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November 2008

Winter Comes To Traverse City Michigan

I usually post on the first snow in my hometown of Traverse City, Michigan.  The first snow to stick to the ground came last Sunday, at 5:00 A.M. when Brian and I were heading to the airport to get on a plane to Los Angeles.  Now, several days later, it is snowing again.  Big. Fluffy. Flakes of snow.  I don’t know why I love winter so much.  It’s the most dramatic season change there is.  It is a signal of change and usually opens a new chapter in my life.  I love winter.  Especially in Traverse City, Michigan.

Right now, I am sitting in the car with my three sons, Echo, Fielding and Apollo and our new dog Hickory.  Hickory was abandoned as a small puppy at the local city park, which doubles as our local ski resort in the winter.  Of course, the park is called Hickory Hills.

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Do Small Companies Look More Attractive To Investors in the Current Economic Climate?

One has to wonder whether or not putting your money into publicly traded securities will ever be the same after the latest stock market woes and bailouts.  Small and medium sized companies looking for private investment including startup companies, have always had to compete in the capital markets against money being placed in the publicly traded markets.  I have to wonder... Won’t small and medium sized businesses look like better potential investments moving forward? 

Many small and medium sized businesses have great concepts but fail to realize their potential as a result of the lack capital.  Finding private investors to make five, six, and seven figure investments in your company has always been an extreme challenge.  There is no publicly available market for companies to seek angel, start up and expansion-level private capital.

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If The IP Sector Takes A Hit, The You Will Probably Take A Hit.

As our economy moves towards a market built on ideas, intellectual property practice groups have reported strong growth over the last several years.  My law firm Traverse Legal, PLC protects ideas in an online world. 

As reported over at the NIPC blog on IP and IT issues, Jane Lambert notes that many intellectual property attorneys remain bullish on market opportunities and IP group revenue.  Many lawyers are simply blind to the reality that this economic downturn creates.  Companies under severe financial stress will typically use their economic leverage to delay payment to counsel and drive representation and legal costs down, all to the detriment of the firms that serve them.  Some firms will end up getting stiffed by their clients as conditions worsen.  An idea economy still needs capital and/or revenue to keep it moving forward.  As stated by Ms. Lambert:

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Which Law Firms Will Be Left Standing 12-36 Months from Now?

I have a client who was contacted by a top partner at one of the leading intellectual property law firms in Los Angeles.  The attorney reviewed the new complaint filing in federal court on trademark issues, researches the defendant companies online, and then sends them an email with the complaint attached before they are officially served.  He then starts marketing his services as a trademark litigator to the client. 

Does anyone else think that partners at large firms are starting to get desperate?  What happens when you are steeped in debt, have a mortgage that is a multiple higher in debt than the worth of your house and all the partners are pushing for client origination?  There is a general sense that business at the larger law firms has been light.  Certainly, there are practice groups within large law firms that are seriously struggling.  The practice groups that are doing well don’t like to subsidize the ones that don’t.  I predict that there will be some major shake-ups in the legal market as large firms break up into smaller pieces and individual lawyers from large firms split off to start their own solo or small group practices. The best lawyers at the largest firms have no reason to subsidize intractable overhead and diminishing profits. 

So what firms will be left standing in the next one to three years?  Far fewer than you might think.

Will your firm still be standing 12-36 months from now? You had better start looking for the signs of tight financial times in the eyes of those administering the business side of your firm. 

Legal Service Sector Loses 1,100 Jobs in October: Opportunities For New Players Begin To Take Shape

The On the Record blog has an interesting post “Is economic downturn hurting Baltimore law firm?".  Legal Affairs Writer Caryn Tamber notes that several big firm collapses contributed to the high job loss within the sector.  She wonders whether or not smaller “mean and lean” firms in the Baltimore market will be insulated from the economic stress felt by big fat law firms in the big cities.

Some firms say it’s because the Baltimore market is insulated from some of the worst because few lawyers here practice the kind of finance law that’s suffered lately. Others say it’s because of good planning on their part. While New York firms grew bloated with high-priced associates during the boom, the smart Baltimoreans restrained themselves, stayed lean and are now in a better position, the story goes.

But stories like one from the New York Lawyer, forwarded by my colleague Brendan Kearney, really make me wonder how long Baltimore firms can dodge the impact of the lousy economy, if in fact they’re actually successfully dodging now. The link is subscriber-only, but here’s some:

The legal services sector shed 1,100 jobs in October as contraction in the general economy continued to hit law firm employment, according to figures released Friday by the U.S. Bureau of Labor Statistics.     Overall, jobs in the legal industry have shrunk 1.1 percent since October 2007, the report says, to 1.16 million employees.

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What Are The Signs That Your Law Firm Is In Trouble?

How would you even know if you were about to lose your job or if your law firm would soon be struggling to meet payroll?  Hourly billing attorneys live by a math formula which calculates the number of people times their hourly rate and compares it to overhead.  The rest is profits.  Firms will soon be worrying more about payroll than they will profits. 

What are the signs that a law firm is headed for trouble?  Please post your thoughts as comments below as we try and build a list of signals which might tip you off that it is time to start considering options.  I’ll start the list off here and look forward to your thoughts and observations.

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Call to Action! It Is Time To Start Spreading The Word.

If you have enjoyed reading this blog over the last five years, or are a relative newcomer, I have a favor to ask.  Start spreading the word.  There’s going to be tremendous opportunity for talented lawyers over the next several years.  We are building a community of like-minded lawyers, all of whom see what is happening around us.  We understand that things are changing.  We, quite simply, want to be a part of what is going to happen next.  

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Twenty Percent of the Am Law 200 Are Issuing Cutbacks

The American Lawyer and its sibling publications are tracking the woes of the largest large firms in America.  One article called “The Layoff List” contains a comprehensive list of news articles about Am Law 200 law firms who are firing or laying off employees over the last seven months or so.  Legal services are about to undergo a transformation, not by choice, but by circumstance.  Just as a forest fire clears land for new growth, the global economic collapse swirling around us will clear fertile soil for the growth of new and innovative law firms.  Will your firm be part of the discussion?

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