What Should Lawyers And Accountants Worry About In The Current Economic Downturn?
Bruce Marcus has a great article about the economic downturn. I love his analogy:
"An economy is an hydraulic system – a closed system in which pressure at one end translates into pressure elsewhere in the system. In other words, nothing happens in an economy without reactions elsewhere in the system. In economics, there’s the added element of fear. Fear of the known and fear of the unknown, which is the worst kind, and adds to the pressure."
Here's his advice for lawyers and accountants:
Are there defensive measures to be taken? Yes (except maybe for those lawyers and accountants invested in mortgage backed securities). The answer lies in firm management. And do it now – before the deluge hits your firm.
- First, reassess the situation. Check your client list for potential weak companies. Weak companies that may be caught up in the economic downturn become slow payers, and then no payers. Either increase collection methods, or be prepared to let them go and cut your losses.
- Second, check your firm. You don’t want to give up real talent, but in today’s climate, you don’t want to carry staff (including partners) who aren’t carrying their share of the load.
- Third, think productivity. Review all your management processes, from partnership agreements to cash flow management to marketing. Make sure your electronics are up-to-date, and are really saving you money. Look for potential return on perks and club memberships. Preserve capital as best you can. And take your banker to lunch – you may need him or her.
- Fourth, look to your marketing. It’s not an expense, its an investment. If you use it wisely, and give the marketing professionals a chance, sound marketing may give you the best return on your investment.
- Fifth, pay closer attention to the industries your major clients are in. That’s where the early warning signs will be.
And finally, the economy really is like an hydraulic system, which means that anything that happens at one end will eventually get to you. Pay attention and avoid surprises. You may come out ahead of the economy, whether it’s a recession, depression, or phase of the moon.
As companies deal with the changed and changing economic climate, some will struggl more than others. As much as economic downturn makes it more difficult for everyone, it can also create opportunities for smart people and organisations with their eyes open. Lawyers, accountants, risk managers, actuaries, corporate finance experts all have important roles to play in rehabilitating struggling companies, managing the elegant decline of others, and raking through the ashes of those that collapsed in a hurry.
However, there are risks here too. A long term view past the current cycle to position your organisation for success in the next phase is important to build a successful, robust and sustainable organisation. Be seen to prey on struggling firms may backfire if not managed professionally. Emerging the other side of a tough economic period can do wonders for your reputation and busines pipeline in the successful times as well as the next downturn.
I'm glad marketing got a look in here - and even more impressed that it has been noted that it is an investment.
When the tough times hit, the marketing budget is usually the first casualty - often a fatal mistake.
Then again, depending on your situation, marketing does not have to cost an arm and a leg - but it has to be well planned, focused and consistent to reap the rewards - and doubly so in a wobbly economy.