Is your law firm as profitable as it could be?
Probably not. Most law firms leak profits through a lack of attention to the four pillars that support profitability.
The 4 pillars of law firm profitability are:
Marketing is the life blood of any law practice. Without enough business any law firm will fail. Yet so many attorneys refuse to or are inept at marketing. Developing and following a marketing plan is essential to the success of your practice. On an ongoing basis you should devote a percentage of your time to developing legal business. I ask my clients to decide on a time budget for marketing based on the number of hours they will invest, on a weekly basis, in developing new business. The numbers they commit to vary, based upon time they have available, but the important thing is that they invest in their law practice profitability through marketing consistently. The time budget also helps in developing a marketing plan. Based upon the number of hours per week available, we determine the most valuable use of the attorneys marketing time; where they will receive the greatest return on their time investment.
Systems are what makes a law firm run efficiently. Doing the same thing in the same way over and over is a time waster. It is important to your law firm's profitability to analyze the procedures in use and evaluate the most efficient way to perform those functions. For example, systems can be developed for client intake, returning telephone calls, responding to emails, scheduling client appointments and creating the legal work product. By implementing systems an attorney can make better use of his and his support staff's time. This results in more work being accomplished in the same, or a lesser, amount of time with a corresponding effect on law firm profitability.
Productivity refers to the attorney's use of time. “Time is money” the saying goes and it especially true in the legal profession. Despite efforts at alternative billing systems, some of which hold promise, billing for the time spent on a matter is the standard method of charging for legal services. Even in fixed-fee-for-service legal services the amount charged is (or should be) based on the amount of time required for the services. By using the time available wisely, a lawyer will have a direct and very significant effect on the law firm's profitability. I have helped attorneys who were spending long hours in the office, often sacrificing personal and family life, but without a decent return in billable hours. Inefficiency is the culprit and and it can be beaten by setting up procedures and systems (yes, systems!) and by using time management techniques.
Support refers to what helps the attorney produce the work product and administer the necessary business functions of a law practice. Support generally falls into two categories: staff and technology.
On the staffing side there is a wide disparity between between firms in the amount and quality of the support personnel. I have seen one man shops with one part time assistant with excellent profitability and I have also seen firms where the staffing budget is completely out of line with customary legal industry ratios only limping along. When a firm is growing the challenge is exacerbated by the shifting ratio of attorneys to staff-always a moving target. Wise planning on the number and qualifications of staff will result in greater profitability for the firm.
Technology is more and more an important factor in law firm profitability. There many companies in the business of providing tech to law firms. Everything from computers, phone systems and office equipment to the more intangible such as CRM systems, billing systems, case management systems and of course, website design and internet marketing. The proper tech and using the tech efficiently will have a major impact on a law firm's bottom line. I once helped a client who was using an archaic timekeeping and billing system. She spent 1.5 days per month preparing her client invoices. So, 12 hours (1.5 days) per month x 12 month = 144 hours per year! She was wasting a lot of billable time and, as a result, her law firm profitability was reduced.