It seems every year there are those who get in front of the press and claim that there is a looming recession that is about to envelop the country and if there is no action, the depths of it will surpass our worst fears.

• Housing starts are down 24% from a year ago. The median sales price of existing single-family homes has been falling all year, according to the National Association of Realtors. A person's home is the largest single asset and the source of a sense of prosperity for most Americans.
• The value of the dollar is near an all-time low [ ]. The dollar is worth the same as the Canadian Loonie currency.
• The price of oil spiked at $100 per barrel on January 2 and has settled at an exorbitant $92 per barrel.
• The US trade deficit widened sharply by 9.3% in November to a larger-than-expected $63.1 billion. The trade deficit has widened to its highest level in more than a year.
• The "credit crunch" means that investment capital is difficult to obtain. Banks and investors become wary of lending funds to corporations, thereby driving up the price of debt products for borrowers. Citigroup, the nation's biggest bank, announced a stunning $10 billion fourth-quarter loss. The Kuwait Investment Authority — a foreign country — is expected to bail out Merrill Lynch with a $4 billion investment.
• The cost of the war in Iraq over the past five years is now approaching a cumulative $500 billion, or about $100 billion per year on average.

Related posts

• Managing Partner Forum Attendees: Business Development Most Effective Way To Improve Profitability
• Who Your Clients Are Can Sell Others on Your Law Firm
• Top 25% of Law Firms Earn Margins Above 40%
• Not Polite Conversation but Law Firms Should Follow Apple's Strategy
• New Blog Mentors Law Firm Associates

The health care plans offered to law firm employees and principals have to be competitive.  As a people business, this isn’t an area you can shortchange. Nevertheless, we are talking big bucks, and health care cost needs to be managed.   The Juris Law Firm Economic Survey conducted in 2006 found that across the board, 40 percent of midrange law firms do not competitively bid health care plans. Without competitive bidding, costs are not likely to ever decline.  Your costs are going in the other direction—up! You can just about guarantee two-digit increases year after year.

As for the 40 percent of law firms who do not get competitive bids, my guess is that it is a matter of “out of sight/out of mind”.  They don’t competitively bid simply because they never consider the issue until its renewal time. When that happens, it is too late.  No one is going to let their plan lapse while they look for a better deal.   If your health care plan renews each January, you need to be shopping in June. Have your HR person or Administrator put health care shopping on their calendar at least six months in advance of the renewal date for your existing policy. From experience I can tell you that shopping your plan, especially if you have not been doing so on a regular basis, will produce more partner income.

Secondly, don’t ignore the opportunity for savings through making small changes that will not significantly impact participating individuals.  Small reductions in co-pays and deductibles add up to big overall dollars.  The predominance of two-income families today means that people place their family coverage with the employer offering the lowest employee cost to add family coverage.  That makes it prudent for you to require some employee contribution for family care. 

Adding health care savings accounts, on the other hand, can increase benefits for the firm’s people without increasing the law firm’s health care cost.  Only about 25 percent of law firms surveyed have made the effort to add health care savings accounts.  One of the benefits of outsourcing payroll to ADP or other equivalent payroll providers is that they make handling things like health care savings accounts easy.

Law firm surveys like the annual Juris Law Firm Economic Survey provide a blueprint for things you can do to improve financial performance and better control expenses like health care.  They do that by shedding light on what others are doing.   With that in mind, let me remind readers that Juris’ current survey will be put to bed after June 30.  You still have a few days to participate.  If you do, you will automatically receive a free copy of the survey when published.  That is a $495 savings, but the ideas you will pick up to improve financial performance within your firm will be the big payoff.  Ask your accounting person or administrator to complete the survey today by going to http://www.jurisinsight.com/2006survey.

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income contact Juris National Sales Center:

 877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Related posts

• No related posts.

Every law firm should be smart about managing cost and the following tips will help you do so.

FOR FURTHER INFORMATION, CONTACT JURIS AT (877) 377.3740 OR INFO@JURIS.COM

• Don’t fall for volume discounts to buy more than what you need. The vendor wants to unload tons of inventory on your back. If you buy more than you need, chances are you’ll waste more, and waste almost always wipes out volume discounts.

