I am a partner in an 8 attorney firm in the Chicago suburbs. Our firm has started having discussions about what we need to be doing differently. This is huge for us – one meeting a year is our typical meeting frequency and then only to discuss how we are going to cut the pie. How have other firms done during the recession? What are you seeing?
In general small firms in the midwest have fared pretty well during the recession. Last year some firms had the best year ever while others experienced flat or 10% revenue declines. Small firms that had the biggest problems were those that had issues before the recession or were in problem practice areas. Big law firms have had to face unique challenges.
Small firms that have weathered the storm and fared the best were those that:
I believe that law firms that fail to focus their practices, set goals, measure accomplishments, and foster accountability will fall short and not meet their financial objectives. Law firms that fail to plan are planning to fail.
Law firms as well as solo practices need to begin focusing their firms and practices, setting firm and individual production goals, measure accomplishment and implementing systems to instill accountability from all members of the team – attorneys and staff alike.
Consider using budgeting which is a tool that can be used to measure goal attainment and how well the firm is doing.
What gets measured is what gets done.
John W. Olmstead, MBA, Ph.D, CMC
I am the founding partner of a 17 attorney firm in Missouri and I serve as the managing partner. We have 12 partners and 5 associates. Our practice is entirely defense – personal injury and workers compensation. The majority of our clients are insurance companies and third party administrators. We represent a handful of self insured companies. While we have had a successful past fifteen years are firm is now struggling. We have lost market share and our case counts are way down due to the economy and regulatory changes in Missouri. Our profitability has suffered as a result. We need to make some changes but are unsure where to start. Could you share your thoughts?
The present state of the insurance defense practice presents numerous challenges to the law firm. These challenges simply cannot be ignored – they will have to be faced head-on. The solutions are complex and will require time to sort through. While solutions can come in different varieties, they will take the form of one of two general strategic approaches.
The remainder of this post will focus on reinventing the practice and staying in the game.
For some firms the appropriate strategy may be to stay in the game. These will be firms that have a well-established reputation in insurance defense, where insurance defense represents a major source of their revenue, and where adequate leverage and profitability and leverage exist. These firms will not be firms that dabble in insurance work. These firms will be committed to this practice area and will focus on it exclusively. Some of the following actions will be required to reinvent the practice and stay in the game:
John W. Olmstead, MBA, Ph.D, CMC
We are a 5 attorney (all partners) personal injury plaintiff law firm in Central Illinois. We are all working hard, are extremely busy, but we don't seem to be seeing the results of our hard work in our earnings and compensation. We are making hefty marketing investments – in fact we are spending around 6% of revenue on marketing. What are your recommendations on how we can improve our profitability?
It is hard for me to comment specifically with the limited information that you have provided. There are numerous variables that need to be examined. However, in general terms:
John W. Olmstead, MBA, Ph.C, CMC
I am a member of a three attorney firm. I think that we know where we are as a firm, where we want to be, but we don't know how to get to the next level. Do you have any ideas?
Rather than following the pack – attorneys need to find ways in which their firms can "dare to be different."
Many attorneys are providing the same service – solving the same sort of legal problems for their clients using similar tools strategies/approaches. To many clients – attorneys all look the same. What can you do to stand out?
Marketing is about more than just promoting the firm to get clients. It is also about deciding on:
Effective marketing requires a mix of the above elements in your plan and then effectively communicated.
Many attorneys suffer from random (unplanned) acts of marketing or business development. To be effective you need to be well focused, have a plan to focus the firm's efforts, and be disciplined and make excellent use of your professional time. Often the largest marketing investment is not advertising or the cost of other marketing vehicles – it is the cost of you non-billable (or investment) time.
A business/marketing plan (10 pages or less) for the firm can do wonders.
Sit down with the other attorneys in the firm, do some brainstorming away from the office, and put a plan together. Then work the plan.
John W. Olmstead, MBA, Ph.D, CMC
Question: What are some ideas that our eight attorney should be doing to improve profitability?
Use the RULES formula to focus your effort.
R = Realization rate or effective rate per hour.
U = Utilization – billable hours or case production hours.
L = Leverage – ratio of partners to other timekeepers.
E = Expenses – overhead.
S = Speed – collection cycle – converting work to bills and bills to cash.
Profitable law firms have an appropriate mix of each of these profitability levers. Compare against internal and external benchmarks and determine which of the levers require attention. Usually expenses is not the primary problem – in fact many firms should be spending more in the form of investment. Usually the primary focus should be on improving:
Many firms need to increase case/matter volume through better client development and marketing to be able to obtain higher leverage ratios.
John W. Olmstead, MBA, Ph.D, CMC
As we approach the Christmas holiday season we need to begin thinking about next year. Here are some suggestions:
John W. Olmstead, MBA, Ph.D, CMC
How can the new technology help law firms improve profitability?
What Does Your Law Firm Need From the E-Marketplace: More Clients, More Business, More Income?
