Solo and Small Law Firms – Where is the Revenue?

The story may be familiar, but it has to be told so all can learn from it.

One or two attorneys decided to leave the Big Firm and start they own. The registration, preparing the Article of Incorporation and such is just a piece of cake. Then the Clients and cases show up on the horizon and the need to generate more and more business to grow. Incredible hours are put into cases to make the Clients happy and the practice run.

Somehow the cash situation does not feel like being in line with the amount of work done. Something is off. Looking at the heart of the matter, you may see the following issues:
• Working on a client matter without a fully executed contract
• Not invoicing the Client for a long time, then when invoiced, you realize that the contract is not executed; or if executed, due to the long delay of invoicing the Client is renegotiating the due balance
• No proper timesheets showing your time on cases
• You pay all your bills but not invoicing for revenues

The “excuse” is usually something like “Between cases and lead generation, I don’t have time to deal with administrative matters.” Sounds familiar?

The consequences of not taking care of bookkeeping, tax, payroll, invoicing, appropriate web site updates are that you are working a lot but not gaining much. Also, if your bookkeeping and accounting is lagging behind, how can taxes, invoicing or proposal estimating be completed in a timely and precise matter?

Time is what we sell – no question about it. An attorney with a busy schedule and lot of competing priorities (including lead generation) can’t spend hours every week with business administration. But being busy and successful with your clients’ cases should not cost you – it should earn you more.

So, what advice can be given to someone in this situation? When you work a lot, assume you earn accordingly, but you don’t because you can’t do it all? Why should you do it all?

Go to those working with small law firms. They are also professionals – of a different field. Be honest and state where you need assistance. The sooner you do it, the sooner your firm will be up to date and profitable again. It is not only about your bottom line – it is also about your peace of mind.

My name is Sylvia Pacher, managing director for the Virtual Corporate Services team, and I invite you to discover what a virtual corporate service group can take off of your shoulder to make you more billable, profitable, and probably happier because you can focus on what you do best. We can do everything else. Please let me know if you have questions – I am always here to assist you with making your business grow bigger, stronger, more profitable and competitive. Please email me personally: spacher@myvirtualcorporate.com

Organizational Changes for Increased Competitiveness

Those of you responding to RFPs, getting business by winning government grants and contracts learn a new rule. In the past, cost was not a determining factor to win a contract. If you could deliver exceptional results, you could have been funded regardless the fact that your proposal might not have been the cheapest. Now, you are competing with your cost proposals as well.

Discussions on necessary changes to make you more competitive for current and future work with local, regional and the federal government are must-haves. Let’s take a quick look at what the major discussion items are for these purposes:

Your direct cost (labor hour in particular) is the biggest item on your proposal. Comparing pay ranges to your competitors on the marketplace would be able to pinpoint a very telling issue you need to look into. If your employees are making 5-10-15% more than your competitors, you need to look into it.

Changes to fringe benefits could be very sensitive. Fringes include paid time-off, holidays, insurance payments such as health, dental, vision, long- and short-term disability. Also, employer taxes, 401K or other retirement plans are included in this pool. Employees are usually most sensitive to changes to insurance benefits. You may be able to change the carry-over limits, or change the vacation-sick leave ratio with positive impact to your bottom line but without major disagreement of your workforce. However, it may not be enough.

It is important to understand why fringes are as imperative to look at as it can be. In terms of government billing (and proposal preparation), direct labor equal the hourly rate of the employee times your fringe rate! So if you are working on a cost reimbursable proposal it is imperative to be sensitive to this matter. The below example demonstrates what it means:

Joe, a manager, is proposed on the upcoming grant application. He makes $50/hour. The company’s fringe rate is 30%. Putting all these together, the direct labor cost for the funding agency to have Joe working on the job is $65/hour. ($50 x 1.3 = $65)

You need to ask yourself the question: Is it my employee’s hourly rate or my company’s fringe rate that makes me less competitive? Or maybe both?

When it comes to overhead and G&A costs, your office space and “corporate officers” come to mind. Reducing office space needs could be achieved by being creative when offering telecommuting schedules. With the Cloud being available from everywhere, it is much more a question of finding positions that could telecommute.

The cost of a traditional corporate office is a very different question. Every business needs to look into options to outsource accounting, bookkeeping, HR, web issues and related matters. Need to look at the costs, risks and benefits. With the today technological advancements in virtual services, it may offer significant savings increasing the company’s competitiveness.

Remember, staying competitive and profitable in the today’s marketplace requires old-school and new-bee leaders to look into options that may first look overachieving or out of your comfort zone. It makes business sense to see how even small changes could increase your competitive edge when it comes to cost.

