Definition: Individuals who provide your company with specialized service,
including but not restricted to lawyers, accountants and management
consultants
After you've owned your own business for a while, you know how
to run it. You've probably done everything from answering the
phones to hiring a general manager, and you can justly claim to
know your business inside and out, in general and in detail. In
case there's any operation you can't personally undertake, one of
your employees probably can. There are, however, exceptions to this
rule. Highly technical matters of law, accounting, management and
marketing are usually best handled by outside experts. Attorneys,
accountants and management and marketing consultants have
specialized knowledge about niche areas that you couldn't--and
shouldn't--hope to duplicate either personally or in the form of an
in-house employee.
Having access to legal, accounting and other expertise is
important to help your business grow as rapidly and efficiently as
possible. Given enough time, you may be able to master the
intricacies of law and finance. But why bother? Hand these duties
off to professional service providers. They can do them faster and
more effectively than you ever could. Besides, your skills are
needed in helping your business expand.
Referrals are the best way to get a new professional service
provider. The best source of referrals is other entrepreneurs. Make
a point of asking people in the same business sector (service,
retail, restaurant, manufacturing, etc.) for referrals. You can
also get good referrals from other professionals. That is, ask your
accountant for an attorney's name and your attorney for an
accountant's name. Other service providers, such as recruiters and
bankers, are also good sources. Don't forget to ask suppliers and
customers. Trade associations can also be good places to find names
of professional service providers.
Once you are outfitted with a few referrals, contact several to
gauge their interest in you and your interest in them. Then
personally interview at least three prospects.
At your first interview with a professional service provider, be
ready to describe your business and its legal, accounting or other
needs. Take note of what the provider says and does, and look for
the following qualities:
- Experience. Although it's not essential to
find an expert in your particular field, it makes sense to look for
someone who specializes in small-business problems as opposed to,
say, maritime law. Make sure the professional is willing to take on
small problems; if you're trying to collect on a relatively small
invoice, for example, will the lawyer think it's worth his or her
time?
- Understanding. Be sure the professional is
willing to learn about your business's goals. You're looking for
someone who will be a long-term partner in your business's growth.
Does the professional understand where you want to be tomorrow and
share your vision for the future?
- Ability to communicate. If the lawyer
speaks in legalese or the accountant uses lots of arcane financial
terms without bothering to explain them, look for someone
else.
- Availability. Will the professional be
available for conferences at your convenience, not his or hers? How
quickly can you expect emergency phone calls to be returned?
- Rapport. Is this someone you can get along
with? You will be discussing matters close to your heart with this
person, so make sure you feel comfortable doing so. Good chemistry
will ensure a better relationship and positive results for your
business.
- Reasonable fees. Attorneys, accountants and
other professionals charge anywhere from $90 to $300 (or more) per
hour, depending on the location, size and prestige of the provider.
Shop around and get quotes from several providers before making
your decision. However, beware of comparing one provider with
another on the basis of fees alone. The lowest hourly fees may not
indicate the best value; an inexperienced professional may take
twice as long to complete a project as an experienced one
will.
- References. Don't be afraid to ask for
references. What types of businesses or cases has the attorney
worked with in the past? Get a list of clients or other
professionals you can contact to discuss competence, service and
fees.
Some jobs, such as auditing financials to satisfy the
requirements of lenders or investors, simply must be done by a
professional with specific credentials. A certified public
accountant is a good example. If you are looking for legal advice,
you certainly want an attorney with a juris doctor or equivalent
degree who is a member of the bar.
You have more flexibility in looking for other credentials. The
initials MBA after a person's name suggest that, as the holder of a
master's of business administration degree, that person is
well-trained. However, highly experienced people may be just as
effective even if they lack the diploma and the initials.
Evaluating the worth of credentials can be tricky. Check with
associations such as the American Bar Association, the American
Institute of Certified Public Accountants, or the government agency
in your state charged with granting CPA credentials.
The professional services marketplace is a buyers' market these
days. Here are 10 steps to keep your costs in check without hurting
your chances of growing:
1. Choose the right professionals. The key is to match
your needs with the skills and resources of the provider. Most
small-business owners simply do not need a large, major-city law
firm or international accountant. The overhead expenses of such
megafirms are passed on to their clients in the form of high hourly
rates. Instead of a big name, look for small-business
expertise.
