September 12, 2009

Why small and medium legal firm may not survive in the long run

I had a drinking session with a lawyer friend the other night. One of the issue that we touched was on how many people tried to squeeze lawyers when it comes for us to get what we were owed. How much people asked for legal fees to be shared or to be discounted and leave us with just pittance to survive. I can hear the cry of "All lawyers are filthy rich!" from all of you out there.

Let me paint the scenario.

Before that, a disclaimer (read all about disclaimer here) : We are not allowed give discount and share our legal fees with anyone. So, at no time I condone or practice this.

When someone purchase a property from another person, he will come to ask to do a sale and purchase agreement (SPA). We are allowed to charge up to 1% for property below RM150,000-00. Say that the property is RM100,000-00 making that our fee to be RM1,000-00.

Smart consumer will ask for some discount. Say that I give 20% of that amount, making my fee to be RM800-00.

Then, say that I got the file from a developer as my firm on their panel. They will asked us to abide by a certain discount. One developer is known to ask for all SPA to be paid the fee of RM1,000-00 even for cases where the property price in the millions. This has been going on for years and the developer is big. 

If I get the file from an introducer, which maybe a real estate agent, the last I heard, the going rate for them to refer files to us is 30% from the fee that we get.

How much fee we finally get if the balance of RM800-00 is taxed again by these agents? They will pocket RM240-00 and we will only get RM560-00. Our final cut.

Count in the overhead, the income tax we have to pay every year and all the hidden cost of running a business. 

Good business? Think again....How long can this last?

No comments:

Custom Search