General business development issues

BLC Question: ‘How does your organization handle COVID-19?’

If you have not been following it, Silvia Hodges Silverstein‘s Buying Legal Council has been running an interesting question since April 2020:

How does your organisation handle COVID-19?

For clarity, ‘organisation’ here is in-house.

Tracking the responses to this question over a six month period (see graph above) has been interesting.

  • Extending payment terms; which I thought would have ballooned, has actually contracted.
  • Ask for (additional) discounts; which I would have thought would be leading the pack, has actually held relatively steady.
  • Bring more work in-house (outside of a blip in June) has held relatively steady. But more on this one in a second.
  • Hire alternative legal providers has actually ballooned, and may go some way to explaining why may believe the alternative legal services providers have been the real winners from COVID-19 – there time has come.
  • Renegotiating terms with law firms – more on this one below.
  • Pushing non-urgent work to a later date. No surprises with this one, makes perfect sense.
  • Cut non-essential costs: this one has shrunk relatively significantly since April. Not sure if that tells us there isn’t much ‘fat’ in in-house teams?
  • Reduce internal head count; is on the increase again and would seem to suggest a conflict with the “bring more work in-house” response above. Alternatively, in-house teams are really busy at the moment, which coupled with the rise in the use of alternative legal providers could well be very true.

Anyhow, the purpose of this post was to remake on the significant rise in clients ‘renegotiating terms with law firms’.

While this BLC reports (from what I could find) doesn’t define how this renegotiation process is happening, my experience has been that since May of 2020 there has been a significant increase in pitch and tender activity. Many clients are looking for significant savings and are looking to lock law firms into those savings for lengthy periods of time.

And I would have to say that I expect this trend to grow, so if you are a private practice lawyer who hasn’t yet locked-in expert pursuit/pitch/pricing expertise, you’re probably in for a rough 2021.

In any event, keep an eye on BLC – seeing where this trend tack us will be interested in the coming months.

As always, the above represent my own thoughts only and would love to hear yours.

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How are Australian law firms fairing in this post-pandemic world?

Citing a recently published Thomson-Reuters ‘State of the Legal Market 2020‘ report, The Australian Financial Review (AFR) published two articles last Friday (28 August 2020) that, collectively, provide one of the first insights in to how Australian law firms are fairing in this post-pandemic COVID-19 world.

How is Australia doing compared to the rest of the world?

The first article ‘Law firms prove world-beaters as virus strikes‘ by Michael Pelly would, at first blush, seem to suggest that law firms here in Oz are doing far better than the rest of the world.

Looking at the five key metrics of:

  1. billable hours,
  2. hourly rates,
  3. fee revenue,
  4. productivity, and
  5. lawyer growth,

Australia’s results look spectacular.

But kick the tires a little and you’ll see that a June Q19 to June Q20 period is an Australian Financial Year – and not all, in fact none of the other regions, works to that same time line.

So these results should be read with caution, in that they are a moment in time which may not be a true reflection of how the other markets are fairing (it would be interesting to run those same numbers on a Jan to Dec timeline which would probably be a truer period [admitting that even then the UK numbers would be out] because, as we know, not every month is equal – in that we don’t split an annual budget by 12!).

Nevertheless a good result for the Oz firms – but that ‘red blip’ of productivity would be a concern to me if I were a Managing Partner.

Which leads us to…

…who is doing the work?

One of the more interesting takeaways from the chart above is how the hourly rate in every geographic region has increased, even where fee revenue and number of billable hours has decreased (and in some cases significantly).

If you are asking yourself how can that possibly be, look no further than my post of two weeks ago – ‘When does the law of supply and demand not apply? – when you’re running a law firm of course!‘ – and this is also (in my opinion) reflected in the second of the AFR articles last Friday: ‘Law firm partners working harder during pandemic‘:

Look at that spike in partner hours!

For those who may not have read my post of two weeks ago there are, in my view, two reasons why you get that kind of spike:- (1) the work is more complex and needs more grey-haired thought, or (2) senior lawyers need to protect their budget – your choice.

So where are we at really?

I’d treat the financial results of the Australian law firms above with a pinch of salt till the end of February 2021, which -in my opinion – will be a truer barometer of how the industry is doing down here.

As always, the above just represent my own thoughts and would love to hear your thoughts (and; ps: if you want to know why I say end of Feb 2021, email me).

