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?

Marketing through presence at events

As a lawyer, the rules have been set for us to follow that we cannot market our services by advertising or even soliciting openly through the normal channel like buying some small print advertisement in newspaper and magazine telling people of your services. A lawyer in Malaysia cannot even claim that he is better than another lawyer when he is handling a case. A lawyer here also must always keep his demeanor either in the court of law or in his everyday conduct. Even if they won a case, a lawyer cannot solicit for an interview which may be viewed as him trumpeting his achievement. The code of ethics for lawyers are outlined properly in the Legal Profession (Practice and Etiquette) Rules 1978.

Some lawyers do skirt around the rules by getting their name published in newspaper and articles. They write and they comment on certain issues. They are not necessarily to blame as the newspaper and magazines can get extra mileage if they can get a lawyer of prominent cases to comment on the case such as the strategy that they use or the reason behind that strategy. Some of them published books detailing their career. Some of them are hauled to the front of the Displinary Committee of the Bar Council which supervise such travesty. One of the famous case is when a lawyer published a book on his rags to riches story on how he build his legal firm empire which is now one of the largest legal firm in town.

That is why one of the best way to be known that your legal firm exist is to go and meet people. You can go to offices of those who can give you cases such. Places like the offices of manager of a bank or the Chief Executive Officer of a developer. Some may give you some lip service of trying you out but never will but some do really give you the try-out that you deserve. Another way for you to be known is to go to events that you have seen I went to like those events where there are wristwatches or cars being launch. At these events, I can mingle around with people who may never meet or know that there existed people like me. Those who are plying their trade but can never advertise at all about their practice.

So, for a lawyer, events can sometimes be a good place to be at to ensure more files are translated at the office. Oh, the hard work....

 

Meeting school friends can sometimes be a form of marketing

(breaking of fast with them in 2008)

Managing cahsflow is everything (even for a legal firm)

As most businesspersons know, the hard part of the business is not in making a profit. There are a lot of businesses out there where you can make 30% or even 100% of profit if you look hard enough for them and work for it. I actually believe those businesses which contribute to the real economy in contrast to the false economy is the business which give you good returns.  Even if you sell food by the roadside, if you price your goods at a price which can cover your cost and then some, you will be making a profit. 

The hard part of a business is managing cashflow. Managing cashflow means that you get paid on time for all the things that you have supplied by the person you supplied your goods to.When you work in the service industry, the equation become different. People will easily say that you do not have any cost to borne and people assume you do not have any overhead. Managing a legal firm for the past 10 years, I was presented this scenario so many time. People always assume a legal firm do not need any overhead to run it. They forgot that the people who service them, make sure the filings for documents are done on time and represent them in many situations are all 'cost' which someone (the legal firm) has to bear.

When a legal firm gets any payment from its client, the law requires for certain type of files, there is a clear division between the amount which you will use to finish the job that you have been tasked to do and the amount which will be your profit. The problem starts when your client asked for you to advance the money needed to complete the job first before they make any payment. As the files pile up, if you do not have any reserve cash, as is the case for most of legal firm in Malaysia, you will start to feel the burden of having to manage your firm with negative cash flow.

After 10 years of managing to balance out my legal firm's cash flow with profits that we make year after year that had me survive for so long, the pinch has started to crept in...

Is life really about the journey and not the destination?

If you look up there at the title of this blog, after the word Legal Cat-asthrophe, I put down some words from one of the a Rock gods, called Aerosmith. Not sure whether it was Tyler or any other member who came up with the lyrics or whether it is original or not, but I get to know this maxim from them. I love the idea they tried to propose when I get to know them more intimately, which was not when the album Pump came out but was when I bought one of their many compilation.

Is life really about the journey? As I grow older, I believe this to be less and less. I now believe the destination is as important as the journey. Not just that, the destination is the one thing that set the tone of the journey. If you don't believe in the ending, you might not stay for the whole movie. You might let go while you should be holding on.

After a while, I thinking both is as important. You need to keep your eye on the goal while you need to ensure your journey is worthwhile. The people you meet along the way. The life you affected as you tread through the world. The simple thing and the complicated matter entrusted to you.

You are just here for a while, maybe sometimes you need to look around to see the big picture.

Twestival Local : Kuala Lumpur

Date of Twestival : 12th September 2009
Venue : The Mist, Bangsar, Kuala Lumpur
Time : 7pm to 10pm
Ticket price : RM30-00 if paid before the date
                     RM40-00 minimum at the door
In aid of : Destiny Starting Point (a halfway home in Klang)
Twestival Kuala Lumpur Twitter : twestivalkl
Hashtag for TwestivalKL : #TwestivalKL

How to get invites?

You can go to the official website of Twestival Kuala Lumpur here - Twestival Kuala Lumpur

Through the Twitter KL official twitter name, you can see how many sponsors have come on board for the gifts that night which include AirAsia, 1901Hotdogs, cziplee, Starbucks, GSC movie vouchers and a few others. There are door gifts and there are lucky draws. There will be performance by Twilight Action Girl.

You can read more about Twestival Kuala Lumpur at two of my blogger friends blog. They have done a good job explaining what it is all about :

1) Niki Cheong (twitter.com/nikicheong) - All About Twestival KL


2) Serge (twitter.com/dustyhawk) - Twestival KL : Destiny Starting Point

Come one, come all. It is for a good cause.

Oh, if there are anyone who wants to go but can't afford it, I am paying more than the door price and can sponsor maybe one or 2 persons. Contact me at my Twitter account kruel74 (and follow me).

See you there