Thinking About a Transactional Practice? Here Are a Few Rules
As business conditions slowly improve, more companies are doing more deals, and need lawyers to help them do those deals. At the mention of a transactional legal practice, perhaps the first image that would have come to mind not long ago is that of a technology company doing an initial public offering, or a private equity firm acquiring a longtime market leader. But even with an improved economy there isn't nearly the high volume, high priced work in such deals today.
Challenges of Small Businesses
Yet there's another transactional world out there - the world of small and family businesses. According to the latest statistics from the U.S. Small Business Administration, there are more than 27 million small businesses (companies with 500 or fewer employees) in the United States. They account for nearly half of all private sector jobs, and collectively are 99% of all the employers in the country. Each of them is different, but all of them face similar challenges:
- Operating under the proper legal and organizational structure.
- Selecting the best financing options: loan, letter of credit, private investment, public offering.
- Growing through construction of new facilities or combination with existing businesses.
- Developing the right compensation and benefit approaches.
- Crafting business succession or business transfer strategies.
Four Rules for Growing a Transactional Practice
This is fertile ground for the right small business law firm - if the firm plans properly. These four rules for growing a transactional practice can help any firm develop a profitable niche.
- Manage your client base, so that your resources are not drained by too many small clients that make a disproportionately small contribution to firm profits. Make sure that no one client accounts for more than 10% of your revenue from small businesses.
- Manage your cash flow. Transactional work is notoriously variable, and small companies can be slow to pay even with prodding so every transactional firm should have at least a six month cash cushion to sustain operations while pursuing collections.
- Manage your billing rates. Do not offer discounts. If a client requests a flat fee, approach it as a quid pro quo that couples it with a guarantee of payment up front - something a business client should understand.
- Manage your collection policies. Explain them at the start of an engagement, enforce them consistently, make your bills easy to understand and convenient to pay. The business world rewards efficiency, and efficient collections benefit firm and client alike.
|
