Fremont Consulting Limited

Welcome to 2008

Twelve months ago, Professional Service Firms were viewing a very different prospect: in hindsight we can perhaps say that in 2007 the good times came to an end, at least for now. Professional firms generally succeed in line with conditions in their business environment (who doesn’t?). With great uncertainty in banking and finance, real estate markets in reverse, and generally low business confidence, profits are going to be harder to earn: pressure on billing and recovery rates is already evident. Some firms are structured with a built-in hedge  (eg lawyers and accountants with strong insolvency practices, lawyers strong in general litigation ) and can ride the counter-cycle – but for most, this means that things may be  less tough, not buoyant!
 
In the absence of any other inspiration, this points firms in one direction – back to basics! A few (very few) firms are always hot on the basics, and because they are used to doing them , day-in-day-out, they will get through relatively well: others will find it more painful, because they will have to change the way they do things.

So what are “the basics”?

• Looking after the cash. If ever there was a time for partners to take ownership of the billing and collection process, this is it. Plenty of supposedly profitable businesses go bust because they run out of cash. Getting the clients to pay what is due and owing should not be a big deal, but it is harder if you have never  been clear and robust on this issue. Good credit control procedures should reduce your exposure to write-offs and client failure
    
• Looking after the costs. Good times produce waste and inefficiency, mainly because everyone is too busy dealing with the work to think about the best way to do it. It is amazing what you can achieve when you put your mind to it. Review every cost line, and I suggest firms should remove the automatic right of teams to recruit, even when replacing leavers.
     
• Looking after the clients. Ensuring that relationships are as strong as they can be may help you to get work that could go to others, will help you maintain chargeable rates, will help to reduce misunderstandings about fees and aid realisation, and will enable you to get paid quicker.  Also, finding potential clients must be a priority: unfortunately, effective marketing is not something to be turned on and off like a tap, and everyone else will be doing the same thing. Firms will have to work harder to get a bigger share of a smaller pie: they should be focussed, and play to their strengths. 
   
• Looking after the people. If things get really tough, any firm should know in advance who it can and cannot afford to lose: whatever happens the irreplaceable people must be looked after. Firms need to get the best out of their people, and management of performance is key, at all levels. Those firms who already have a robust system are in a much better position: for those who don’t, this is the time to do it! 

The problem with all this is that it is mostly about habits, the things that you do automatically day after day. Changing from bad to good habits is not easy, and requires practice: it is not ideal to be changing when business conditions are poor, but it is perhaps easier to get acceptance of the need to do it.

If you have any comments or observations, I would be happy to hear from you

Good luck