You may have left a larger law firm to start your own law firm or you may have started it straight out of law school. But you have been struggling along the last few years with low pay while working too many hours. You know that you cannot continue like you are and that something has to change.
Your law firm is exactly how you have built it. It is the product of the choices that you have made from the inception until now. Law schools may do a great job of teaching you how to be a great lawyer, but they don’t teach you to build and manage a great law firm.
If you keep doing what you have always done, then you will get the same results. If you want to change your results, you need to change and you need to change your firm. You can change and build the law firm that will support you and your family, while solving your clients’ legal problems.
The equation of the income statement is Revenue – Expenses = Profit. Revenue is the value you provide for your clients, profit is how efficiently you provide that revenue. A healthy business is growing in revenue, while maintaining or increasing its efficiency, in order to maximize profit. A small firm that is managed well can have profit of 50% or even more of its revenue. By increasing revenue over time while maintaining or increasing efficiently, a firm can provide more profit to its owners.
In the remainder of the this article, we will look at the growth of a law firm as steps on a journey to greater heights.
Steps of the Journey
1. Determine where you are now. The first thing that you need to do is to honestly assess where you are now. What is your annual revenue and profit? For many or most law firms it is not where you want it to be. What are the practice areas that you serve and what is the percentage of your total revenue of each? How many leads do you get on a monthly basis and how many are you converting to clients? How many hours are you working and how happy are you. Honestly answer these questions to see your starting point.
2. Determine where you want to go. Once you know where you are, you need to decide where you want to be. Set goals as to where you want to be in one year, and in 3-5 years. If you are just starting out as a solo practice, the first goal is to get to where you are financially viable. You may seek to reach $250,000 in revenue and $125,000 in profit in 2 years. If you are at the level already, you may want to grow the firm beyond yourself and set a goal of $500,000 in revenue and $250,000 in profit in 3 years.
3. Design a strategy to get you from where you are now to where you want to go. When you know where you are and you know where you want to go, you need to move in that direction. You need to bill more revenue. To do this you either need more clients or a higher value per client. To get more clients you need leads. You need to determine how many leads you need, converting a percentage of them in order to get your revenue to that level. There are several items to consider in designing your strategy:
- Find a Niche. There are several advantages in focusing on a practice area rather than being a generalist. You can become an expert in that area. You will be able to charge higher fees. You will have less competition. It allows you to focus your marketing. Prospects and referral sources will come to you.
- Develop and implement a marketing and sales strategy. The best methods for a law firm to market depend on the practice area it is focusing on. A personal injury attorney should market differently from a family law attorney. Click here to see the best marketing methods for each practice area.
- Improve your intake process. Improving the client intake process can help the firm work more efficiently. Reducing the amount of time that it takes to collect the information from the client and get paperwork signed will allow the attorney to handle more cases and do more billable work. With a good system in place, the attorney doesn’t have to do this work.
- Develop a team. The solo law firm owner with no employees is limited on how much that he can grow the firm. In addition to practicing law, he must do administration, intake, marketing, accounting and a myriad of other duties. If he used to work for a larger firm, he had someone to do these duties for him, but now he is responsible for them. By leveraging others, the attorney can grow revenue and serve more clients.
- Build your systems. Many solo or small law practices are more like a job than a business. They may start out that way, but the goal should be to build systems and standardized policies and procedures. You should write out your policies and procedures so that that knowledge won’t walk out the door when your employee leaves. As part of your systems you should develop a technology stack that you use with a legal practice management software as the hub with the other components integrated with it. Cloud-based systems give many advantages. They allow you to access any of the systems of your firm wherever you are, even using your smartphone. Going to a paperless office will allow you to be more organized and allow you to find information quicker. It is easier to share documents with others and reduces the need for physical filing cabinets. The efficiencies that good systems create free up much time for billable work and allow you to serve more clients.
- Excellent client service. Client service has grown more important in the last several years. From the time that your client first calls you to the resolution of the case, you want your clients to have a good experience. If someone finds you on the internet and calls you and you don’t answer the phone, they will simply go on to the next attorney on the list. If you give excellent client service, they will tell others about you.
- Consider other billing methods. The billable hour has long been the standard method of billing for most practice areas. But the billable hour rewards inefficiency. Clients appreciate more predictability in their billing and don’t like getting blindsided by a large, unexpectedly high bill. If you work to get more efficient and better at what you do, you are punished if you bill hourly. You should seek to create value for your client. Consider fixed-fee, upfront pricing for many of your engagements. It is obviously not possible for all engagements, especially if litigation is involved, but it works well for many types of engagements.
4. Implement the strategy. Designing a strategy for growing your firm is not enough. It must be implemented in order to succeed. You don’t have to do everything at once, but pick out a few things to start on, set goals for when they should be implemented, and then start implementing them. You can build the firm of your dreams with a good plan and the desire to change. Your firm can support your dreams and provide for you and your family.
Please email me at firstname.lastname@example.org to discuss how I can help you grow your firm.