Robservations…
A concerning trend in many firms is the rapidity with which even lawyers who understand what they should be doing reduce their marketing efforts.
This seems to occur when people are comfortable with their workload, but also it seems lawyers are prone to just taking their eye off the marketing ball, not “maintaining the rage”.
Forty-five years in the Profession has shown me over and over that marketing needs to be consistent and continuous to avoid substantial “airlocks” in the enquiry pipeline.
Backing off marketing effort inevitably leads eventually to a reduction in enquiry, and the impact is often exacerbated by market factors such as entry of additional competition, existing competition marketing better, societal changes, and economic downturn generally.
With the world-wide economic outlook not great for 2020, and the outlook for the Australian economy in particular quite gloomy, firms will need to significantly up the ante with focussed, smart, marketing efforts to avoid shortages of work that will heavily impact profitability.
With the vast majority of every day utilised just to achieve break-even, allowing a shortage (or complete absence) of work in the remainder of every day effectively evaporates the large part of the reasonable profit opportunity.
While on the subject of pipelines, in our own is the opening of a KMS operation on the Gold Coast, putting me within even easier reach of firms in South East Queensland and Northern New South Wales. More information soon.
Pricing…
Marketing and pricing are of course interrelated.
Beware reducing prices in an effort to secure more work…
Often when there is not enough work the uninitiated consider the option of reducing prices in an effort to convert more enquiry. It can seem to hold the promise of being a lot easier, and a lot faster, than marketing harder…and better.
The huge concern is in the maths…
A simple example will suffice…
A firm does Conveyancing Purchases for $1125 plus GST with a gross profit margin of 20% or $225.
If the price is reduced by 10% in an attempt to convert more enquiry and build up work for the team, gross profit becomes $112.50…a reduction of 50%.
On the other hand, if price is increased approx. 5.3%, to $1185, gross profit increases to $285, an increase of over 26%.
At $1125, 100 transactions grosses $112,500, with profit $22500.
At $1012.50, to achieve gross profit of $22,500 and get back to where they were, the firm needs to handle 200 transactions.
In contrast, at $1185, grossing $22,500 would require only 79 transactions…20% fewer for the same gross profit.
Even if a price under 6% higher than originally charged led to a loss of 10% of clients, the remaining 90 transactions would return a gross profit of $25,650. That is an improvement in gross profit of 14% for 10% less work.
Use your own numbers to do the maths…then start adding value for clients and increasing your pricing, avoiding threshold numbers.
KMS Common Sense Law Firm Marketing…more short sharp real-world thoughts from the trenches where small-medium law firms can genuinely prosper…
Introducing for the first time in over thirty years an element of “curation” into “Robservations”…
Brendan Kelso of Legal Sites is always good for practical tips…This is a direct quote…
“Here’s my monthly tip:
Would you like to drastically increase your monthly website visitors? Well, here’s a great place to start.
3 Best Rated is a popular website. It ranks businesses based on a variety of factors.
Why should you care? Well, here are a few reasons…
- It receives a high number of monthly website visitors via Google. In fact, it often ranks in the top three on Google search results for each relevant category. Check out UberSuggestto see for yourself.
- 3 Best Rated is 100% FREE. How good is that?
- Anyone can apply. I’ve done this for my clients. What was the result? Well, they received a substantial boost in traffic.
- Three Best Rated provides you with a ‘badge’ that can be added to your website. It looks really professional and sets you apart from the pack.
- It reduces options for your potential client. Do you really want them checking out EVERY law firm on the front page of Google? I know I don’t. I’d much prefer they only check out three.
Better yet, if you know which other firms are on the list, you can adjust your website accordingly. What are your competitors NOT doing well? How can you appeal to potential clients in a way that your competitors AREN’T? Use this data to increase your qualified leads.
LegalSites is experienced in submitting successful applications to popular websites like 3 Best Rated.
If you need help, please get in touch.”
Lies, Damned Lies, and Statistics…
In each issue I look to introduce comment about a management issue that revolves around “the numbers”.
Here’s a little note of caution when trying to get a handle on what competitors are paying staff you perceive to be essentially the same as one of your team members.
Hours of work expected are varying greatly for team members considered full-time…as low as 7 hours/day in many cases.
Your strategy in remuneration will in all likelihood vary from that of other firms, but in trying to do comparisons make sure you’re comparing apples and apples as far as possible.
For example, in the Australian market, many firms are now setting total working hour expectations at the same level as the National Employment Standards, 7.6/day or 38 hours/week.
Compare a firm expecting only 35 hours/week or 7 hours/day, the hours are 8.5% longer in the firm expecting 38 hours/week.
I am seeing firms expecting daily hours invested to be allocated to ClientTime and FirmTime in relationships as low as 4/3 or 4.5/3.5.
Assume an aspirational average charge rate of $365/hour…that’s targeted ClientTime “worth” between a Raw WIP level of around $337K and $379K…a whopping $42K difference.
If we took an average rate of 90% for Realisation of Raw WIP to Invoices, and 3% Debtor write-off average, we’re looking at $36K plus.
What do you want to use it for?
Lifting remuneration with a view to keeping good team members and attracting even better team members? Generating improved profit? Investing in greater innovation? A healthy mix of these?
Remember that 4 and 4.5 used above are very low…and should only be justified if the remaining hours of the days are wisely planned to be invested in sensible FirmTime.
If your team members are not wisely using 3 or 3.5 hours a day FirmTime in pursuance of your business plan, perhaps you should be re-directing some of that valueless time into looking after more clients.
After all, on the same numbers as I used above, each extra hour a day has a probable net value to you of over $73,000 a year.
That gives you great scope to do a lot of important things in the practice, including remunerating more aggressively and competitively, and usually that would make a lot of sense.
Importantly you don’t need to pay bonuses to create more productivity off a crazy low base like 4 or 4.5 hours!
Every team member worth their salt can work effectively 7 or 7.6 hours/day on average, and work for clients 5 or 5.5 of those hours, for their normal quality remuneration, without carrot-style bonus arrangements.
Almost always, if they don’t have enough client file work that is the fault of the practice, not the employed team member.
Personal effectiveness note…
A tip you won’t hear from me…
Purchase business shoes without laces so every work day you can start that little bit earlier…every little bit counts!
*** “The Business of Law”…In-house training for Australian firms…
Please email to indicate your interest and set-up a chat about topics, duration, my availability, your team members’ CPD credits, your investment etc.
These Australian sessions are delivered by me directly…rather than through an intermediary commercial provider.
Rob’s been up to What?!!!
This little section is to keep readers aware in just seconds of your valuable time what aspects of assistance to small-medium firms interest me, and occupy me most, these days…without providing lists!
Succession issues are keeping me busy in firms across Australia and New Zealand…getting succession planning right to ensure happy, well-informed and well-prepared, “winders-down” and “winders-up”…is a vital aspect of practice health.
I’ve also been assisting with Marketing training, and Productivity improvement, including assisting numerous individuals with structuring of more appropriate WorkPlans™, and assisting with better time management.
The College of Law has me presenting a session in one of their mandatory CPD requirements programs in Sydney in late October…addressing Productivity Improvement.
Early October saw me working in Dunedin for the first time in 31 years of consulting, a most rewarding experience.
More??
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, and non-Group, LI posts are now going to over 7200 Connections, 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
