I recently attended a legal conference in Edinburgh, when one of the speakers was former solicitor, turned business adviser, Michelle Peters (The Business Instructor). Like me, Michelle has practiced as a solicitor, so knows the issues and challenges law firms face, and provides very practical advice and tips you might want to consider putting in practice to maximising profits at your firm, or perhaps for that new law firm you are always talking about setting up!
Michelle challenges the traditional mind-set that to increase profits you must get more new enquiries. She says that this is only one aspect to look at. Instead she talks about the 7 ‘Profit Zones’, and that you should spread your efforts across all of them, as a marginal improvement across a few areas, results in significant overall gain. This makes a lot of sense, in the context of my last Blog, and the Team Sky philosophy of marginal gains.
So what are these ‘Profit Zones’:
1. Getting more enquiries
Of course, this is one means of maximising profits, and should always form part of your plan / strategy, but it should certainly not be your only strategy.
2. Better conversion ratio
Think about how your receptionists answer the phone to new enquiries. Are they polite / welcoming? Do they always get the persons’ name, contact details and the nature of their enquiry? Do they know all the areas of law your firm can offer advice on? Do they have enough information to answer basic questions the enquirer may have? Think about reviewing these things and spending some time explaining to whoever answers the phone or email enquiries, just how important their role is. Improving the conversion of enquiries positively impacts the bottom line, without you having to get any new/additional enquiries at all.
3. Increase the frequency of work (for existing clients)
Straightforward when you think about it – does your client know the other services you provide? Will they instruct you for other things? If not, think about using a service such as Client Communications to keep in touch with your clients, keep them up to date with all the services you provide etc. That way, they are more likely to come back to you when next faced with a legal issue.
4. Increase the size of transactions
The common example of this is when doing a conveyancing transaction for a client, explaining to them that now might be a good time to write a Will. However, there are countless opportunities to do additional work for clients, just don’t be afraid to ask for it!
5. Boosting profit margin
The automatic thought when this is mentioned is inflating fees. However, that doesn’t have to be the case, unless of course you are entitled to do so because you are a specialist in a particular area, you are advising on a particularly unusual or high value matter, or perhaps there is increased risk involved in some way. The other ways to boost profit margin are to find ways to become more efficient at doing the work by, for example automating parts of the process, and / or lowering the costs of doing the work. An example may be having less expensive resource doing parts of the process.
6. Get more referrals
This increases your profit margin due to the fact that it costs you far less to get a new client by way of referral (or additional / repeat work from an existing client) than it does to win new work. The marketing / business development spend and time in gaining new work can all be saved by getting good introductions / referrals. One tip – ask clients for introductions or referrals. You’ll be amazed how often they will do so, when asked!
7. Improving client lifetime
By this we mean how long they stay as clients. This ties in with No. 6, in the sense that it is far cheaper, and therefore more profitable, to keep getting instructions from existing clients. The main reason clients leave is because they don’t think the firm cares about them. Again, think about keeping in touch with your clients and letting them know that they are important to you and asking them to keep instructing you.
So there you are! Maximising profits does not just mean getting lots of new enquiries, or spending loads of money on marketing. Although this will obviously help, if done in the right way, it is only one of a number of factors that can and should be considered.
Business Development Manager at The Cashroom