Financial Crisis Management - How to Stay Afloat in Tough Times

Welcome to Accountants LawPod, where accounting professionals and law firms converge. Hosted by Lynda Artesani, Sarah Prevost, and Stephen Libhardt.

Welcome back to the podcast, everyone. How you doing, Steve?

I'm doing well. We made it through Thanksgiving, huh?

I know, first holiday down. It's funny, on my Alexa thing in the kitchen, it said, It said, how do you feel about the holidays? And it said, like, thumbs up or thumbs down. And I put the thumbs down, and I was in the 23th percentile. Everybody else is like 80% was happy.

Really?

The holidays. And then the next thing you know, I'm seeing articles about— not that they listen to you, but articles about holiday stress, which I don't really have any because I didn't cook on Thanksgiving, and I went to a friend's house.

And you went to a friend's house?

Yeah. Yeah. Amazing dinner. And it was nice seeing the friends. Although now they're getting to the age we talk about all of our doctor visits and our ailments. As I sat back and observed the group, I'm like, "Ooh, this is my future." But it was nice seeing them because they're friends from back up in Rhode Island. And then the next holiday, I already asked my daughter, "What do the kids want?" And I just really just send money and that's it. And then I'm done. And I don't have— my husband and I just do a Christmas card. We don't even do anything more than that. So it's very, I don't put a tree up, I don't do anything.

I'm like, screw it. Yeah, we stopped doing that years ago.

Yeah, I just don't bother. It's for kids. If my grandkids and I lived in the same state as my grandkids, I would definitely do it. But right now I'm like, nah. So hopefully it airs before Christmas and we're not just kind of, well, there'll still be holidays, right? 'Cause then you got New Year's. But yeah, so we could be—

I know, can you believe in the accounting world that we're gonna be in the middle of January in another week and a half and—

Ah!

Or middle of December, I mean. In another week and a half. And it's like, oh my gosh, it's sneaking up on us.

I know, we gotta enjoy these moments because it really ramps up. I'm trying to take advantage of my time, which I bet every other accountant and bookkeeper's doing, kind of going through things. And I've discovered a few really cool podcasts that I've been listening to and just like listening and learning and doing the things that we can do right now. One of the things I promised myself I would do is go through all the content that's in Clio. And I haven't done that yet. I've not found the time. Because I'm kind of running around doing a few other admin type things, but I'm really getting myself set up in a better workflow place for next year, which kind of proud of.

So— We just talked about that in our company this morning about the workflows, and we're, we're actually in the best condition that we've been in, oh, 2 years. I mean, we're really— and we've really made a lot of strides this year, but, um, we've got some stuff to tighten down next year now.

So yeah, I mean, that's— it's always the case, right? Even if you I doubt anybody ever sits back and says, yay, I'm in the perfect place. Everything's perfectly running. I don't think perfection is actually a thing. I was gonna say, in fact, with what we're talking about today, with working with getting yourself prepared, it kind of flows into today's topic, which is financial crisis management. How do you stay afloat in the tough times? I'm hoping that's not like, we're not being pro— we're just not like seeing the future here and kind of predicting. We don't know, but it's always good to be prepared. I mean, I learned that from my grandfather. So—

Yeah, yeah. And you said exactly what I was just going to say. And one of the things we're doing that we discussed this morning is I'm going to look at all of the subscriptions that we have and, you know, how are we using them? Are they serving us now? Where are we at with them? And we might do a little bit of housecleaning there to save some cash flow. And, you know, that's smart business. That's, you know, It's like when you subscribe to all these TV streaming services and all of a sudden you're like, wait a minute, I'm spending $500 a month to watch TV. You know, what can I do to change that?

