I trust this May 2019 edition of KMS “Robservations” finds you very well…
Rob Knowsley LLB.
Robservations…
The strongest thread from my consulting in recent months has been in relation to small law firm profitability. The persistent theme of discussions with many small firm lawyers in firms, conferences, and workshops, was along the lines of, “We think we’re doing ok, but feel there’s plenty of room for improvement…and are not really sure where to start to explore that possible opportunity”.
There’s no doubt at all in my mind that there is plenty of room for almost every firm to improve profitability substantially, because in most firms the vast bulk of the groundwork has been done.
These firms are at, or a little bit beyond, break-even, after Principals’ proper salaries.
Almost all additional revenues generated will be profit, attracting little or no extra overhead to create them.
In most firms the existing resources have capacity to do a little more client file work, and a little more effective practical marketing to ensure it is always there to be worked on, in the profit zone.
Further, in the vast majority of such firms there is little sophistication in pricing, and as a direct result in almost every matter currently being worked on for clients there is some revenue, and a lot of profit, being left on the table.
Lifting skills in identifying value to the client, and communicating it well, will allow better revenues and strongly improved profits without any extra legal work being necessary.
Improved enquiries as a result of improved marketing will increase pricing confidence, and coupled with increased pricing skills, this will lift revenues on work accepted, and allow firms to reject more work that upon proper examination will not return fees that are fair to both client and firm.
Once profits are improved as a result of the powerful combination of better marketing and pricing, and improved efficiencies wherever possible, profitable growth is the next logical step.
When carried out sensibly with good leverage this can lift profitability per Principal further, despite the then necessary extra investment in overheads…and that sound growth will be under-pinned by newly embedded skillsets in both pricing and marketing.
I was fortunate recently to have the chance to further develop my own skills, given the opportunity, through the College of Law NZ, of presenting my first 1 hour webinar for CCH in New Zealand, “Maximising Financial Performance and Profitability”.
Ongoing skills development is essential for every professional.
I found the learning involved in drafting the webinar content directly into a PowerPoint slide deck, liaising with an UpWorker in Chennai to develop the graphics for the 30+ slides, familiarising with the WeTransfer app for sharing really big files, setting up the IT for online delivery from my office using the GoToWebinar app on a high speed wireless NBN connection with a new USB headset, actually delivering the webinar and answering attendee questions, demanding and very satisfying.
With the newly-acquired skills the “old dog” certainly has “new tricks”…and there will now be a greater emphasis on webinars to channel relevant, helpful, information on law firm profitability improvement to those interested, in small-medium law firms in wide-ranging markets.
Pricing developments…
Regular readers will be very aware that for a long time I have been advocating lawyers’ upskilling in pricing.
It was certainly high on my list of seven areas where today’s lawyers will benefit most from upskilling in an earlier LinkedIn article.
Further evidence that the Legal Profession is getting properly serious about improving pricing sophistication can be seen in the establishment of the Legal Pricing Academy.
I have paraphrased the following from the LPA website…
The mission of the Legal Pricing Academy® is to educate and support the fast-growing community of pricing professionals in the legal industry. It is committed to propagating and elevating pricing expertise through both online and in-person learning.
Their training supports better understanding of best practices and encourages sharing and developing pricing strategies, tactics, and mechanisms to aid organisational change. LPA is a collaboration of Validatum® and the Buying Legal Council, and is dedicated to the success of legal pricing professionals, helping them become industry leaders in their field and earn the recognition they deserve. Three levels of Certification will be available…Legal Pricing Associate, Legal Pricing Specialist, and Legal Pricing Professional.
This is a brilliant initiative, and my comment for readers in SmallLaw in particular is that upskilling through the online learning available from LPA will assist in ensuring that fees are not left on the table in as many client engagements as presently, and that profit is significantly enhanced accordingly.
Pricing skills are required for every lawyer, by no means just in BigLaw!
KMS Common Sense Law Firm Marketing…more short sharp real-world thoughts from the trenches where small-medium law firms can genuinely prosper…
One area that often gets overlooked in law firm marketing is giving existing clients, and relevant contacts, the benefit of knowledge the firm holds applicable to them.
Life is full of challenges and opportunities, and all firms have a wide range of knowledge of the practicalities from matters they have been involved in, and their ongoing reading from a wide range of sources.
There are two main aspects to the flow of helpful, relevant, information:
- Getting it written…
- Getting it disseminated easily in a well-targeted system…
It is the second aspect I want to provide some comment on in this issue, and particularly one issue relating to Contact Relationship Management (‘CRM’) systems.
I am still encountering firms that have utterly inadequate CRM databases.
Often it becomes clear that smaller firms in particular are in effect sitting on their hands, because they sense that their Practice Management Software CRM is not adequate for purpose, but they are paranoid about using another dedicated piece of software for managing the flow of helpful, relevant, information to clients, referrers, gatekeepers and influencers.
They allow the fear of some data duplication to stall them before the start line on one of the most important business development initiatives they could possibly be involved in.
They successfully avoid duplication by successfully avoiding regular and properly-targeted communication into the richest seams of potential new instructions that exist for them.
