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CARES Act Funding for Small Law Firms – Danger or Opportunity?

by Mar 28, 2020

Today I want to talk about the CARES Act and offer some suggestions about how I think small law firms should approach the potential availability of funding and loan forgiveness to become better and more resilient.

Feeling a bit out of touch here at home, I recently ventured back onto Facebook to see what friends and family are up to. I saw some attorney friends talking about The CARES Act and other government intervention, and it got me thinking.

To preface, I’ve been largely absent from Facebook for the last few years. If you want to know why, I recommend two books, “Hooked: How to Build Habit-Forming Products” and “Indistractable: How to Control Your Attention and Choose Your Life,” both by Nir Eyal.

On Facebook I saw attorneys who own small law firms and have employees voice their opinions about the The CARES Act. Some see it as a boon, while others see it is a F-you to small businesses.

What I did not see was any mention, by any attorney, of the opportunity that the CARES Act could provide them to work on their firms to become better and more resilient. That’s what this post is about.

The spread of COVID-19, the fluctuations of the Dow, and the actions of politicians in Washington are beyond the control of the average attorney just trying to survive and do the right things for their clients, their employees and their families.

I understand the frustration. It sucks to be out of control, or dependent on an outsider in any aspect of your law practice. I founded LawLytics to help attorneys overcome systemic and widespread learned helplessness in their legal marketing. I hated being out of control of my firm’s marketing, and I saw that so many of my attorney colleagues did too.

Learned helplessness is not unique to legal marketing. If allowed, it will permeate many aspects of a small law firm’s business. For example, I know attorneys who have a terrible employee. That employee makes life in the firm unpleasant, causes revenue to decline and good employees to flee. And yet, because the attorney is “busy practicing law” and thinks that he is reliant on that bad employee to keep the plates spinning, the attorney believes that he cannot fire the employee. Call it codependence. Call it abdication. Call it self-sabotage. Call it manipulation by the bad employee. Whatever you call it, the result is that the bad employee prevents the law firm owner from being in control until that employee’s last day — which often only comes when the employee voluntarily leaves.

And when the bad employee leaves, the attorney starts to notice how little that employee actually did to keep the plates spinning, or how the firm’s culture improves, or how business improves, or how other employees step up, speak up and become more productive. I know lawyers who have endured a toxic employee for more than a decade. Why? After the employee is gone they ALL say exactly the same thing. They explain that they kept that employee because keeping that employee seemed easier than making the hard and courageous choice to let the employee go and retake control over the attorney’s own practice.

My point is that many attorneys don’t realize that their thoughts, their words and their actions, when it comes to their businesses, are disempowering. This is as true of some of the boldest and most confident litigators that I know as it is of the most introverted transactional attorneys. Most attorneys are much more in tune with practicing law on behalf others than on practicing business on themselves. So I want to share some thoughts that I have about how attorneys can frame, in their minds and in their firms, the government’s response for small businesses like theirs. I’m not talking about legal, financial or accounting framing. And I won’t touch the topic of avaiability or qualification for funding. I’ll leave the questions about what kind of relief lawyers are eligible for, the financial risks and advantages of participating and how to apply it to their payroll and books to the subject matter experts in those disciplines.

I’m talking about how you, the owner of your own law firm, frame in your own mind what the government, in partnership with private lenders, is going to offer you. I recently wrote about the winning legal marketing mindset that wins in both recessions and boom times, and what I’m talking about goes beyond that.

I know one thing with absolute certainty with it comes to the business of law — solo practitioners and small law firm owners who approach their businesses with entitled laziness ALWAYS struggle at the bottom. And their peers who approach their businesses with a willingness to take control, roll up their sleeves and do what it takes to succeed engage in a positive struggle to reach their goals, and in the process almost always end up succeeding. In other words, if you’re a lawyer who is a law firm owner, you’re going to have to struggle one way or another. There are good struggles that produce personal and professional growth, and there are bad struggles that are a byproduct of the wrong attitude. And you get to choose which kind you engage in every aspect of your life and your practice.

Since I started this blog series surrounding COVID-19, I’ve heard from attorneys across the United States about the things that they are now proactively doing to set their business up for success. Last Tuesday I suggested these nine things, and I have some additional feedback and ideas to add to those soon. It’s of critical importance that you remain active and work intentionally because, while the dominant meme is that we should all fight this battle to save the world from our couches while binging on Netflix, doing that won’t do shit for your law practice. That battle will be won or lost in your own head, and if you show up to that battle, and you don’t give up, you’ll emerge stronger as an individual, and your law firm will be stronger too.