You know? I actually just did that recently through all my accounts because, you know, what things did I turn on for the kids? And, you know, are they looking at them? Do we wanna keep them? I did the same thing. I turned off, I think I turned off Paramount and Hulu. For whatever reason I had signed up for them and they had been running in the background and it does, it's too expensive. And we watch the same like 3 channels all the time. And, you know, Netflix, I kept the certain ones I kept, but it's, it's definitely a place you can, and this kind of flows into even financial crisis in your own personal, right? Should you be looking at a budget? Everybody hates the word budget. It's a, it's a bad word. But I think, and what we've been talking about the last few weeks is definitely— this flows into it because if you're going to prepare for the future, preparing for a financial crisis, it's kind of the same thing. And I think if you're looking at your numbers now and you're seeing them as not the place you had put as a goal, or you're seeing them as you— because you can feel it when your business is starting to slow down and maybe the leads aren't coming, or— And with our attorney clients, we don't see that very often. But if you're seeing that as a business owner or an accountant, or because that can happen, because it does ebb and flow. Sometimes we'll go through spurts where we don't have clients, and then all of a sudden, you know, what hits the fan. I mean, I've had that. Sarah will say to me, oh, don't say that out loud, because as soon as we say it, then the floodgates open. But I think if you're in that place where you're looking at your cash flow, which is what we talked about last week, and you're saying, wow. I am upside down. Where can you— and the worst thing, the biggest expense in any, most businesses, professional services is your wages. So if you're looking at a place that you've got staff and you might have to take down some of the staff count because there's not enough work for the people that you have, that's a hard one. That's one because you're not just affecting that person, you're affecting that person's family. So, and it's hard to find good people. So I think you have to look at where, where you're at and whether or not you need to have to let go of somebody, which is really hard. And definitely make sure that you go through your HR department to see how—

Very good advice.

Don't go and just willy-nilly do it. Some states the criteria, the bar, you wanna do it right to begin with. You don't wanna have any problems.

That's right. That's right.

I think ethically you can handle it, but you just never know. You don't wanna make a mistake and not follow protocol. 'Cause when you fire somebody, you have to pay them right away, number one. But if you're letting them go and they're gonna go on unemployment, you just wanna do it in a way that's manageable for that person too, especially if you really like the person, but they're not cutting it or the work's not there. But that is one of the biggest places of the highest expense typically in a law firm is the wages. And if you need to reduce your staff, that's probably one of the first places it's going to be. The— if there's not enough work and people are sitting around, you're paying them to do nothing, that's a problem, right?

Well, the one thing with law firms too is to really tune into your staff, tune into your attorney, all of your attorneys, and see who's sinking and who's not sinking. And right-size the work. So, maybe there's a paralegal, to your point, where they're not doing a lot, but you see this attorney and their paralegal over here just swamped on a case that they're working on. Right-size that and move them over. Say, "Hey, where do you need help? Who needs help here?" Let's, you know, if you include everybody in that process, then they're not as afraid if you have to lay somebody off and they see them going out the door. It's also a time to take vacations. It's a time to—

Yeah.

Really look at how the operation is going and where you can move people around and move work around and maybe prevent having to let somebody go. And you can actually get the production up on the workflow that you have right now and turn that out, which opens doors for more legal work to come in. So, you know, it's not— to your point, it's not just cut it and you're done. You know, really look at your operation and see what you can do to move things around and do it wisely.

So to kind of restate what you said, so you want— that person should really evaluate their business, look at where there's places where, you know, somebody's not really— doesn't have the work. Maybe you can look at it where the paralegal's got a lot of work, but this attorney doesn't. And if it's a— if it's just a small lull in the business, there's nothing wrong with having that attorney maybe do some paralegal work in the interim instead of laying them off, where they're still working.

Right.

Value out of them, especially if you know it's not, and you don't wanna lose a good person because it really is hard to get a new person and it's expensive to train. So if you have somebody in place that you don't wanna lose, I think that's a great tip to kind of maybe reevaluate and then look at maybe reshuffling the workload to see if you can keep them in a position. You know, there's also, and we've seen it, at times. In fact, we just talked to some people that had a— had it really affect their law firm, and maybe the partners need to take a pay cut. We've seen that happen in our career where the person has to take a pay cut so that they can keep their staff working. But the, the boss basically takes a big pay cut or defers the compensation or whatever to keep the business running, because there's not enough money to pay for everything. So that's also another place I think you can look at. That one doesn't hurt as— it hurts bad personally, but if you can afford it, it doesn't hurt so bad that you're not affecting other people's families that really live week to week, you know.

Well, and I've said this in many of the podcasts that we've done in the past, and I say this with all humble approach, this is the time of year at the end of the year when law firms have turnover.