2. Examine your fee agreement. Once you find a
professional with whom you feel comfortable, read the fee agreement
letter carefully. Focus on hourly rates, expenses such as postage
and photocopying, and travel time. Ask candidates for a sample of
their standard fee agreement for your review. Be suspicious of any
professional who balks at this request.
3. Use paralegals and bookkeepers as part of your
professional team. Certain legal tasks are straightforward
enough that utilizing a paralegal instead of a business lawyer can
result in significant savings. The same goes for using a bookkeeper
instead of an accountant.
4. Do your own footwork. Keeping organized records,
indexing volumes of documents and writing out memorandums can
reduce your professional fees significantly. Professionals will do
all this for you--but at their hourly rates, and on your tab.
5. Meet with your professionals regularly. At first, this
may not seem to be a very effective way to keep fees down, but
you'll be amazed at how much it actually reduces both the number of
phone calls your provider has to make and the endless rounds of
telephone tag.
6. Use your attorney as a coach for minor legal matters.
When you have a customer who owes you money and refuses to pay, do
you turn the case over to your lawyer? Some entrepreneurs do, but
some handle small legal matters on their own by using their
attorneys as coaches. Lawyers can be very effective in coaching you
to file lawsuits in small-claims court, draft employment manuals,
and complete other uncomplicated legal tasks.
7. Demand and examine monthly invoices. While most
professionals are diligent about sending out monthly invoices, some
wait until the bill is sufficiently large. If yours does not bill
in a timely manner, ask for a breakdown of the time spent and costs
incurred to date, and for similar monthly invoices to be sent
thereafter. When the invoice comes, check the work description to
be sure you weren't inadvertently billed for work performed for
another client.
8. Negotiate prompt-payment discounts. If you are paying
a retainer fee, request that your bill be discounted by 10 percent.
(A retainer fee is an amount of money that acts as a fee
pre-payment; the remainder is refunded to the client.) Even if you
did not pay a retainer, negotiate a prompt-payment discount if you
pay your fees within 30 days of your invoice date. You may not get
as much of a discount using this method, but even a 5 percent
discount on your monthly legal fees can add thousands of dollars
per year to your business's bottom line.
9. Do not make impromptu calls to your professional. Most
attorneys bill under a structure that includes minimum time
increments for repetitive functions such as phone calls. This means
when you call your lawyer for a quick question, you will be subject
to a minimum time increment for billing purposes. For instance, if
you place four impromptu calls a week to your professional at a
minimum time increment of a quarter-hour per call, you'll get a
bill for an hour of your lawyer's time--even though you only
received five minutes' worth of advice! Keep a list of subjects you
need to discuss, and make a single call to discuss them all.
10. Negotiate outcome-based fee arrangements with
attorneys. Although this is a relatively new concept in the
legal market, more and more firms agree to such arrangements in
this competitive marketplace. An outcome-based fee arrangement is a
risk-sharing plan. Simply put, if your lawyer accomplishes a
particular favorable outcome, the bill is adjusted to increase the
fees by a preset formula. But if the outcome is not favorable, the
final bill is adjusted downward (though not eliminated.)
Get everything in writing when dealing with professional service
providers. Your written agreement should cover the scope of the
services to be rendered, the duration of the agreement and the
fees. The fee schedule should state whether fees are to be based on
an hourly, daily or project rate, and who is responsible for paying
expenses. You should consider having fees based at least in part on
performance to protect you from having to pay top rates for shoddy
work.
Your agreement should also specify who will be performing the
work for your company. Some professional services firms have
certain people whose primary job it is to solicit business, while
others do the actual work. However, you may not want a lower-level
attorney or junior accountant working on your project.
Finally, the contract should explain how the agreement can be
ended prematurely, typically with some kind of notice to the other
party. This will allow you to get out of an unsatisfactory contract
without having to pay the full amount.
Having access to top legal, accounting and other professional
service expertise is essential to your business's long-term health.
With these professionals on your side, you can deal effectively
with legal, tax and financial issues that might require years of
study to master. So instead of trying to do a professional's job,
stick to doing what you do best--growing your business.