• Avoid long-term commitments (leases, etc.) as much as possible, most especially on products and services that are marked by a deflationary trend. The provider will offer you discounts to sign up for two or three years on telecommunications, office equipment, software, etc. The price of these technologies tends to keep falling as a result of Moore’s Law. By “staying short,” you can typically reduce costs.

• Be smart about office space. It’s good to be a little squeezed. So squeeze first before expanding into new space.

• Treat technology expenses as normal ongoing expenses instead of periodic capital purchases. Buy a little bit every month. You’ll smooth out your cash flow, keep your technology more current, and probably lower your costs too.

• Renegotiate your health care insurance as often as you can stand and don’t do it at renewal time. Also, look at co-pays, deductibles and penalties for unhealthy behavior (e.g., smoking) and offer flexible spending plans.

• If you have uneven cash flow, you might be dipping into credit lines often. Credit lines also tend to come with fees attached whether you use them or not. It pays to review your banking agreements to ensure interest rates are competitive and to look carefully at bank fees. You can usually negotiate better rates.

• Always compare unit costs and terms from current vendors to the competition. First, rank your overhead line items from high to low. Start at the top to avoid spending two weeks lowering the cost of pencils to save eleven dollars per partner. Next, look at material costs from non-critical vendor relationships (e.g., office supplies) where there is lots of competition and service really isn’t an issue…just price. Simply call and say, “Give me a better price or I’m outta here.” There are plenty of third-party outfits that will audit bills for accuracy, compliance with terms, and to compare your costs to the competition. As you move into more complex vendor relationships such as a software provider or your health care provider, you must take more account of quality of service and whether the vendor is delivering on their promises. For these relationships, it might save more to simply work together to improve the level of service as opposed to going to the lowest bidder. Service providers want to do more for you…find out how far they will go.

• Make people ask for things, including reports. Lots of supplies and paper get wasted when they are automatically distributed and people don’t actually use them. It’s helpful to periodically check by shutting off supply.

• Budget and compare budget to actual. Compare both aggregate dollars and unit costs.

• Let the finance team have the internal goal to bring down the overhead rate. If you do have profit center reporting, don’t get obsessed about allocating overhead costs. Just use a standard overhead rate for everyone and then task the finance team with the job of beating the rate while maintaining the quality and culture demanded by the firm.

• Don’t ever cut out the coffee.

While managing cost is important, cost-cutting campaigns will not move a law firm into the category of a top performer. If you want to increase profitability, you need to concentrate on increasing revenue rather than becoming obsessed about reducing expenses. You should pursue business development as well as opportunities to increase productivity, increase the firm’s effective rate, and improve realization. Eliminating amenities, degrading facilities, reducing personnel, holding back on salary increases, and reducing administrative staff is likely to cause more harm than gain.

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Related posts

• Health Care Costs in Midsized Law Firms
• Law Firms Can't Protect Paper
• Will Office 2007 Turn Us Into McLawOffices?
• Whatever Happen to the Paperless Law Office?
• What Will Determine Your Law Firm's Future?

Recently Juris, Inc. asked midsized law firms about health insurance—155 firms responded to those questions.

Respondents reported an annual inflation rate of 10 percent for health care costs. Considering employee compensation accounts for 60 percent to 80 percent of firm operating expenses, a 10 percent yearly rate increase will eat away partner income pretty quickly.

Only 35 percent of respondents indicated that they have raised co-pays to manage costs. Only 59 percent indicated that they had competitively bid their health care program.

Inflation in employee health care is presenting a real cost-management challenge to all businesses. Midsized law firms may forgo efforts to negotiate lower rates due to a feeling that they do not have the necessary critical mass for negotiating leverage. That is wrong. You can lower rates or avoid double-digit increases by shopping around, especially if you are willing to accept higher co-pays or deductibles.

Start shopping six months before your renewal date. When it’s renewal time, it is too late to shop.

Firms reported an average health insurance premium of $594 per employee. Over half of the reporting firms have cafeteria plans, and only 10 percent have fitness and wellness programs.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
 

Related posts

• High Performing Law Firms Spend More
• Will Office 2007 Turn Us Into McLawOffices?
• What Will Determine Your Law Firm's Future?
• Want To Have A Record Year For Your Law Firm?
• Unfunded Liability Results in Law Firm Dissolutions

By Guest Author Barry Lancaster: Juris, Inc. Senior Director of Client Services

Citrix® technology has been used by law firms as an effective method of providing legal professionals and administrative staff with remote access. The question is, “Are newer technologies making Citrix obsolete?”