I believe in the power of positive thinking. Paradoxically, I also practice negative visualization, by using my imagination to see the dangers lurking around future corners. One without the other, I believe, sets a person up for failure or a paranoid existence. Let me give an example in the practice of law:

If you believe you’re going to lose that trial, you probably will. But if you believe you’re going to win and you fail to anticipate how opposing counsel will try to prevent you from winning, your positive thinking is a liability.

If you believe that you’ll never be able to grow your practice because you’re at the mercy of forces bigger than you, or that you need to just wait, watch and hope, then guess what? You’ll never be able to grow your practice.

Work the problem. Solve for growth now. Stop waiting on somebody else to save your practice, or grow your practice. It ain’t gonna happen. Your firm’s success or failure is both your prerogative and responsibility, and nobody else’s.

Now, back to the sudden “free money” that might be available to small law firms through the CARES Act.

Most law firms are not used to having outside funding. I never got a penny in my decade of law practice. Not from the government. Not from a private investor. Not from a benevolent benefactor or patron. And I’m thankful for it. I know I can be resourceful and bootstrap a business.

As the CEO of a rapidly-growing technology company, I have raised equity capital on behalf of LawLytics from institutional investors, and I won a $250k non-dilutive prize from the Arizona Commerce Authority in a business plan and pitch competition on behalf of LawLytics. And here’s what I can tell you about the infusion of private or government money into a business:

If the business is crystal clear about how the funds should be applied to growth, and if the business has a plan to measure the results using objective numbers, then the money can significantly accelerate the business. In this scenario outside money is a benevolent force. On the other hand, if the funds are to serve as a band-aid for a flagging business, or as a cushion to get through a hard time or “figure things out,” the money can cause a lot more harm than good. This is because necessity is the mother of invention, and comfort kills.

So I implore you. Do not get comfortable. I’m not saying don’t take available money. I am saying that, if you do, make sure that you, as your firm’s leader are clear about what it’s to be used for, and that it’s viewed as a precious opportunity and not an entitlement.

I personally don’t want to see anybody lose a job (and I’m very fortunate that, here at LawLytics our business is fully operational and growing through the crisis). My heart breaks for business owners who are wrestling with life-altering decisions about employees. I also have empathy for hard-hit commercial property owners who are wondering if the next rent payments will be coming in.

So take the money, when available, to take care of your people and pay your rent. But be careful, because these are highly impressionable times, and you can easily and accidentally destroy your firm’s work culture if you are not careful.

If I was a small law firm owner right now, and if I had access to government backing to keep good employees on staff (even when there isn’t the revenue or typical job description-aligned work to support remaining fully staffed), I would. But I would do so with a clear agreement with each and every member of my retained team that they would be working, every day, full days, to build a foundation for the next decade of success in the firm. I would let them know that, short of putting themselves or their families in harms way, I expect that the boundaries of the job description that they had before the COVID-19 crisis do not apply until further notice.

Why is it important to be clear about what you expect of your retained employees?

As the law firm owner, you’re already accustomed to doing jobs that the average employee attorney does not do or think about. In addition to playing the part of lawyer, you’ve likely also played the part of at least some of these roles at some point: janitor, bookkeeper, receptionist, paralegal, tech support, copy machine repair person, office manager, collections agent, bouncer, and many other things. You’ve always been willing to jump in and roll up your sleeves to do whatever was necessary for your firm, because, well, it’s YOUR FIRM.

But your employees may lack the experience and context to understand why an owner deviates from her typical activities. It’s your job to make them understand, and it’s your job to create a wartime, all-hands-on-deck mentality in every staff member.

It’s up to you to explain to your employees, individually and collectively, exactly what is expected of them. You must assign them specific tasks if their time is not occupied with their regular job duties. It’s your job to tell them how to grow your firm, not their job to invent ways for you. Spend some time thinking about what an idle employee, on payroll and available to work from home, could do to help your practice if they devoted eight hours a day, five days a week to doing whatever it takes to build an advantage. Here are some ideas to get you started.

Create content for your website. This is a great thing for associate attorneys to do. Every piece that they create gives you a marketing advantage and one additional page out there for your future potential clients to discover. If you’re a LawLytics customer, we can help you understand how best to harness this available content creation labor productively, show your attorneys how to use the tools, and support them as they are working to support you.

