Law Firm Brinksmanship, or the (Approaching) Death of a Practice

I recently heard a story on NPR about Whole Foods ceasing sales of many types of fish because they are overfished and in danger of disappearing. My first thought was that humans, as a species, are culturally conditioned to brinksmanship. We push everything to the very edge, then when it starts to hurt too much, we pull back and change things. Hopefully not too late (see “warming, global).
“Brinksmanship” led me to another unpleasant thought. In the last several weeks I have had to tell three attorneys that “this practice can’t be saved.” Not because they weren’t good lawyers; not because there wasn’t demand for their practice areas, but because they had ignored the signs of changing times. All three were in similar situations: precipitous drops in revenues, and out-of-pocket subsidies over too long a time while waiting for “things to return to normal” and doing little or nothing to increase their marketing or refocus their practices.

Unfortunately, things are normal – the new normal. All of them had exhausted nearly all their personal monies and couldn’t sustain the six months or a year it would take for them to re-think, re-direct and rebuild their practices. They had gone over the falls and were trying vainly to figure out how to swim back up.

A Measure and a Warning
IF – your practice revenues have dropped more than 20% for two quarters in a row –
IF – you have been waiting for “things to return to normal” –
IF – you have been subsidizing your practice from your second mortgage or IRA or kids’ college funds —

DON’T WAIT ANOTHER DAY.
Take action NOW –
— Pore through the articles & tips on my blog.
— Find everything you can on Bar websites about marketing.
— Join the ABA Law Practice Management Section and delve into the voluminous archives of Law Practice Magazine.
— Find the websites of other law practice development advisors & glean everything you can.

Then – STOP GATHERING INFORMATION AND SWIM LIKE CRAZY.
Your most important job is NOT (and never has been) “doing the law.” It’s making sure there is law to do – in other words, marketing. So start DOING rather than worrying about what to do. If you need some direction, call me.

Don’t play brinksmanship with your future.

Older Lawyers Subsidizing Failing Practices While Younger Lawyers Are Homeless

Three years ago I offered a succession planning program to Bar associations around the country with the warning that there was a crisis looming on the horizon relating to the aging of the profession. It was greeted with yawns. Now the subject is plastered all over the covers of scores of national, state, and local Bar publications.

Unfortunately, neat and tidy “transitions” are not in the cards for huge numbers of solo and small firm attorneys.

In a recent presentation to a malpractice insurer I observed that I am seeing a growing number of previously successful older lawyers who are now subsidizing their  failing practices with their retirement funds, until both the attorney and the funds are exhausted, and the attorney surrenders.

While this tragedy is in process, there are literally hundreds of young homeless lawyers who would be willing – no, enthusiastic – about teaming up with the senior lawyer to revitalize the practice, and gain the mentoring and direction of the older lawyer.

As I see it, the issue of  “transition,” as it’s neatly referred to, is really an issue of professional life or death for those at both ends of the career spectrum.

My friend Jordan Furlong, in my mind the most accurate and thoughtful of the futurists, in his blog Law21: Dispatches from a Legal Profession on the Brink  http://www.law21.ca/ quotes some truly frightening statistics from the U.S. Bureau of Labor Statistics. He reads the statistics in this way: “over the course of this decade, 440,000 new law graduates will be competing for 212,000 jobs, a 48% employment level.” This while literally thousands of senior attorneys are trying – and failing – to land their practices safely and retire.

Yes, certainly many are in the “commodity” areas of practice that are being killed off by the likes of LegalZoom and Rocket Lawyer. But many are in higher-value areas, and simply have not kept up with new marketing methods or, frankly, the die-off of their best referral sources. Many others are in smaller communities – where I believe the best opportunities still exist for newer attorneys to find a good income and a wonderful lifestyle – because in those areas “goodwill” (that is, reputation and connections in the community) still has value.

For thousands of younger attorneys who are struggling to survive in a raging sea of competition and change, the opportunity to team with a senior lawyer with reputation, skills and connections would be a godsend.

There are a lucky few lawyers who will be able to “sell” (or whatever their Bar associations call it) their practices for some amount of money. But there will be more, far more, whose successful careers will come to a sad end, as T.S. Eliot put it, “not with a bang, but a whimper.”

Watch this space. Over the coming months I will be providing more information to both sides of the aisle. I will also be working  in conjunction with Bar associations across the country to help senior attorneys make more successful transitions, and help younger attorneys connect with them, and work together for the benefit of both.

Oh, the Places You’ll (Fail to) Go: How Great Intentions Turn Into Great Disasters

Each time I’m called to conduct a retreat, I’m reminded that lawyers are great at lawyering, but often stink at anything relating to effective business operations. One recent “retreat,” actually an informal mediation in a year-old two-attorney merger, was typical.

Musing 1: The Shoemaker’s Children Have No – Common Sense.
Two plaintiff attorney “partners” had been working together as a “firm’ for over a year without anything in writing. No shareholder agreement. No compensation/origination plan. No shared responsibility for the credit line. No employment agreement. Now these two, who had started out as friends, were trying to sort out all the “I thought you” and “remember we discussed” and “I don’t recall,” “you owe me for…” and “I deserve…”

The result was predictable. Nearly all the optimism lost, fear and anger rising. On the verge of MAD – mutual assured destruction.

I was called in to see if this “partnership” be saved. After a tough day, we were able to work through most of the issues without bloodshed. But in the long term, even if the partnership proceeds, the friendship and trust will remain wounded – unnecessarily. All because they didn’t make it a priority to work out all the issues BEFORE moving in together.

Do YOU have a partner agreement & compensation structure, or just a handshake? “We trust each other” won’t be enough when big enough problems surface. Take time now to get it all in writing.

One partner dispute I remember from the distant past resulted in seven years of suits and countersuits. Worse than breaking a mirror.

Musing Two: Cancer Sometimes Masquerades as a Friend
The two above partners wanted to make it work. Unfortunately, one attorney’s longtime trusted right hand staff member didn’t want her world disturbed. Like a spoiled child, she subtly spread rumors, created dissension, and destroyed staff trust. Her sabotage and lack of cooperation was close to destroying the attorney’s trust in the incipient partner. Fortunately we were able to finally recognize the problem. If blind loyalty trumps a better future and staff is running the firm, it’s time for the attorney to turn in his diploma.

Musing 3: Succession Planning Isn’t for Wusses.
The purpose of the merger, such as it was, was to create a succession plan for the senior attorney. Unfortunately, it was approached in the same way as the “partnership.” No plan, no structure, no idea of what was needed to make it work – and a deep paranoia from the senior partner, even though the whole idea was his in the first place.

Succession planning isn’t for wusses. Attorneys who think they know everything too often end up failing miserably at the process. And both the senior and junior attorneys end up losing literally hundreds of thousands of dollars in personal income.

What we grudgingly cobbled together in the retreat worked for a few months. But presently the two are in a legal and financial struggle to the death, which will entail multiple lawsuits and mutual bloody clubbings in court.

If you’re looking toward a transition of any sort in your practice, doing it right takes planning and expert guidance. Anything less could be one of the most expensive mistakes you’ll ever make. Don’t do it blindly or ex post facto. Get expert guidance. Not sure where to find it? Call me. 407-830-9810.