After two years of riding high on a post-pandemic wave of stunning financial growth, some in the legal industry are now bracing for a recession. And while a recession might be a worrying prospect, it also presents some great opportunities for law firms and their business.
Making good decisions ahead of time and taking actions now can help ensure that your law firm not only survives during tough economic times, but thrives. Here are some ways your firm can better prepare for a coming recession, grow in your business, and engineer your own soft landing – no matter what happens.
1. Protect Your Cash Flow and Customer Base
Two lifelines that must be protected when trying to recession-proof your law firm are: cash flow and customers. Without a healthy inflow and outflow of cash, your firm fails. Decreasing expenses is key to controlling your outflows of cash. And maintaining positive relationships with your customers and clients will help you retain and grow your business.
2. Diversify Your Law Firm’s Offerings
As part of the services industry, it is important for law firms to look at what services they offer and how they offer them. Your law firm can become more efficient and more effective with more diversification in your legal services. Diversifying your law firm’s offerings can help further reduce risk for your business if/ when a recession occurs. Expand your services to more audiences, extend your service(s) portfolio and diversify your workforce strengths. Ultimately, diversifying allows your law firm to deliver more services in more ways to even more clients, resulting in greater and more diversified revenue streams.
3. Invest in the Right Technology
By being forward-thinking and investing in the right technology for your firm, you can save money, be more efficient, better serve your clients and better focus on the day-to-day activities that contribute to your bottom line.
4. Invest in Yourself and Your Business
While recessions certainly bring several challenges, they also present several economic opportunities for lawyers and their firms. The key is to seize these opportunities when they come. For many companies, signs of an onset recession causes them to buckle down, put off new projects and cut overhead. For resourceful law firms, however, recessions can create great opportunities for increased client acquisitions, less-expensive marketing initiatives, untapped business segments and greater law firm growth.
5. Cut Excess Expenses Now
It is easy to justify cutting expenses during a crisis; however, smart business leaders know that it is just as important to make tough decisions during the good times as it is the bad. Law firms need to take inventory of their excess expenses. Go back and analyze your budget and get your law firm in order economically. What is your net income? What are the unnecessary expenses in your firm? Who are your top performers? How can you increase your top and bottom lines? By taking an in-depth look at your law firm and its parts, you can better determine which factors are key to your firm’s overall performance and success; and which factors can be eliminated in order to run lean before the next crisis comes around.
6. Build a Recurring Revenue Model and Increase Reserves
There is no better way to control your law firm’s future, weather a recession and keep your business moving forward than having a profitable, sound business that has monthly recurring revenue and generates cash. Track your profit margins and operating cash flow to build a reserve runway.
In Summary – Don’t Waste A Recession
Economic dips are inevitable, but taking the right steps to properly prepare can help your law practice come out on top during recessionary times.