In this series, Michael G. McDonald, Esq.
of the McDonald Law Corporation offers
practical advice to WC lawyers and adjustors.
As the son of an attorney, I recall listening to my father’s
stories of law, his colleagues, his firm, the courts and the
profession. He told stories about trials, discovery and evidence
which piqued my interest in the study of law. None of his stories
concerned the business of law. In fact, he told stories about
many of his peers retiring from the practice once the insurance
companies began the computerized auditing of bills in spite
of excellent results at trial. We hear the same stories today.
The profession of law requires business planning and the ability
to carry out the plan. It is my experience that lawyers are
typically not the greatest business minds. As lawyers, we may
know the law, negotiate deals and make money for our firms and
our clients. We do not typically empathize with our employees’
concerns about our firms. California law mandates set rules
by which we must abide. The employees are not viewed as an asset,
but rather a cost.
However, what happens to the money our firms make and how do
we keep our business afloat in difficult economic times?
Many young people have not experienced the economic decline
we currently have. During economic downturns small businesses
need to look for opportunities to compete against competitors
and adapt to the situation. Typically, a larger competitor may
be unable to adapt quickly and expect to perform in a “business
as usual” manner.
The Small Business Administration provides many ideas to compete
in difficult economic times. Many books have been written outlining
plans and providing suggestions for survival. As a lawyer engaged
in the profession of law, it is imperative to look at and assess
our plan to succeed, not just survive.
Business Rule 101 states that you cannot remain in business
unless you make a profit. What is your profit goal? Ten percent?
35 percent? 50 percent? Create your goal and benchmark your
How do you make a profit? The easy answer is to increase your
income and/or decrease your expenses.
First, it is important to maintain a strong cash flow and remain
as liquid as possible. Cash flow allows us to pay bills without
going into debt by attempting to obtain credit.
Second, become more efficient, and take cost-effective actions.
Be lean, but be careful not to damage your money-makers (billers).
Third, look for opportunities in shifting market conditions
to increase your business. What can you offer a potential client
that another cannot? Be aggressive and market your ideas and
Market your firm and prove you are not part of the status quo.
Seek out new business by contacting current or past clients.
The holiday season is a good opportunity to do this. Show the
potential clients what you have to offer and/or attempt to increase
your work with them. Keep in mind that attorneys and claims
adjusters are like mushrooms. They appear at a location for
a while, disappear and re-appear another time. Keep on good
terms with the adjusters and try to follow where they go. Personal
contact is a way of developing a client base.
Are your firm’s rates competitive? Are you under pricing
or overpricing your services which lead to a decrease in income?
Are there other options for billing a client? What are the client’s
needs and wants? If you are an applicant attorney, what is your
hourly rate for depositions, vocational rehabilitation, etc.?
Do you have the experience to raise your rates? What will the
insurance company do in response to your rate?
Monitor and improve your cash flow by creating regular cash
flow reports. Know where your money is going and how much is
going to each vendor. Look at the essential bills and determine
whether there are bills which can be reduced or eliminated.
For instance, look at your insurance coverage. Use a broker
and shop around for better deals. You will be surprised how
much money you may save by looking at different carriers. Then
determine whether the insurance should be paid over time (to
keep your cash reserves) or paid all at once (to eliminate an
expense over several months).
Telephone costs, overnight charges, copy charges may be billed
to clients depending on the contract. Review your contract and
determine what costs can be billed to clients.
Taxable office equipment is another item for review. Does the
city or county tax your office equipment? If so, do you even
have that equipment any longer? If not, run an annual inventory
and determine whether you are being taxed for items no longer
Fight unemployment claims if they are not legitimate. The EDD
will “charge back” your account if there are no
claims charges on your account.
Reduce non-essential expenses to become leaner. What is “non-essential”?
Will the expense increase profit? If not, it may be “non-essential.”
If you eliminate an expense, how will that elimination affect
your staff? How about the effect it will have on your billers?
Some expenses indirectly create a comfortable environment from
which your billers will give you more hours or work.
Keep an eye on your Accounts Receivables. Simply put, reduce
your AR aging by calling clients to pay their bills. The likelihood
of payment after 90 days decreases significantly. Keep on top
of the AR!
Build up your capital reserves by stretching out debt. What
does that mean? If you have a long-term lease, re-negotiate
it. If you have an inventory of automobiles, is it more cost-effective
to offer a car allowance? Target your long-term debt and think
of ways to reduce the money charges.
Involve your employees in the methods and implementation of
the cost-saving methods. This may be easier said than done.
However, our employees are the cogs which make the business
run and make us money. Give them an opportunity to assist in
the implementation and the methods to reduce costs. They may
have good ideas. Most employees understand that cost-saving
methods are just that, cost-saving. The methods are not the
first step to closing the office. Rather, they are designed
to allow for growth in the future.
These thoughts should be used to create a comfortable office
climate, not a climate of fear, slash and burn. Respect your
employees. They are people who have concerns for their jobs.
Cross-train your employees and make them more useful to the
firm. Give them an opportunity to voice their concerns in private.
Make them part of the solution to make the firm get through
this current economy in order to thrive.
Michael G. McDonald
is the founder of McDonald Law Corporation in Concord, California
and a Certified Specialist in Workers' Compensation Law, State
of California. He is a Director for the California Workers'
Compensation Defense Attorneys Association.
For more information, click
Michael G. McDonald, Esq.
McDonald Law Corporation
1800 Sutter Street, Suite 430
Concord, CA 94520-2563
Voice: (925) 363-4380
Fax: (925) 363-4352
Other locations: Sacramento, San Jose and Fresno