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Small Clients: Love 'Em or Leave 'Em?

For someone like Seth Godin, Small Is the New Big. But for some large firms, small clients are nothing but a big waste of time. Should bigger firms cull smaller clients? That's the topic addressed in this three-way blog discussion between Ed Wesemenn, Ed Poll and Tom Collins.

Wesemann initiated the discussion with this post advising larger firms to consider firing small clients. Wesemann describes the drawbacks of small clients thusly:

By almost any standard, small clients -- either individuals or businesses -- are problematic for law firms. Being sensitive to the limited financial resources of small clients, rarely is all of the time required to perform work recorded by the working attorneys and while billing, small clients often are the most frequently written down.

After billing, small clients represent the greatest risk of bad debt write-off of all accounts receivable. Indeed when you review the accounts receivable delinquency lists of law firms, individuals and small and startup companies tend to be the largest offenders. And if a firm becomes aggressive in attempting to secure payment, small clients represent the greatest risk of a malpractice suit. In fact, the nuisance claims that law firms routinely buy-off are invariably brought by small clients. By the same token, small clients, by their sheer number present the greatest conflicts of interest.

Any firm that has attempted to trace where its entertainment expenses are going, particularly tickets to sporting events and usage of stadium loges, will quickly note the small clients are entertained with a frequency disproportionate to their revenue contribution.

Finally, small clients do little to enhance the reputation of the firm and build the skill levels of its lawyers.

Ed Poll takes his shot next, with a different view. Poll argues:

The suggestion that law firms “cull” 10% of their clients each year ... or that they “fire” their small clients ... rattles my very bones when I hear this. So long as the work being done for clients is profitable or can effectively be used as a training ground for new lawyers, there is reason to continue to retain this business.

Tom Collins makes the point that firms need to leverage off associates to increase profitability and suggests that smaller clients don't generate enough work to produce sufficient leverage. But he sees value in both Wesemann's and Poll's positions:

Ed Wesemann’s comments are likely to be good advice for law firms in a full capacity situation with a sound leverage level.  And we all know that small clients introduce conflicts that may prevent a firm from taking on large client opportunities.  However, Ed Poll’s warning is sound -- think very hard before you start firing clients.

As for me, I think you all know where a solo like myself comes down. I loved Ed Wesemann's post about how large firms should fire small clients, because it means more work for my solo colleagues and me. Plus, I can't think of better marketing material than Wesemann's post to sell small clients on the benefits of a small practice over a big firm. 

As always, we're open for your comments below.

Posted by Carolyn Elefant on August 23, 2006 at 03:49 PM | Permalink | Comments (3)

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