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 Bottom Line: Squeezing Expenses
(FMBK Recognized for Best Practices of
the Year 2006)
Ryan Malkin, Small Firm Business, 02-21-2006
No matter how many billable hours you
clock, ultimately, it's all about the bottom line. To keep as much cash in your pocket as
possible, cutting costs is your first line of defense. At the Los Angeles firm of
Feinberg, Mindel, Brandt, Klein & Kline, between 2004 and 2005, the firm's revenue
increased $250,000, due to cutting costs and taking a more aggressive marketing stance to
increase cash flow.
This year the firm saved big on a major
cost: malpractice insurance. Feinberg Mindel's revenue is about $5 million per year and
its malpractice insurance is roughly two percent of that ($100,000). "It's our
largest expense item next to rent and health insurance," says managing partner Steven
Mindel. In late 2004, the firm's former insurance carrier, TIG, stopped writing policies
in California. So the firm had to find a new carrier before its policy lapsed in December.
But the quotes Mindel received were around
$130,000, far more than the firm wanted to pay. From his managing law partners group (a
group of attorneys in the L.A. area) Mindel was put in contact with Brian Ahern of Ahern
Insurance Brokerage. Ahern had helped one of the partners in that group save $100,000 on
malpractice insurance by accompanying the partner to London to meet directly with several
underwriters from Lloyds, a major underwriter for U.S. firms.
Instead of flying to London, Mindel took
another tip from Ahern: He wrote a statement for the carriers, noting why the firm carries
less risk than other firms and therefore deserved a lower rate.
That story included information about each
of the firm's 11 attorneys, their years of experience, claims history, how many paralegals
the firm has per attorney and how the firm manages collections. "Carriers are
interested in that; they want to see an active collection policy and to see that more than
one person has checked fee bills before they go out," says Mindel. Also of interest
is the amount at risk in the average case.
Then, about a month before the firm's old
policy lapsed, Ahern met directly with three or four different underwriters. The result:
Instead of paying the $130,000 Mindel was quoted before meeting Ahern, the firm now pays
$70,000 for malpractice insurance.
Feinberg Mindel also invested more money in
infrastructure, with the hopes of collecting more from clients. Several years ago the firm
initiated an evergreen trust system to be sure retainers are maintained at a constant
rate. "If the money is already there, we don't have to waste time getting the
money," explains Mindel. "It increases the cash flow and reduces defaults."
And to further ensure that any defaults are collected, last year the firm hired an
accounts receivable manager.
"She spends the whole day doing just
collections," Mindel says. By hiring the accounts receivable manager, the firm has
saved an estimated $200,000 in defaults, after her salary (savings that the firm may or
may not have realized).
Although minimal in comparison, Mindel also
reduced library costs by $1,000 per month simply by cutting down on paper subscriptions
and going with cheaper online resources. The firm also began taking advantage of Los
Angeles County Bar Association discounts and utilizing big box stores, like Costco, for
supplies. Sound like a lot of work? Perhaps. But hey, even without an accounts receivable
manager, these tactics have saved the firm more than $150,000. |