Virtual Private Networks, VPNs, now allow firms to set up secure direct access to their network over the Web. For “office-like performance,” VPNs require a broadband Internet connection. What is different today is that home Internet users and law firm branch offices now have broadband access. Likewise, most hotels offer broadband services. Many towns and coffee shops offer free broadband services. In addition to broadband access, dedicated phone line connections between law firm branches and the firm’s main office are now moderately priced and provide even better data transfer quality. Today, if you are working from home, on the road, or in a branch office, quality high-speed connections are now readily available and inexpensive. That high-speed accessibility for users outside the office has made the VPN approach an alternative to Citrix.

In addition to the direct network connection alternative using VPN technology, there are a growing number of developments making Citrix less essential. An increasing number of the applications used by law firms now offer a browser version, for example. Smart Client technology (under Microsoft® .NET) and similar new technologies coming from the browser side of the fence are starting to show up in law firms. These Smart Client products are designed for easy direct access over the Web. Smart Client applications (including, for example, the Juris, Inc.’s attorney dashboard application, MyJuris®) use security services to protect data, providing full confidentiality over the Web.

There are advantages and disadvantages to the various technologies, including Citrix. However, changes in connection speeds and software designs make it appropriate for you to re-evaluate Citrix on a recurring basis. Depending on your particular circumstances, you may find that you can improve office-like performance for your traveling and remote team members while also lowering IT-related cost.

Lower cost is always nice, but it is the potential for productivity gains that should drive your decision.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
 

Related posts

• Want To Have A Record Year For Your Law Firm?
• High Performing Law Firms Spend More
• Generation X
• A New Microsoft Windows Is Coming and Its Impact on Law Firm Hardware Plans
• Will Office 2007 Turn Us Into McLawOffices?

By Guest Author Barry Lancaster, Juris, Inc. Senior Director of Client Services

In today’s environment, computers and technology are a vital part to the operation of a law firm. Law firms need to develop a long-term strategy to maintain their level of technology in the practice. This article focuses on developing a strategy to maintain hardware such as computers and servers.

We recommend that computers and servers be replaced every three years. This is a common practice among many top technology firms who, likewise, follow the accounting practice depreciating computer purchases over 3 years. New innovations in technology continue to make older purchases out of date. The day-to-day use of computers in an office environment also wears on equipment. After three years of usage, the reliability of a desktop computer or server drops. Also, new software is usually designed and regularly updated to use the resources available on current technologies. So software updates can also make older technology purchases obsolete.

Just like purchasing a car, there is a key decision you must make when purchasing new PC equipment: Do I lease or purchase my equipment? During my previous experience with Accenture in support of large consulting engagements with over 50 consultants, I have had to cost benefit leasing equipment versus buying equipment. I found that it was cheaper to buy the equipment versus leasing the equipment if the leasing terms were greater than a year. Leasing, however, can be beneficial in the management of cash flow by spreading the cost over the life of the equipment.

The leasing company we used was responsive and provided good service. However, regardless of what leasing company is used, there are two things you need to be aware of.

1.  Accessories: When we had to return equipment, we had to pay a high premium for missing accessories such as network cards. In today’s computers, these items are built into the motherboard so it is less likely you will have to order accessories.

2.  Length of the lease: We were on a three year lease. Due to circumstances at the time, we went over the three years and had to continue to pay the rent in accordance with the lease terms. At the end of the day, our cost to lease was higher than anticipated and significantly above the aggregate value of the equipment and related cost of money.
Remembering these two factors will help you contain the costs of your lease.

Leasing may be the best alternative for a small firm to “smooth” technology costs over three years. A monthly payment instead of one large “investment” every 3 years can be easier on cash flow. Larger firms should consider a strategy to stagger purchases on a yearly basis. Every year, refresh one-third of your equipment. This lessens disruptions of having to swap out equipment for 60 employees at one time. Your technology purchases become a yearly cost that you plan for.

