It's bad out there. If you're bottom line is taking a beating, some of your clients are doing much, much worse. Some of them are giving going under a long, hard look. If you have clients in real estate, construction or finance, you had better read this post, and take it very seriously.
One of my favorite blogs is called In-house Rants. It's the anonymous musings of a general counsel who is more than a little cranky. This morning's post is an eye-opener. I'll quote most of it:
We went to our top 5 firms (by billings last year), and said, “Hi. We need at least a 15% discount.” No one balked. They had to be expecting it and were only too glad to oblige. Especially when we opened with, “We’ve only got a short time — we’ve got meetings with [insert names of other major firms who work with us].” By the way, we are not a Fortune-anything sized company. If you don’t ask, you don’t get.
We also softened them up for more concessions down the road. “Our new ERP system is great at figuring out exactly what we spend on a per-transaction basis, and our executives are insisting on tighter budgets all around.”
Even the firms with commodity practices like labor and employment are willing to give across the board discounts. The competition is heating up, the economy is slowing, and keeping clients is important. If you’re in private practice, what are you doing to keep my business?
Are you at least staying in touch?
Let's see now. In New York, base salary for a first-year associate is around $180,000. Many big firms (and midsized ones) for years have been pursuing the nonstrategy of mindlessly announcing rate increases every year, just because they can, basically. Now, the credit market is frozen solid, the Dow has dropped by 40% or so, virtually every major bank, investment and otherwise, in the country is in big, big trouble. If you think your clients aren't going to be coming after their legal budgets with a cleaver, you're dreaming.
So what can you do? What you can do is take the proactive step of getting out in front of this trend. Call your biggest clients. Set up a lunch, which you pay for. Right over the lobster ravioli, tell them you know they're hurting, and offer them a rate decrease before they ask you for one. There is always a way to turn even the worst situation to your advantage, and this is it.
Two good things will happen here. First, you will retain some control over the situation, and will be able to set the table for a rate increase down the road when things are better. You may even be able to get that in writing. The "soften them up for more concessions down the road" part of the post sounds pretty ominous. Second, you will absolutely cement your most important relationships, and provided you don't, say, embezzle funds from them, they will be your clients forever.