A while back I wrote this post discussing how the economy has impacted your client and why you really need to consider how you are building your practice as a direct result of the financial changes influencing your client’s lives.  Too often we just consider our own needs, overhead, student loan payments and more. And in turn we pass this desperation along to our clients by wanting to ante-up our fees instead of rethinking our fees as a result of understanding ‘The Big Picture.’

When you consider the big picture, what is going on in the world, our country, our state, our county, our town, our neighborhood, you’ll start to grasp the enormity of what is really happening and how it will impact your practice and your ability to attract paying clients.

I recently had a discussion with the marketing representative from a large company unrelated to the legal profession and they asked for my candid opinion about their product and services and their image.  I said,

‘Your image is off-putting and your spokespeople unrelatable. Your company is touting the good life, your representatives discussing golfing,  fine dining and lavish trips. I can’t relate to that.  And your intended audience is definitely not relating to your products and services. Not only can’t they relate, they no longer can afford your products and services. They are too busy trying to put food on their table and not lose the roof over their heads.”

There was a disconnect and insensitivity in the message and she was alienating herself from the very people she was trying to engage to use her products and services. Her message and her pricing were so 2006 when everyone was living in fantasy land raiding their home equity lines, delirious on cheap credit and the only frontier left to conquer was the holy grail of living – work/life balance. She was not focused on what was going on in the lives of her intended audience.

Welcome to the Cautionary Generation:

In a Special Report published in April, The Economist looked ahead and saw that “In the next couple of years the businesses that thrive will be those that are miserly with costs, wary of debt, cautious with cashflow and obsessively attentive to what customers want.”

If these companies turn a mirror to their customers and prospects, they may see the exact same traits. (from T-3.com)

So, let’s revisit what is going on in our United States:

I always mention deflation as a time when prices fall, which sounds great.  The problem with deflation is that not only do debts remain constant, but incomes fall as well.  The early signs of falling wages are here, and the long-term ramifications are not comforting.

Professor Kenneth Couch did a small and obviously not exhaustive study of workers in CT and found that those returning to work after a period of unemployment were taking an average of a 40% pay cut.  As the WSJ reports, in previous downturns the pay cut was not as large, and it still took 6 years for workers to regain 80% of their previous pay.

In the next 12 months, look for wage growth to go negative.  The implications for foreclosures and consumer spending are obvious. (H.S. Dent, Jr.)

Don’t be fooled by your neighbor’s seeming affluence:

The severance economy — unemployed Americans who use severance pay and savings to maintain their lifestyles. Many lost their jobs in 2007 and 2008, and thought they’d soon find work. Now, they’re getting desperate. Last week, lawmakers passed a bill extending unemployment benefits up to 20 weeks. Unemployment benefits, which typically last about 26 weeks, were expected to run out for 1.3 million people by the end of the year, according to the National Employment Law Project.

All of this is happening as the long-term jobless rate hits its highest point on record. More than a third of those who are out of work have been looking for more than six months, making this category of unemployed the biggest since the Bureau of Labor Statistics began tracking it in 1948.

And even if you target those that still have real money you will find:

Behavior changes at all income levels

Think of it as two different groups …. — spenders and savers. Even those with the most money, however, are not spending freely.

The truth is our society is being forced to change en masse and it will be a very long time before they will ever change back to the days of excess and drunken spending.  And as we have all learned, legal fees are not excluded from this change.

(And for those who think their practice area is safe, no practice area is safe.  Not even contingency work. Why? If you know your client’s case is worth $240,000 after 3 years of litigation and there is an offer on the table from a smart adjuster who’s done a little checking into your client’s background and found he’s out of work, home close to foreclosure and throws out a settlement of $45,000 you have to bring to your client, he’s betting and may be right, they’ll grab it.  Their goes your $80,000 fee reduced to $15,000.)

As people are being forced back to concentrating on life’s basics, like food and shelter, legal fees for what is perceived as discretionary or something they can handle themselves (Google is now wading into free legal research) will be the first to go unless you can make a compelling argument as to why they are wise to spend money on these legal services. You need to not just show them it is a more intelligent choice to hire you, but the actual value to them in doing so, that intelligent spending on appropriate legal fees is very much a part of this new economy and reflects their changed values. It’s not necessarily an easy proposition but one you must figure out. This will be the thrust of your marketing message. It requires thought and understanding about what makes your client tick.

It can’t be a false message, however.  You have to create a practice which allows you to deliver on your promise of reasonable pricing and value which your client will be looking for. This requires making real changes.

It is a multi-pronged proposition.

The key is for you to run a very smart and low-frills law office.  This doesn’t mean not spending money on programs, services or equipment you will need, but spending money wisely with the goal of keeping your overhead to a lean 25%  or less of every dollar earned. This gives you the greatest flexbility when it comes to your pricing policies.  If you can keep your costs to a minimum without compromising service you will be able to adapt to this new, less affluent economy, while still reaching your financial goals.

This may include starting out (or staying) home- based, possibly with virtual law office technology;  SaaS (software as a service), unbundling your legal services and expanding your demographic reach; keeping your marketing at low-to-no cost by maximizing your presence on the internet.  The key is not to compromise or eliminate critical elements of what you need to run your office, but to run your office intelligently by taking full advantage of what is available today to keep your costs very low.

Payment plans will by necessity have to become more creative. As people may no longer have traditional currency to exchange for your services, look for major growth in barter as these potential clients still have their own skills to market for those services they need in return and this includes legal services.

Expanding your practice areas will be critical. A recent article in the Connecticut Law Tribune highlighted solos who are expanding their practices areas out of necessity because they are not getting enough business.

Lawyers statewide in Connecticut have begun noticing some unfamiliar faces in their area of specialty. And given the state of the economy, they don’t think it’s a coincidence. They say solo practitioners or members of small firms have been forced to branch out in order to stay afloat financially during lean times.

“When that business drops down to low levels people need to find ways to keep their offices going,” said Stamford Public Defender Barry Butler, who’s noticed an influx of new faces in the criminal courts in recent months. “So they start dabbling in areas they wouldn’t normally have to go to or prefer.”

I’ve always maintained you should be conversant in more than one practice area.  You are trained to find answers, fashion an argument and advocate.  That is your skill set and it is not unique to one practice area.  You need to capitalize on this, especially now.  And when times get better, you will be happy you did because you will have more versatility and options. This brings me to another point.

Let your current clients know that you handle other practice areas.  These are clients who already know, like and trust you.  Don’t lose them to another lawyer because you don’t do the type of work they need.  It is not a luxury you can afford today and it’s not the grievance trap one would think as noted in the article from the Connecticut Law Tribune. It’s not multiple practice areas which generally trigger grievances and/or malpractice, it’s too much volume.

….many lawyers avoid ethical lapses by asking for help from other lawyers. More common, Dubois noted, are complaints that stem from a lawyer taking on too many cases in too many areas and failing to properly service clients or communicate with them adequately. “We see lawyers overwhelmed by their volume of work,” Dubois said.

The upshot of all of this:

1. Understand the economy

2. Appreciate what your client is going through

3. Lower your overhead costs but spend wisely to increase efficiency

4. Get creative with your payment plans and options

5. Maximize all low-to-no cost marketing options

6. Get educated on new practice areas

7. Expand your practice areas and demographic reach

8. Tell your current clients who already know, like and trust you about your new practice areas

If you can appreciate the wisdom of this advice, implement these strategies effectively and stay afloat during these next challenging few years, you will be in a successful business for the rest of your professional career.