When purchasing equipment, one important decision is whether or not you should purchase an extended warranty. Offices without an on-site technology resource to service any computer hardware issues should buy extended warranties that cover the time frame you expect to use the computer. This puts the burden on the manufacturer to correct equipment issues. I supported a project of 70 consultants with an on-site technology resource and I still purchased the extended warranty. We did not carry spare motherboards or hard drives, so it was more convenient to support the computers through the extended warranty. I found the extra money spent on the extended warranty was worth it

At Juris, Inc., we are a technology company. Having up-to-date technology to support our client base is important to us. The practices outlined in this article are the practices we employ for our company. Law firms specialize in law, not in technology. However, they have the same need for a sound strategy for managing technology purchases. Law firms are responsible for servicing clients and should use technology to increase the efficiency and quality of the firm’s services.

Review recommendations in this article and develop a strategy that makes sense for you. Whether you are a large or small firm, you should have a capital budget to plan for technology expenses. We have discussed PC equipment in this article. Your capital plan should be all inclusive of printers, fax machines, copiers and phone equipment. Any recurring costs for services should also be budgeted in the plan.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
 

Related posts

• A New Microsoft Windows Is Coming and Its Impact on Law Firm Hardware Plans
• Will Office 2007 Turn Us Into McLawOffices?
• Stolen Laptops, a Wake-Up Call For Law Firms
• Alternatives for Law Firm Remote Access
• What Will Determine Your Law Firm's Future?

The most profitable firms don’t have the lowest cost structure. That was one of the findings from a recent Juris, Inc. survey. Top performing firms had higher per-head operating expenses and a higher ratio of non-fee earners to fee earners. Full survey details will become available later this month.

The findings provide more evidence that it pays to focus on revenue rather than cost reduction. That is not to say that profitable firms spend recklessly. While costs per head are higher, the firm’s total cost as a percentage of revenue was lower due to higher revenue per partner and per head.

Cost cutting campaigns will not move a law firm into the category of a top performer. If you want to increase profitability, you need to concentrate on increasing revenue rather than focusing attention on reducing expenses. You should pursue business development as well as opportunities to increase productivity, effective rate, and realization. Eliminating amenities, downgrading facilities, reducing personnel, holding back on salary increases, and reducing administrative staff is likely to cause more harm than gain.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Related posts

• Cost Cutting Isn't The Answer
• Billable Hours vs. Head Count Leverage in Law Firms
• Want To Have A Record Year For Your Law Firm?
• Modeling the Law Firm's Financial Performance
• Law Firm Growth Prospects - 2005 Survey Results

There are some law firm expenses that can be lowered just by calling your existing vendor and asking for a lower price. Usually you can lower the cost further by changing vendors—vendors, I might add, that are virtually indistinguishable. Your phone service and other communication cost are at the top of that list.

If you haven’t re-negotiated for these services lately, do it now. With cutthroat competition in the communication industries, law firms can lower cost every time they return to the negotiating table.

Most providers require you to sign up for a certain amount of time for the best rates, but contracts beyond two years (three years absolute max) should be avoided. Some contracts now pass the savings to you if the vendor subsequently reduces their prices. In the cell phone industry, vendors start offering more minutes for the same price. Ask for that deal.

Regarding contract expiration or anniversary dates, vendors do not tell you when the minimum term has expired. Many count on their customers forgetting about the date so that the vendor can continue to charge older (higher) prices. Smart customers track contract dates and go back to the market with every opportunity.

Changing providers is no longer difficult, but you can get big savings without changing vendors. Don’t wait for your minimum period to expire. Simply tell the vendor’s representative that you are going to start shopping for lower rates unless they upgrade your current contract to give you more competitive rates now. That conversation will open negotiations for lower costs and a contract term renewal.

Communication cost can be significant in a midsized law firm. Look for opportunities to consolidate your wireless, long distance, high speed services, etc. under a single vendor who will give you the best price based on the consolidated volume. Firms with multiple locations may find it cost effective to connect those locations through dedicated links, eliminating long distance charges and providing clients with a single phone number for reaching attorneys and staff regardless of location. In addition, voice-over IP has reached a level of quality that is nearly indistinguishable from traditional voice services. For firms with heavy long-distance traffic, moving to voice-over IP may be worth it. At a minimum, begin experimenting with voice-over IP to determine its suitability in your environment.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Related posts

• RainToday Report: 76% of Law Firms Discount Fees
• Mining for business
• Law Firm Surcharges Increase in Popularity
• Law Firm Failure and Success
• How Many Billable Hours Are There?