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This week’s photo credit shout-out goes to Joey Csunyo on Unsplash

Does your firm use data as a profitability management tool?

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I’ve just finished reading the latest Altman Weil ‘Law Firms in Transition 2020‘ report.

With all things COVID the Report (as it has done in any event for the past decade) makes for interesting reading.

But, the response(s) to one of the questions in this year’s Report  I found particularly concerning.

When asked:

“Which of the following statements describes your firm’s use of profitability data as a management tool?”*

16.2% of respondents replied:

“We don’t want to use the data because it is potentially controversial or divisive.”

16.2% of respondents believe sharing and using data in 2020 can be ‘potentially controversial or divisive.’

I find that rather sad.

And don’t even get me started on how it is possible that over 13% of respondents don’t even know how to use the data!

As always, the above just represent my own thoughts and always interested to hear the views of others.

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* see page 50 of the Report

[This post first appeared on my LinkedIn feed Thursday 2 July 2020]

My 5 x 5 Planning Tool

As we approach end of Financial Year here in Australia many will be looking at finalising, and implementing, their strategic plans for FY2021.

With this in mind I thought I would share my own base-level planning tool; my go-to starting point for any short, medium and long-term planning activity – I call it my ‘5 x 5 Planning Tool‘, it has served me well and works like this:

  • 5 Minutes: Will the decision I make have an affect/effect 5 minutes from now?
  • 5 Days: Will the decision I make have an affect/effect 5 days from now?
  • 5 Weeks: Will the decision I make have an affect/effect 5 weeks from now?
  • 5 Months: Will the decision I make have an affect/effect 5 months from now?
  • 5 Years: Will the decision I make have an affect/effect 5 years from now?

It’s rare, but possible, that a decision you make will have an affect/effect on all five plains; but, in my experience, what the above does do is give you clarity. It allows you to compartmentalise thoughts into the short, medium and long-term and gives you the ability to then focus on what is then, in that moment, important to you and your business.

Give it a try.

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Survey: The 6 most important criteria in-house counsel consider when evaluating law firms

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In last week’s post I looked at the Top 5 Reasons Clients Switch Firms as recently reported by Wolters Kluner. Conveniently this same Survey also reports on the ‘6 most important criteria in-house consider when evaluating law firms‘ – so here’s a quick look at what they are:

The in-house view

1.  Specialization

In recent years I have heard it said on a number of occasions that in-house counsel no longer differentiate lawyers/law firms they ask to do work for them on the issue of ‘specialisation’ – it is a given that you know your topic and this merely gives you a seat at the table.

The results of this Survey clearly show that impression to be wrong – specialisation (at 23%) remains top of mind to in-house.

Unfortunately the term used in the Survey is ‘specialisation’ as opposed to ‘niche’. While there may not appear to be much of a difference between these two terms, for many there is and I would be interested to see the results if this was an option.

2.  Technology

The fact that a lawyer’s ability to use technology ranks equal top (23%) with specialisation shouldn’t be too much of a surprise in a survey conducted on technology adaptation in law firms.

That said, the use of technology in collaboration efforts should raise some eye-brows as it clearly shows, in my opinion, further evidence that in-house counsel want shared platforms and that knowledge sharing among law firms who continue to develop stand-alone technology platforms are likely wasting their money.

3.  Ability to understand client needs

At first the fact that ‘ability to understand client needs‘ came third in the list at 19% surprised me.

But then I thought: not many clients truly know what their needs are – maybe this question would have been better phrased as: ‘Understanding our business/sector?’

4.  Price – and 6.  AFAs

Price gets 16% of the vote. AFAs gets 9%. If you combined them, they get 25%. And would top the table.

But they are not combined.

They are seperate.

Which make me wonder: Why?

Also: if your law firm is really offering value – price, whether it be hourly rates or AFAs, would be the last thing that matters.

5.  Process innovation

I found the fact that process innovation only got 10% of the vote interesting, because if you read the rest of this survey a core message is that law firms need to get better at demonstrating efficiencies.

This result somewhat undermines that message.

The law firm view

I was pleasantly surprised how consistent the law firm view was to that of their in-house clients.

Of course there will always be one significant difference of opinions between law firms and their clients (in the law firm’s mind) as to why they were chosen: ‘Price’.