My name is Sylvia Pacher and I am always here to assist your company with strategic advice and recommendations on how to make your company more competitive and profitable in the today’s marketplace. Please feel free to reach out to me personally to discuss your special needs and challenges (spacher@myvirtualcorporate.com).

Getting back to business and rebuilding a dream – after Hurricane Sandy swept it away

Can you imagine yourself owning your business in the NY-NJ shore swept away by Hurricane Sandy? Not only the physical location of the business is gone, but all your books and records, contract files, vendor and client information. How can you continue your business? Can you at all?
Any business can find a new location to open an office. But how would you find your vendor information? How can one reconstruct a business when all books and records are stored on a computer located in a building that no longer exists? How can you file an insurance claim without a support of accounting records?

How many of such businesses exist? A lot. How many of them gave up and feels hopeless to rebuild what is gone – a lot of them. If lucky, the insurance company would cover some of the lost business income or similar expenses, but it can’t really help you get back to where you were.

Well, a well-versed accountant can make a difference. A big one. Using publicly available records, your business records can be reconstructed in a short period of time, your books and records can be rebuilt. You can have access to accurate books and records, vendor and client information. You probably lose the latest open timesheets you recording your most recent work, but you can get back to work, reach out to your clients, pick up the business where you left off.

When it comes to use the money you received from the insurance company, probably the best use of it is to invest it into yourself and your business – to get back to business, full-swing, sooner rather than later. You must turn some profit again, make a living. You earned it with years of hard work.

Possible?

Yes, it is possible.

And if you still believe in your business and want it (and what it had to offer you) back, please reach out to me. My name is Sylvia Pacher, I am always here for a free consultation to see how I can help you get back on your feet and back to business. Please do not hesitate to email me personally to schedule a free consultation or to forward my contact information to anyone who could benefit from it (spacher@myvirtualcorporate.com).

How and Whom to Give Incentive Payments?

  This article is to share – and hopefully start a discussion on – the reasoning for giving incentives to some of your employees. How leaders, managers reason for incentives? What do we see as different approaches in the small business world? Which approach would you prefer?

In the today economy the financial challenges are very quickly and often negatively change the direction a business have to take to stay profitable and competitive. Often, business revenue is tied to government and/or commercial contracts. If any of the major contracts is lost, the business may change strategy in every segment.

So if your business learns today that one of your major revenue-earning contracts is not going to be extended and will expire in 6-9 months, how do you make sure you keep your best and brightest people, and those who you can’t keep but you need until the full completion of the project?

The two ways to deal with the situation I often see are:
1. The business makes a decision who would have continued employment with the company following the expiration of the contract, no matter what. These are key talents who must stay so the company can bid for more new work. These ones receive the incentive payment only and the conversation with their supervisors about their job security.
2. The business gives incentive to those only, who will not have a job following the expiration of the contract but play a key role in the completion of the project. Often enough these incentives are coming in installments, the earlier the smaller; and the last, biggest piece at the very end of the project.

Can a business in the given situation afford doing both? Incentives are costs to the company. It also adds to the payroll taxes businesses pay after every paycheck given to an employee. Since these are not “direct working hours”, incentives can’t be invoiced to the clients – it often comes out of the overhead or profit.

Overhead  dollars however are badly needed to work on new proposals, spend on marketing – all the necessary activates to put the business in a better position on the marketplace.

Would you pick one of these, or mixing them into a different option? What would be the message to the other employees if you mix it – because people talk? What would you do? What was the best and worst scenario you ever seen? What would be your personal solution in a given situation?

My name is Sylvia Pacher, managing director for the Virtual Corporate Services team (www.myvirtualcorporate.com), and I invite you to discover what a virtual corporate service group can take off of your shoulder to make you more billable, profitable, and probably happier because you can focus on what you do best. Please let me know if you have questions – I am always here to assist you with making your business grow bigger, stronger, more profitable and competitive. Please email me personally: spacher@myvirtualcorporate.com

When the Flu Hits Your Business

  When the flu hits you or your loved one you care for, your billable hours may be close to none for a few days. Not being able to provide billable work to your clients is hard enough since they count on you – but they would understand. It also means that you do not recognize any revenue at all.

If you are personally hit by the flu, it is not only your clients you can’t care for, but your own business. You need to send invoices out to secure steady cash flow. You need to pay the bills. At the personal level, you need to do the groceries, check on your elderly parents. With the flu, these are all on hold.

Can you afford not to care for these? How can you care for your business when you have a hard time to care for yourself?

Our virtual corporate group can be an answer to this question. A designated accountant would care for your invoices and bills, not to mention payroll, as scheduled. Your cash flow would not be in jeopardy for a minute. You do not even have to email or call – this is what we usually do for a client anyways.