Yeah.

And so if you can sit tight for a few weeks and ride that out, sometimes the field will weed itself.

Mm-hmm.

You know, and so when somebody leaves, you can say, okay, we're not gonna replace this person. We're gonna right shift the work. We're gonna change it all around and change it up. And, you know, don't work from a place of panic with this. And also the other thing, and we talked about this in a recent podcast, and I'm so passionate about this, is when you're looking at, what they're making, what they're earning. Don't just look at the salary, look at the benefits, look at the taxes that the firm pays. And that's, that's the whole package for Attorney A, and this is the package for Attorney B, and so on. And have all of that in your toolbox so that you can approach it instead of a place coming from a place of fear, you're coming from a place of proactive action.

Yeah, 100%. I mean, I think that If you see it coming, you, instead of letting it go and go and go, and each week you're just falling, falling behind, it's eating out your, your cash that's in the bank. Start to proactively take control of the situation. Don't ignore it. I think a lot of people ignore it because it's less painful to ignore it every week and then hope it goes away, I guess, or not quite sure, but I think it's just easy to not confront it. So And that's part of it. I think, like you mentioned about just us looking at our personal side and cleaning up things, there's stuff on the P&L you could take and make it a business decision, which I don't know how good of a business decision this would be, but you know, you're gonna curb taking the client out for a meal.

Right.

Evaluate it. Is it going to be— how many clients have turned— how many people have turned into a client because you took them out for a meal? Maybe there's another way you can approach it that's less expensive so that way you're getting a full expense on something. And I don't know what that something is, but I think that if you can evaluate that, because sometimes we see that category is huge where there's a lot of meals and it gets abused sometimes. So I think that—

Sure.

Look at going through the P&L, looking at all the expenses, and then seeing what's discretionary. And maybe just taking the discretionary off the table. Like, this is, you know, make a list. What is needed? Not— you can't live without. And what is maybe you can live without for a bit and see where that goes and clean that up. I think that that is one of the places expense-wise. Maybe if you have a line of credit, that's a place to go. Or if you have cash, maybe start to infuse the cash, but you don't want to use it. So use it wisely, but keeping the firm going. If you're upside down, you don't have enough cash flowing in at the time, you're gonna have to use that to get through the hard times. If you're faced with that, I, I know that that's another place that you might find that. And if you are, and I've seen this from working with contractors, which when I worked with contractors, this is why I didn't pick contractors, because their business would be here and then also the economy would be down and then it would be nothing. And the owners would go without a pay and they would lay off, and it was painful, and doing the last paychecks and handing them out.

Yeah.

Awful. And I think sometimes you can go to your creditors and you can say, look, I've got this debt and I'm having an issue. Don't ignore it. Go to them and say, you know, if you have a vendor, go to them and say, look, I will pay you something, but it's not the amount you need. But during this time, make a deal with them if you can so that you can continue to pay off whatever debt you have. It's better to have the conversation than to ignore it. And everybody would appreciate that. But if you do make a deal, make it a deal that you can afford to stick with and stick with it because no one's going to want to make a deal with you again if you break your deal. Nice. So, you know.

Right. And, you know, be in tune, be in tune with your employees. Perhaps you've heard that there's an employee who's having an illness issue in their family. And approach them and say, "Hey, we're here for you. Do you need some extra time off? Would that help you out?" You know, and think about that. Like in the state where I live, we have a family law clause in the state laws now that protects employees in times like that. So, if they can prove that they need to be there to help that family member who's ill or, you know, needs that extra support, they can still get some money from that fund.

Mm-hmm.

And make and be okay. And they'll so believe in you for caring about them.

Yes.

You know?

And it's a nice thing to do 'cause it's really hard if you have to bring the hammer down and start to reduce staff. I think that that's the worst thing. I think too, and I think about, 'cause COVID really was eye-opening for a lot of different firms.

Yeah, yeah.

Some firms really got hit hard where they had to pivot. And I think of a good friend of mine, Chris Maxey, who was in the restaurant business. So there's an industry that got hit real hard.

Sure.