And what this Survey shows, as many before it have, is that law firms need (finally) to start moving away from that needle.

As always, these just represent my thoughts and always interested to hear your views.

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Now is the time to focus on your existing relationships


I read an article on Inc.com last week by Damon Brown in which Damon writes that if you run a business in a post COVID-19 world ‘You Need More Customers, Not Higher-Paying Ones’ – which [as someone with an interest in pricing] caught my attention.

There is no doubt that right now the appeal of diversifying your customer base and revenue stream is going to look appealing. As Damon writes, “your business needs varied and multiple customers” for essentially three reasons:

  1. Diversify income streams
  2. Lessen the over-dependence effect – security in numbers
  3. Protect your business against Black Swans

My mother would have called this: “avoid putting all your eggs in the same basket”.

But while insulation from risk is undoubtably core to a lawyer’s heart, right now – appealing as it may seem – would be the wrong time to be looking to expand your client base. And I say this for the following three reasons (in inverse order to Damon’s):

  1. This is a pandemic, not a Black Swan, event: in that none of us have a clue how we got here or how we will get out of it – we are not here because of strategic issues.
  2. Pareto: notwithstanding how large your client base is, the facts are in -: 80% of your revenue comes from 20% of your clients. Expanding your client-base isn’t really going to have much beneficial impact on this, rather it’s going to suck-up much needed diminishing resources.
  3. Diversify income streams: isn’t a customer-based issue in professional services firms. If you truly want to diversify your income stream you don’t need to expand/diversify your client-base, you need to expand/diversify your product offering. That’s a whole different problem (and one which could be achieved).

In short, you don’t need to be expanding your client-base, what you need to be doing is focussing and developing your relationships with those top 20% of your clients.

Or, as Ron Baker has written: “It’s one thing to get more business, it’s another thing to get better business”. And while predictability and certainty of revenue is great:

“…if you bring in those customers at the wrong price, you have done nothing but add layers of mediocrity to your firm”.

Some thoughts to consider before you start chasing rabbits down holes…

Again, these just represent my thoughts though and always interested to hear your views.

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25 Legal Podcasts I Listen To

Over the weekend my attention was drawn to a post by Lauren Lee on Simple Legal titled ‘The 20 Best Legal Podcasts to Listen to in 2020‘. Lauren’s list is pretty comprehensive, if not a little US-based. Anyhow, it got me to thinking what podcasts I listen to here in Australia.

So here’s my list (in no order of preference – other than how they have been listed in my Podcasts app):

  1. In Seclusion with Greg Lambert
  2. Ditching Hourly with Jonathan Stark
  3. The Thought Leadership Project with Jay Harrington & Tom Nixon
  4. Doing Law Differently with Lucy Dickens
  5. The Law Firm Marketing Minute with Marc Cerniglia and Daniel Decker
  6. The Legal Ops Podcast with Alex Rosenrauch and Elliot Leibu
  7. Reinventing Professionals with Ari Kaplan
  8. Impact Pricing with Mark Stiving
  9. Law Next with Robert Ambrogi
  10. Legal Speak by Law.com
  11. The Kennedy-Mighell Report with Dennis Kennedy and Tom Mighell
  12. The Soul of Enterprise with Ron Baker and Ed Kless
  13. Size 10 1/2 Boots CoffeeCast with Doug Mcpherson
  14. Duct Tape Marketing with John Jantsch
  15. Lawyerist Podcast with  Sam Glover, Aaron Street, and Stephanie Everet
  16. Pricing is Positioning with Paul Klein
  17. Accounting Influencers withRob Brown
  18. The Happy Lawyer Happy Life Podcast with Clarissa J Rayward
  19. The Geek in Review with Greg Lambert & Marlene Gebauer
  20. The Legal Toolkit with Scott Wallingford and Aaron Pierce
  21. Innovating Leadership with Maureen Metcalf
  22. PSM: Professional Services Marketing with Josh Miles and David Lecours
  23. The Legalpreneurs Sandbox with Centre for Legal Innovation
  24. Beyond Billables with Michael Bromley
  25. LMA Podcast

Some other industry related podcasts I listen to include:

Those of you who subscribe to my weekly digest will have seen last week that I’m now also subscribed to a few industry related YouTube feeds that are also worth keeping an eye on.

Anyhow, most of the podcasts in my list run from 30 minutes to an hour long. I’d suggest listening to them on your morning walk while we are in lock-down or on your commute once we return to normality.

