Over the past six years, I’ve had the opportunity to work with hundreds of professional services organizations spanning from consulting companies, law firms, accounting firms, medical practices, and everything in between. Despite the diversity of these clients, what strikes me, however, is how often these businesses think of themselves as unique and the basic business principles aren’t applicable to their particular brands. Law firms are particularly guilty with respect to this type of mindset, and it’s costing them valuable opportunities to attract and retain clients and increase revenues.
Despite these issues keeping law firms from growing their practices, there are several ways they can correct their course to become more efficient, financially successful operations. Some of the fundamental business principles that I’ve seen law firm’s often lack include:
Business Intelligence (BI) and Analytics
At Practice Alchemy, we conduct audits of 50+ law firms a year, and to date, there have been very few practices that have any sort of reporting or analytics to run their organizations. Outside of using basic accounting of expenses and tracking revenue, there’s little data on how they operate. This lack of BI solutions has always struck me as a huge opportunity in the market, considering the power of key performance indicators (KPIs) and firm-wide focus on business analytics.
Without BI and analytics tools in the fold at your firm, you cannot concretely:
- Identify expenses pertaining to staff and operations
- Visualize the firm’s most critical data to make actionable decisions
- Establish the necessary benchmarking pertaining to productivity and revenue against determined KPIs.
Accounting & Forecasting
I often see law firms also struggle from an accounting & forecasting perspective because they lack the structure in place to effectively track their revenue performance. Usually, firms have a loose mix of time tracking, accrual, invoicing, and collections processes run by a combination of internal staff and an external certified public accountant (CPA).
The bookkeeping spectrum is diverse, and firms may have dedicated internal bookkeeping staff who provide accurate forecasting for their firms’ planning, while other practices rely on the office manager to handle the books along with dozens of other unrelated tasks. Even at larger firms with internal staff to handle the bookkeeping, revenue forecasting is usually non-existent even though it’s critical to their success.
If your law firm lacks forecasting solutions, you cannot:
- Determine case demands against projected staffing needs to make informed hiring decisions
- Gain an understanding of your firm’s cash flow to ensure success during market fluctuations
- Analyze past business trends to predict future outcomes
The first client lifecycle of any law firm is the customer acquisition process. Most practices rely on word of mouth, networking, and referrals to fuel their customer acquisition strategy. This is a logical first step for law firms, but they’re usually missing out on significant opportunities to further accelerate their growth from these different types of channels:
- Organic Traffic: For consumer-focused practices, law firms can benefit greatly from leveraging Google to attract potential clients who are actively seeking legal solutions on the popular search engine. To utilize Google to its full potential, practices can employ a digital keyword strategy as part of a healthy search engine optimization (SEO) program. For corporate-facing firms, LinkedIn can be a valuable platform to produce content targeting such clients, yet practices often publish content sporadically (if at all) or the strategy fails to target the right types of prospects. Your firm should create content that establishes your firm as a thought leader in your practice areas, which will allow prospects in need to both locate and gain trust in your particular expertise.
- Paid Advertising: There are numerous ways to leverage paid and traditional advertising in order to drive prospects into your sales funnel. “Sales” is sometimes seen as a dirty word in the legal industry, but at the end of the day, partners are selling their services to potential clients, and a law firm’s sales funnel is strikingly similar to other professional services firms. Paid ads will enable your practice to target more ready-to-buy prospects compared to organic channels, as they’re more actively seeking solutions to solve their legal problems. Firms with corporate clients often discount paid advertising - but in their case “sponsored content” (paying for their thought leadership content to be surfaced on platforms such as LinkedIn) can both elevate brand and exposure.
- Programmatic Referral Program (PRP): While most firms have referrals that occur with varying frequency, I’ve rarely run into a law firm that has a formal system for inbound and outbound referral tracking. Any partner who sends a referral out to another law firm needs to ensure that each referral is documented in a central tracking repository. There are numerous ways to accomplish this. For example, a very easy method is to have the team member bcc a firm-operated referrals email address , which is then managed administratively in a central document. Tracking referrals is more than just record-keeping, though. By analyzing where referrals come from firms can gain significant insights into where (and how) to get more high-quality referral business.
- Outbound Prospecting: For business-to-business (B2B) law firms, outbound prospecting represents a HUGE opportunity that’s rarely leveraged by practices due to attorneys’ misconception of how this process actually works. For example, as a law firm with a commercial real estate practice, there’s a finite number of real estate agencies and brokerages in your area that must have a relationship with an attorney. By proactively reaching out to these firms, your practice can queue up new relationships and conversations that can eventually turn into lucrative clients, without a “hard sell” or coming off as “salesy.” With the correct automation in place and strategy, these types of prospecting campaigns can be run at scale to create a sustainable pipeline of new clients to bolster your firm’s existing client pool. In the case of one lawyer that Practice Alchemy worked with, we identified 50 commercial real estate brokers who worked locally and sent each an email requesting a meeting. We followed this up with a phone call and successfully set up meetings with 36% of the brokers.
Stop Mismanaging Your Firm
The firms that figure out they’re a real business early on stand a much better chance of sustainable growth. Concrete metrics, goals, client generation, and operations not only free up attorneys’ time to focus on other critical aspects of their practices, but creates a sustainable platform for either expansion, mergers/acquisitions, or a healthy retirement.
Law Firms are just like every other professional services firm on the planet, and they depend on human capital to succeed. With these tools and processes in place, your practice will have insight into firm’s utilization rates and can forecast future casework to ensure you’re equipped from a staff member standpoint.
If your law firm is lacking structure around any of your business practices, stop trying to recreate the wheel. Practice Alchemy is an outsourcing and advisory services firm that will support your administrative, backend, and client acquisition services so you can focus on practicing law, rather than running your business. Contact us today for a consultation.