I signed up for his, and I would never have done this, but I signed up to read his newsletters because I was curious knowing how brilliant he was. I was curious in how his industry, because he's one of the first people I thought of, like what's gonna happen there? And I watched how they, restaurants pivoted and he had all these articles, helping a lot of clients and they started to deliver meals to the house. Exactly.

Liquor stores were doing that, you know?

Yeah. And now that's kind of become a normal thing where you can actually never leave your house because you've got Uber Eats and they'll just come and bring it. But none of that existed before the pandemic. So I think that being, taking the chance on and being, thinking outside the box can really help you in a tough time where you're having a financial crisis happening? How can you maybe change what you sell? If, if what you're selling to clients is— Oh, where did that come from? I guess that's not a good tip. But if you're— what you're selling to clients isn't working for whatever reason, whatever your niche practice area is, how can you shift? And the shift might mean that you need to make all these tips that we just said a factor in how you get through that time. But if you pivot, you might find that as you creatively change what you're doing, you might find that you're in the opposite spectrum at the end of the day because you made the change. And I know I've had a lot of friends that during the pandemic, I can remember having conversations like, I think I wanna start my business. And I'm like, but who starts a business during a pandemic? And, and I had a couple of friends that actually did that and they're still in business today. Cuz a lot of businesses went outta business in the pandemic.

So— We got busier.

We got busier. Yeah, we did. Well, we had all the PPP stuff and all of that stuff, right? Another thing you can do too is you could, if there are perks for working for you, and I'm not recommending like taking benefits away, but if there are things, if there are ways to lower what you gift out, maybe you are giving things out that aren't necessary. I think what you said about talking with the staff is really important because maybe start to talk to the staff and they're like, well, we don't want to lose Susie or Mary or John. Can we just take less hours so they can stay on? And that might be a resolution to the problem. There's just so much you could do.

I mean, if you have a, if you have a potential partner coming up the pipeline that, that you're— you've already started the dance of maybe bringing them in as an equity owner in the firm. It might be a time for their buy-in.

Yeah. Yeah. How else can you get money in?

Right.

That's definitely— yeah, I think that's definitely a way you can look at it. It's just, I think if you take the time to really analyze your business, look at the scenarios, if you're starting to see that there's something happening And how can you stay afloat? What's worst-case scenario? Maybe look at what worst case is, and then try to figure out what caused it, because it might be the economy is something simple like that, but it could also be something that you didn't see that you spent money on that just failed. And what could you do different? And then really take the time, instead of being Debbie Downer, take the time to look at what did go right.

Exactly.

And that's gonna help you figure out where you're gonna navigate this to, because I think that it's an opportunity too. If work is slowed down, where can you make improvements on what you sell? If it's a service, it's how can I make my service better to entice more people to—

Or maybe you bring in a whole new line of, of service. Maybe you've never done a certain type of law, but you've been interested in it. Go ahead and jump off the diving board and bring it in, you know.

Yeah, just change, change overall. And then maybe it's just not changing the world, changing a little piece of it and testing it out because you have the time and the wherewithal to take the risk of adding an additional practice area or service. And see where it lands. Maybe you test out a different way of being. Maybe your problem's got to do with cash flow, with not being paid, and maybe you change how you're being paid. That could be something very simple. Maybe you accept credit cards. How many times we work with clients, law firm clients, they're like, oh, I'm not paying those fees. And then you're like, look, I just had this conversation with my husband with the condos that we own, and they're sitting on the beach, and they are not rented, and they're beautiful. They're brand new. But why? And is it the price tag that we were told by the broker to list them at? Oh, sure, sure. Reduce that and get people in the door because right now an empty unit or having some money, some cash coming in, and that's a perfect example of a crisis. I mean, we bought beautiful condos, re-renovated them, and then the hurricane came in and everything fell apart because you couldn't rent them and the buildings were offline and they didn't have power, they didn't have water, they didn't have everything. And all that infrastructure's been rebuilt. But we're sitting here with now all of these things coming back online one at a time, but the properties still look a little rough because we had two more hurricanes recently fly through. But now it's cold up north. So what are we doing wrong that we're not having people call and want to rent these? And you know, they have to be rented for 30 days. They're right on the beach. Mm-hmm. What's wrong? Is it the number? And if that's the number, what do we, what if we try $1,000 less a month? What happens there? Uh, you know, my husband's like, whoa, we'll just cut the price in half. I didn't say cut it in half. I said just take a little bit off. And we had the same thing happen back in 2008.