Electronic business to business web sites can now offer law firms the opportunity for quicker, cost effective and, more targeted client contacts. They basically do all the marketing and business aspects of client contacts while lawyers are able to do the legal part. They are geared to provide the following:
Shifting From The Old Legal Business Paradigm to The New Legal E-Market Paradigm
Everyday we read about or directly experience the rapid changes that occur in law firms, professional careers, and business cycles. Change is occurring more and more quickly! Today you see law firms downsizing, going out of business or merging with other law firms. You also observe professional lawyers experiencing a significant decrease in their income or sometimes leaving the profession and entering other career fields. Therefore, it becomes incumbent upon you to keep abreast of the changes that can critically effect law firm practices.
Comparing the old legal business paradigm to the new E-Market paradigm brings out the painful and positive realities facing many law firms today. Look at the differences below.
|Factors of Old Legal Business Paradigm||Factors of New Legal E-Market Paradigm|
|1. Advertise in phone book & other media||1. Web site distributes your services 24/7|
|2. Costs of a full time office staff||2. E-Market does much your office work|
|3. Have files full of papers||3. Become a more paperless firm|
|4. You bill your clients||4. E-Market bills your clients|
|5. You collect from your clients||5. E-Market collects from your clients|
|6. You deposit money into bank account||6. E-Market electronically transfers funds|
You can quickly see that the old legal business paradigm is more labor intensive and costly to maintain. On the other hand E-Markets are more accountable, productive, reliable, and cost effective. They provide you with more time to practice law and less time managing office problems and costly office staff (not to mention rapid staff turn-over rates and required training). At the very least E-Markets should become a necessary adjunct to your practice because it can require minimal input from you with greater payoff.
Do You and Your Staff Have The Basic Computer and Internet Skills Necessary to Meet the 21st Century Business Challenge?
Below is a short assessment of both computer and Internet literacy.
Being computer literate is a necessity today. It is a new skill that must be attained by all professionals in order for them to be fully functional in their jobs and at work. They can be handicapped by not being computer literate and as a result be unable to meet the demands of the E-Markets and business to business relationships.
New Professional Skills and Competencies Needed By Today's Lawyer
To maximize and optimize your opportunity as a successful lawyer in a law firm you will need to add these skills to your existing skills.
What It Takes to Create a Successful Law Firm Practice
In a few words, it takes…awareness, planning and follow through to begin to expand and improve your law firm. Most human beings talk a good game about being successful, but very few ever succeed. Our society teaches us to talk about ideals, but very few live up to the expectations of our words. Human nature is such that we want and expect the best; we work for mediocrity, and settle for very little. Once we establish old antiquated habits, it becomes extremely difficult to convert to new updated habits; that is because the old habits served us well during a specific time frame, but new habits need to be adopted to serve us during current times.
Creating and Reinventing a More Successful Law Firm for the 21st Century
It will take both the understanding of the new business model, and the implementation of current computer technology to be able to use the power of the Internet to your advantage. Below is a list of action plans that you need to address:
A Current List of E-Marketplaces for Your Review Check out the different E-marketplaces listed below. See which ones best fit with your law firm's needs and business plan. These sites are very consumer friendly and willing to answer your questions.
iBidLaw.com -a web site that plans to go after big-ticket assignments. It is still under construction at the time of this writing.
eLawForum.com-a global business to business web site where corporations seek outside counsel by posting an RFP. Fee structures, whether fixed, contingency, or hourly, are stipulated by the corporation.
LegalPath.com-a web site that offers business to business exchange based on corporations seeking outside counsel. It currently focuses on smaller assignments in three areas: work-medical malpractice, insurance defense, and debt collection. Law firms are part of the registry and can gain visibility with prospective clients.
LegalMatch.com-The web site connects lawyers with people. Lawyers can review cases in their practice area and location and inform desired clients of their professional interest.
Lawcommerce.com-This web site is an online center for the legal profession to access. You can access forms, checklists, agreements, locate CLE training and research cases.
Niku.com-This web site helps law firms to become more competitive by exploring the full power of the Internet.
FirmSeek.com-This web site allows potential clients to submit an RFP and law firms can view these and respond to them. You can do legal research, get legal forms, and look at law firm rankings as well as see professional activities for lawyers.
Predicting The Future Labor statistics and experience tells us that professionals, including lawyers, will change jobs many times and careers several times in their lifetime. What does this mean for lawyers and law firms? Basically it means that you must constantly reinvent yourself and your law firm to stay abreast of future change.
Allow us to speculate for a minute about the future. From now till the year 2020 we are able to predict with a certain amount of confidence some of the following changes lawyers may experience in their jobs and careers.
Possible career changes where you can become a:
Possible job changes:
It becomes quickly evident that E-markets and E-business have a very profound effect on what lawyers will be doing in the future. Practicing law is only one option among many possibilities.
Dr. Thomas J. Venardos is an adjunct management consultant with Olmstead & Associates, Legal Management Consultants, St. Louis, MO, and President of Venardos Management Group, Organizational Performance Consultants, located in Las Vegas, Nevada. Dr. Venardos may be contacted by e-mail at email@example.com.