When it comes to these “personal”, “out-of-ordinary” items, our clients can always count on our WishTeam with confidence. They would reach out to your grocery store to arrange home delivery, including your medication. Also, an elderly home care service can be dispatched to attend your elderly parents’ needs.

Sound just unbelievable to have a consulting company with full-scale back-office services on your side caring for YOU? Well, we do that. Would you consider paying about the equivalent of 3-4 hours of your monthly billable time to make sure your books are taken care of, bills paid in time, bank and credit card statements reconciled, taxes are filed, payroll processed and related taxes filed in time? Also, have immediate access to business consultants, management consultants, HR, web, benefit and WishTeam professionals assisting you with your related needs?

My name is Sylvia Pacher, managing director for the Virtual Corporate Services team(www.myvirtualcorporate.com), and I invite you to discover what a virtual corporate service group can take off of your shoulder to make you more billable, profitable, and probably happier because you can focus on what you do best. Please let me know if you have questions – I am always here to assist you with making your business grow bigger, stronger, more profitable and competitive – even when you are fighting the flu. Please email me personally: spacher@myvirtualcorporate.com

Count With Me, Busy Professional, Count With Me!

  As an accounting and legal professional, our hourly rate could be – depending on the case we are working on – averaging between $250-$650/hour. Let’s lowball it and average it to $300 for the sake of this exercise.

So, if you have a not-too-busy month, you are charging about 50% of your 8-hour day. That would take us to 8 hours x 50% x 22 days, equal 88 hours. At the above mentioned $300/hour rate, you are invoicing clients for $26,400. After taxes and paying all the benefits (about 35%), your net is around $17,000. Paying for your office rental, cell phone, office supplies, LexisNexis subscription, and smaller incidental payments (like lunch with clients and such) cost about $5,000. You have about 12,000 left.

Would you consider paying about the equivalent of 3-4 hours of your monthly billable time to make sure your books are taken care of, bills paid in time, bank and credit card statements reconciled, taxes are filed, payroll processed and related taxes filed in time? Also, have immediate access to business consultants, management consultants, HR, web, benefit and WishTeam professionals assisting you (for some additional low hourly or fixed fee) with your related needs as needed?

If so, you are invited to discover what a virtual corporate service group (www.myvirtualcorporate.com) can take off of your shoulder to make you more billable, profitable, and probably happier because you can focus on what you do best. Please let me know if you have questions – I am always here to assist you with making your business grow bigger, stronger, more profitable and competitive. Please email me personally: spacher@myvirtualcorporate.com

Who Will Do My Taxes?

  You may have a tax accountant for years preparing your tax return and an accountant taking care of your books. Or it may be you or your business partner doing the books. How much does it cost you to have such business setup? Is there a more cost effective solution?

Often enough you are facing an expense of a few thousand dollars to take care of your tax filings. Our client, a small non-profit school, was asked to pay about $3,000 for a simple 990 return filing by an independent preparer, when the school did not even recognize any income by the end of the fiscal year.

Why so much? How to reduce such expense but still secure a CPA’s full attention to your taxes?

Based on experience I can say this rule of thumb: if you have the same person taking care of your books and your taxes, it should cost less. If it is a traditional consulting firm, you may have someone caring for your books, but when it comes to your taxes, your files go to a tax specialist who do not know your business. This person will need more time to go thru records and will need to ask more question, go back to different schedules before even starting the work. More time spent means higher cost to do the work. Again: same firm, different persons. And tax preparation results in the same high charges if you are spending valuable time caring for your own books as well – not to mention the cost of additional lost billable time when you try to do your own taxes yourself.

So what is the most cost effective way to go?

First, do the math and have a virtual accountant care for your business administrative matters. So you can charge your clients billable time and make money. For a fraction of your one-day earning you can have a CPA keeping your books straight, and if you need to, you have access to HR, contract, grant, web and
WishTeam professionals as well.

When it comes to taxes, since you have a qualified CPA caring for your books, the same CPA could do your taxes much quicker, without bothering you with questions someone working with you during the year would know anyways. Again: same firm, same person – it makes a difference!

Using virtual corporate services are the most flexible and comprehensive business solution you can have for the least of your money (Accounting and Tax).

Such corporate services can take care of your accounting and tax needs, but if needed, can assist you with full HR assistance, benefit search, web design services. Moreover, your out-of-ordinary needs can also be cared for by the WishTeam (WishTeam).

My name is Sylvia Pacher, managing director for the Virtual Corporate Services team (www.myvirtualcorporate.com), and I invite you to discover what a virtual corporate service group can take off of your shoulder to make you more billable, profitable, and probably happier because you can focus on what you do best. Please let me know if you have questions – I am always here to assist you with making your business grow bigger, stronger, more profitable and competitive. Please email me personally: spacher@myvirtualcorporate.com