My advice…rapidly move onto square one and get high quality CRM underway now.
There are plenty of suitable purpose-built products on the market. Import or export as much data as you can easily between your systems so as to avoid double-entry as far as possible.
The extra profit and cash that will flow from the extra instructions that result will allow you later to further investigate and achieve improved integration…if that is still a worthwhile goal.
In the meantime you will have helped a lot of recipients of the better-targeted content and greatly helped yourself.
At KMS we are still using the same software we established our database on in early 1988…and we were told then it would not be adequate!
By definition, paralysis is not a management “action”!
Lies, Damned Lies, and Statistics…
In each issue I look to introduce comment about a management issue that revolves around “the numbers”.
This issue, just a short reminder that very often in managing a law firm sets of numbers can at first glance appear to point to one thing, when on deeper examination, looked at in the wider context, the numbers are “screaming” something else altogether, requiring quite a different response.
A simple example might be in looking at the average rate new Raw WIP was written at by a particular lawyer in the month just completed.
It is seldom the case that a decision to increase hourly rates of charge will translate into that new rate applying immediately to every piece of work. Arrangements with some clients may not permit the change, or it may not be wise in the context of a client or matter to make a change. There may be little scope to immediately increase charges for fixed price work.
It may be pleasing to see an early strong trend upwards in rate from the average recently pertaining, to an average much closer to the lawyer’s new WorkPlan™ rate, but obviously the matter does not end there.
As Raw WIP on the matters starts to be absorbed in invoices, keep a close eye on the trend in Realisation Rate.
Clearly, recording Raw WIP to files at a better rate is one thing, but it is another thing altogether to translate that into fees invoiced without significant deterioration in Realisation…and of course the next important aspect, the percentage collected from the invoices, and the trend in the average days to collect.
Personal effectiveness note…
Work in many client firms recently has provided strong reminders that large slabs of time are wasted every day. The time as a whole may not necessarily be “valueless time”, but very often parts of it are.
Every day lawyers spend time doing things that don’t make any sense given the opportunity to use that time more wisely by delegating or desisting altogether!
Fallible as we all are, all too often we don’t realise we are doing certain things, or how often we are doing them.
Again all too often we rationalise doing them rather than delegating because there is effort involved in delegating, and, “I might as well just get it done quickly myself and move on to something that is really valuable”.
We know this is happening because of those lawyers who record accurately what they do.
Further, we can suspect it is happening even when we don’t record accurately, because the outputs of many lawyers are extraordinarily low for the amount of time they say they invest, or are observed to be investing.
We have one life only, and we have ever-increasing skills potentially available to get useful, valuable, satisfying things done. We need to be effective!
Regularly doing things that do not return much at all for our skills, and do not add significant value for clients, is not smart, particularly when the better-utilised time could result in additional revenue beyond break-even that will be almost 100% profit.
Quickly assess everything you do against this test…”Does it make sense that I do this given how much more usefully I could be investing the time”.
Then act…invest some time once, to design a much better way of getting things done that must be done, but not by you, and also identify things that on reflection don’t need to be done by anyone!
Inaugural Small Law Industry Summit…
I was very privileged to be asked to join an impressive list of 14 other speakers at the LEAP inaugural Small Law Industry Summit in Sydney on Thursday 14 March, 2019. It was a very successful event, with excellent content, and registrations well above the 500 mark!
Thoughts arising from the KMS workshops in Australia in March…
As mentioned above in the editorial, the pervading theme emanating from the workshop attendees was directed at profitability, “We’re feel we’re doing ok, but feel also there’s plenty of room for improvement…”.
A number of attendees made clear that they were not at all sure where to start in exploring the potential room for improvement in their firm’s profit.
Simply put, the KMS point of difference is that with over 45 years’ experience we have a very clear view of how to identify what needs to be done, and how to go about it.
The answer lies in better aligning the potential of the resources you have with the business plan you have or should have.
This involves crafting a WorkPlan™ for each team member to ensure there is both the alignment needed, and clear understanding by team member and firm of what is expected, so necessary action takes place, performance assessment is effective, and your adjusting reactions to variances of significance are effective. Plan, Implement, Monitor, Assess, Adjust as necessary.
This common sense approach ensures that more things of high value to the business plan get done, improving all aspects of the firm and allowing far better profitability to flow.
More and more firms are seeking assistance with this clear pathway forward. The first step is a brief telephone discussion, at no charge, to determine what the best approach will be for implementation in your firm.
Email me at robk@lawfirmprofit.com to arrange a time for that all-important telephone discussion.
Having this nailed down before the commencement of the new financial year will pay huge dividends.
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If some of this content has been of interest and value for you in your practice, you will find other related content here…
Blog…
My LinkedIn articles…I’m delighted that my non-public LI posts are now going to over 7175 Followers, with excellent, much-appreciated, feedback.
KMSWebsite includes an archive of all earlier newsletters…including all issues of “Robservations” and the earlier “KMSProfitPower Tips™” back to 1996.
My LinkedIn Discussion Group… Excellent Management In The Small Law Firm
