviors than might have worked, with varying degrees of success, in the past.
Recession proofing your law firm will not make you immune to the business cycles. However, it can help your firm to achieve at least these four goals:
- Mitigate the effects of a recession on your firm's profitability
- Shorten the duration of those impacts
- Support a more robust financial recovery earlier than for other law firms
- Better prepare your firm for the next downturn
Alas, there is no easy formula or "one size fits all" solution. However, we have identified three characteristics of law firms that not only survived sharp, multi-year downturns in financial performance, but actually emerged stronger than before. Each one of these strategies needs to be custom-tailored to the realities of your firm, and the relative priority and probable success of each one will vary from firm to firm.
1. Pay close attention to the business.
2. Look for innovations in client care.
3. Master new, dynamic approaches to planning.
These are not academic models or vague "best practices." They are practical approaches that work. We have observed law firms use them not only to survive an economic dislocation, but actually to emerge from the crisis stronger than before — and usually without slashing needed investments in the firm's future or Draconian layoffs of personnel.
In our next post on this subject, we will examine just what "pay close attention to the business" means in the ever-shifting strategic context that has become a driving force in the life of most law firms.