'08.

With the con, uh, apartments. We had a lot of apartments and all of a sudden people were moving out and moving back home and we're like, what the heck is happening? Before we realized and we had empty units and we had pushed the rents up to a certain level and we started to roll them back because again, something's better than zero in the rental income category. And come to find out, when we rolled it back, we were back to levels that were 10-year earlier rental amounts with current-day tax—

The bubbles always pop, you know.

But we had to ride it out and it was better to have some money coming in than none. And even by rolling back the rents, we didn't get as nice a quality tenant, but we had people, we had bodies in the building because we were funding the properties to keep 'em going. It was coming out of our savings account to keep the building running. So you want to at least have something. So sometimes something's better than nothing. And I think, When you're looking at a hardship or a hard time, you gotta do something to get through it. And really maybe talking to your accountant or your bookkeeper, and it's embarrassing because maybe it was something that you decided to do and it failed, and you have to sit there and say, you know, I tried this, it didn't work. But we're not mean people. We're more than happy. We wanna help. Accountants and bookkeepers wanna help everybody. So I think that if we are kept in the conversation, I think that would help. And maybe we'll have an idea that you didn't think of.

Well, here's an idea. I'll give you an example way back. You know, I used to own Denver's Premier Day Spa. And when 9/11 happened, same thing as the pandemic, we freaked out because people were not going to come for massages and facials. And, you know, they're gonna stretch out the time on their hair coloring and all that sort of stuff. We sat down and took our team leaders and we called every single client that was in our database and said, we're here for you. This is probably a really stressful time for you. You know, these are the discounts we're offering this month if you come into the spa and have services. And then on the flip side of that, we took all of the employees and we said, make sure everybody that comes through for a service that you pre-book them for their next service. And in the legal arena, both for law firms and for accountants who service law firms, don't be shy to pick up the phone and call all of your past clients and say, how are you doing? How's your business doing? And just start that conversation with them and you will find that you can mine nuggets out of that to bring in more business. It works.

And that's so true. I think of that sometimes when I go somewhere and they don't ask me, what about let's set up another appointment? Why wouldn't you ask that question as I'm walking out the door, right? That's gonna hook me into doing another appointment. And even if I canceled it later, at least you, you got them to do that. And I think sometimes that's a missed opportunity. So what missed opportunities are out there As you start to evaluate everything in your business, what missed opportunities are there? And what can you do to change? And what can you do to make your service something that somebody can't wait to just work with you again on? And if not work with you again, because the opportunity with a law firm doesn't work, where can you go that would make a good referral? And, and how can you bring in more business in the door? And that's something we really didn't talk about, was how do you get more business in the door? And that might be your marketing. And maybe there's something in your marketing that you can do. Sometimes that's a category that's the first category cut when things go bad.

Yeah.

Yeah. Sometimes it's the worst category to cut, but you got to look at what's working and what's not working. We see a lot of times where attorneys will spend a lot of money on marketing and then not follow through to figure out what is working. If no one's tracking where the leads are coming from, how do you know what's working? If you have all these different— Exactly. Out there, you got to figure out which one's working. So Yeah, well, this was not a happy topic, Steve.

But it had— we generated some ideas and some thoughts to think about and, and, you know, ways to look at this. One other final thing. Mergers happen a lot during, during difficult times. And so, you know, you can position yourself that way. And you know what, if all of this that we're talking about today is for naught, guess what you just did? You just— you looked at your business You looked where you could save money, you looked where you could make more money, you looked where you could tighten things up, and you'll come out ahead. And back to including your team in it, you'll be a hero.

Very true. Good point, Steve. Good way to end it. Thank you.

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Well, let's hope we have a better topic next week. Actually, this was really good. I have to say this was good. I think there are people out there that are facing this and it's a good topic to address. And, and really, if anybody needs help with evaluating, just reach out to us. We're more than happy to help. Yeah, I think this was a good one.

I do too.

We had—

I do too. Thank you so much.

Take care, everybody.

Bye.

Bye.