The average law firm is incredibly inefficient and wasteful. Why? Because they make too much profit. If that sounds crazy, let me explain.
ABA and bar association statistics say that the average sole practitioner/small firm profit margin is between 45 and 55%. Contrast that to the average grocery store margin of one or two percent. With such a razor-thin margin, grocery stores are constantly focusing on efficiency, profitability, increasing sales, increasing customer loyalty – everything to make sure that slender profit margin doesn’t turn to a loss.
Law firms, not surprisingly, generally operate on slop. A few unbilled hours here, a few uncollected dollars there, a little staff inefficiency, little extra expense for services, and, as former president Lyndon Johnson used to say, “a few billion here, a few billion there, pretty soon it adds up to real money.”
(Do you know how to calculate your TRUE profit margin? Ask me.)
Before we get to the details, let me share a few big principles.
First: if you want to grow your practice, first you have to be willing to grow your skills in managing it.
It hardly needs to be said. Attorneys hate to deal with the “business” side of the business. Most suffer from the “I just want to do my work” syndrome. Staffing, firm administration, expense management, accounting, all take a major back seat to “getting my work done.” As a result, attorneys tend to live in a highly disfunctional business environment.
Becoming a better manager starts with the attorney himself or herself. Personal efficiency, organization, productivity. The ability to focus and get things done. Next, they need to know how to create and manage an efficient team. Develop the right team and the right team structure, and build an effective system for delegating, supervising, and managing.
Second: doing legal work is not the primary purpose of your practice. Altruism and idealism aside, the first purpose of the practice is to allow you to have a decent life. If it doesn’t do that, your ability to take the best care of your clients is endangered. Delivering legal service is your product – how you accomplish that primary goal. If you find that offensive, try working the next year for free and see how that works for you.
Third: your most important role in the practice is not doing your legal work. It’s making sure there is legal work for you to do. Marketing. Sorry, all you idealists and ethicists. And by the way, personal marketing has always been ethical. Sales and solicitation are not.
Fourth: most attorneys have never been trained (or have wanted to be trained) in good business practices. Enough said.
Fifth: any change is uncomfortable. Many great changes have been avoided or discarded because the initial process of change proved uncomfortable. As Arnold Palmer once said, “in order to play golf well, first you have to be willing to play it badly.”
Over the next weeks, I’ll offer my thoughts and advice on the following areas:
How to build more powerful initial prospect conversations. The easiest place to start in getting new clients is in increasing the percentage of your prospects who become clients. We’ll talk about how to create the most powerful impressions and communications so that more prospects hire you. Conversely, will examine why and when to say “no.”
How to create stronger initial client relationships. Most clients leave your office without any clear picture of what will happen from then on. In other words, and some level of fear. What are the keys to ensuring a better ongoing client relationship?
How to reduce your accounts receivable through better client communications. More than 55% of all attorney grievances relate to poor communications. What must you do to make sure that the relationship stays afloat and doesn’t crash and burn?
Happy clients mean happy receivables. How do you get there consistently?.
How to increase the efficiency and work quality of your team. Do you have the right team? Are they all working as efficiently as possible? Are you managing them effectively?
How to expand your client base without significant cost. The most successful attorneys are masters at developing a strong base of referrals, and a powerful public reputation. You can be too.