Scan your physical files. If you still work off of physical files for your client matters, you can send your employees home with files, a scanner and a laptop, and they can use the idle time to digitize your practice. In a future post I’ll dive deeper into some best practices here, including recommendations for hardware and software.

Get up and running on a practice management system like Clio. If you aren’t managing your practice using a cloud based provider like Clio, Practice Panther or MyCase, this is a great opportunity to do so using your downtime. As the firm owner you’ll likely want to lead the charge, but then you can have your employees enter the details from physical case files, or do quality assurance on the digital migration if you’re moving the date from a local system to the cloud.

Reach out to all of your former clients. Your former clients are likely at home right now. Assign the best person in your firm to reach out to each client. Emails are okay, but picking the phone is the best. When your former clients know that you’re checking in on them to see how they’re doing, they’ll feel great about your firm, and you’ll be top of mind the next time they need legal help or have a referral to give.

Give free advice and help. Start with former clients and see how you might be able to give them some quick and free legal advice. Have your staff make initial contact to assess their needs. You may have clients who are struggling with things such as not understanding whether they will get a government check, not understanding whether their business qualifies under the CARES Act for help, whether they are going to get in trouble because they can’t check in with their probation office or make an upcoming court date, whether they can postpone jury duty, whether they can be evicted or their water shut off if they can’t pay this month, and many other things. My point is that if you have idle employees in your firm, you have an excellent opportunity to do some community service (while the community, in the form of the federal government is literally paying those employees for you). While it’s not always the case, pro bono work right now may be a great investment in your firms future. The goodwill that it creates and the marketing value will resonate into the future. And, if you believe in karma or in what comes around goes around, then here’s your opportunity to bank some.

Create an internal knowledge base. Use this opportunity to have your team “crowdsource” an internal operations manual. Start by having them write out everything that they do in a week at the office, and have them note which things they are unable to do at home, and why. Make it detailed so that any competent outsider would be able to understand and follow the processes. The result will be an internal playbook that gets and keeps everybody on the same page, as well as a clear list of the things that you need to change (and software or hardware you need to invest in) to make the office-only items possible at home. This will not only get everybody thinking about what they used to do, but also get your team functioning together. Have regular video meetings to check in on progress, and use a common repository of documents where changes can be made and tracked in real time by multiple firm members (I recommend Google Docs for this).

These are all just starter ideas. Spend some time thinking about what your practice needs, and I’ll bet that you’ll have many other ideas. And, what’s the alternative? If you let your employees collect government money that is passed through your firm without working, what precedent are you creating? What will be your firm’s culture when work is once again required to earn the same amount of money that they got from the government for free?

The answer is obvious and it’s not good. Your people want to work and they want to feel useful. They want a sense of purpose. If, as a law firm owner, you fail to give that to them now and instead channel government handouts for them, you’ll be dishonoring them and yourself, and you’ll miss a golden opportunity for your firm, and you’ll be setting your firm up for a very serious hangover when the crisis passes.

Today is your chance to define yourself and your firm as a leader. Your staff is depending on you to guide them, to provide them security, direction and purpose. Now is your time to step out of your comfort zone as a business leader and make some bold calls. Your good staff members will appreciate your steadiness and resoluteness, as it will ensure them that you and your firm are stable.

And for you, the law firm owner, in your extra downtime (in addition to the above) there are a range of books and podcasts that I would love for you to read about being a business leader (I love talking with lawyers who educate themselves about business and business leadership). Topics range from how to manage yourself, to how to hire employees, how to recognize and remove toxic employees, how to market, how to deal with conflict, how to have hard conversations, how to build systems, how to sell, and many more. I’ll blog in the near future about some of the titles that I recommend. And if you’re wanting to read something right now that can give you ideas that you can put to work immediately go grab a Kindle copy of Andy Groves book High Output Management, give it a read, and let me know what you think.

If you’re reading this right now and you’re struggling in your practice, your struggle is your privilege. That’s not always easy to see, but what’s happening right now, what’s keeping you up at night, can be the purest fuel to do the things today that will ensure your future success. Until next time, stay safe, stay healthy, and, when it comes to your practice, stay hungry and keep fighting for your clients, your firm, your employees, your family and yourself.

About The Author
Attorney Dan Jaffe previously built successful small law practices in WA and AZ. He currently serves as the CEO of LawLytics.