One hour at any Washington cocktail party is proof enough that our society is over-lawyered. Nonetheless, there are probably millions of small businesses that have no continuing relationship with a legal counsel. The legal profession is out to change that -- to generate new business for the roughly 40,000 graduates leaving U.S. law schools every year -- and is relying on one of the most tried-and-true marketing techniques around. Small business owners are being offered free samples.
The idea, recently promoted by James C. Frierson in an article in the Journal of the American Bar Association, is for law firms to perform "legal audits" for small businesses. He suggests that an interviewer run through a group of questions to get a profile of the business and assess the owners' sophistication about the various laws and regulations governing them. The lawyer then should respond with a report listing potential trouble areas and suggesting changes in business practices. Firms could bill the audits at discount rates, but Frierson, a lawyer and professor of management, says audits are likelier to drum up business if they are free.
"The purposes of the legal audit are to increase a lawyer's current business, build the client list for the future, and provide effective legal advice before trouble develops," he explains. "Legal audits should be attractive primarily to younger lawyers who have the time to engage in an activity whose main payoff may be in building goodwill and a client list."
Frierson suggests that the audit start with such standard questions as what the business does, how big it is, and whether it is a corporation, a partnership, or a sole proprietorship. Next, he recommends that the lawyer try to gauge how much managers know about such diverse issues as workers' compensation laws, job safety requirements, local licensing laws and zoning regulations. The audit should focus on areas, such as antitrust law, that might catch a beginner business owner unawares. For example, the interviewer should determine whether the owner has tacitly agreed with a competitor on pricing, or signed a supply contract that lets him take certain popular lines only if he will buy other, less attractive, merchandise.
Frierson recommends that the business audit also veer into the personal legal status of the owner, to the extent that it could affect the future of the company. He also suggests questions about wills, life insurance, and buyout agreements with partners.
For the marketing technique to be cost-effective for the lawyer, it must rely heavily on "canned" responses: text stored in a word processor that can be personalized with a minimum of effort for each business before being printed out. For instance, there might be a general description of federal and local antibias statutes, what businesses they apply to, and what kinds of hiring or promotion decisions are likely to be taken as evidence of illegal discrimination.
The descriptions also are likely to include a pitch for some legal services to be rendered at full cost. For instance, a partnership without a buyout plan in case of the death of one of the partners probably will produce a post-audit report that not only spotlights the problems of suddenly getting inexperienced heirs as partners, but also mentions how much the lawyer who conducted the audit would charge to draw up such a contract.
The legal-audit idea combines two related managerial audit techniques that have proved effective business-getters. One technique, offered by accountants, takes a generalized look at a company's financial practices; this type of introductory audit has led to a lot of billable hours for new kinds of work more sophisticated than traditional bookkeeping tasks. The other type is a specialized legal audit offered by specialized firms. For instance, the Philadelphia firm of Sprecher, Felix, Visco, Hutchinson & Young offers to review a company's job applications and personnel practices handbook -- and almost always finds potential problems. "These reviews are helpful in obtaining new business," says Karl Fritton, a partner with the firm.
Lawyers looking for small companies that might be prospects for a legal audit usually either advertise the service -- in which case it is likely to carry a small fee -- or offer it free to members of local business groups. Companies also can expect to be approached by lawyers seeking to conduct similar audits on potential personal legal problems for employes. The lawyer will sell the idea on the theory that the company can offer the audit as a fringe benefit to workers, and yet pay nothing for it. That's a sort of double free sample.