And if you have any podcasts you listen to that you think I should be listing to, let me know!

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‘Annuity Revenue’ – who wouldn’t crave some financial certainty in current circumstances?

Annuity revenue – a predictable revenue stream from new or existing customers who buy products and services associated with new or previously purchased products. 

As the Managing Partner of a law firm today, what would you say if I walked into your office and told you that I could:

  • provide you with a guaranteed monthly revenue income,
  • with a product that creates loyal customers, and
  • where those customers become – at no additional cost to you – brand champions and refer your services to their network, free of charge, via the Holy Grail of marketing – positive ‘word of mouth’ referrals.

Sounds great doesn’t it. Almost too good to be true.

Well all I can say is that if you were anything like one of the Managing Partners servicing customers who responded to the Pitcher Partners recent ‘Legal Survey 2020 Report‘, that’s exactly what you would be saying: “thanks, but no thanks we are happy with the billable hour”.

Pitcher Partners - Billing Methods

The fact that the billable hour remains the ‘go to’ method of billing (not the same as pricing) for Australian law firms and their customers does not, in and of itself, surprise me. I must admit, however, to being a little surprised with the 1% increase in this billing method (up from 58% to 59%) year-on-year.

Given the times (even pre Covid-19), I was also a little surprised to see that both ‘fixed fee’ and ‘value-based’ pricing remain relatively static (although it should be added that from what I could see the report lacks a definition of ‘value-based’, probably purposely so).

To me this represents a massive lack of foresight on the part of law firms and a significant lost opportunity.

In much the same way as software as a service (SaaS) companies have come to realise that one-off payments around shrink wrap contracts were not servicing the long-term financial interests of the company (unless it’s a legacy product that will no longer be supported), the time has come for law firms (and professional services firms more broadly) to realise that if we want to maximise revenue and, potentially, profit we need to rethink how we generate that revenue.

One alternative that the likes of Ron Baker and Mark Stiving have been banging the drum about for some time is ‘subscription based pricing’.

The benefits of adopting a subscription based pricing model

I have posted previously on this blog about the benefits of subscription based pricing (see here), but leaving all that aside for a second; as Amy Gallo wrote way back in October 2014 in the Harvard Business Review (see ‘The Value of Keeping the Right Customers) with the acquisition costs of acquiring new customers running being between 5 and 25 times more expensive than servicing existing customers, it makes economic and financial sense to find, and keep, the right customers.

How you price this is probably the most important step along that path.

The weakness of having billable hours as your default billing method is that you are pricing to the transaction. Whereas one of the greatest benefits of the subscription based pricing model – or even a retainer based pricing model if you must at the start- is that you start thinking about pricing the customer or even the portfolio.

In other words, you start to think about the customer and their needs first. And for an industry that always talks about the customer being at the centre of everything we do, doesn’t it makes sense that our pricing structure reflect this claim?

But it also makes sense internally, because it:

  • is smarter pricing
  • leads to smarter collaboration
  • moves you away from seasonal end of financial and calendar year pressures, and
  • helps remove any discussion around the ‘commodity’ tag.

Not to say, in these COVID-19 times, when you are talking working capital facilities with your bank, it provides you with a guaranteed annuity revenue stream.

Now who would not want that comfort right now?!

These just represent my thoughts though and always interested to hear your views.

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What will the business of law look like in a post COVID-19 world?

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uncertainty’:

The state of not being definitely known or perfectly clear; doubtfulness or vagueness.

Oxford English Dictionary

As we start to talk about the path/way out of COVID-19 lockdown, a number of pre-eminent thinkers in legal consulting have begun discussing what shape and form this might look like for our industry.

Notable among these have included:

  • Richard Susskind + Mark Cohen debating the future of the legal industry as excellently reported by Ron Friedmann on his Prism Legal blog
  • Patrick Lamb discussing ‘The Next Normal: Is There a Roadmap That Gets Us There?’
  • The team on the LawVision Insights Blog giving their views on ‘The Legal Profession in a “Post-COVID” World’, and
  • the excellent and very comprehensive series of blogs by Jordan Furlong under the themed title of ‘Pandemic’.

Then again, as Patrick Dransfield said in Asia Law Portal (Who knows what the future will hold?’) – nobody really knows what the future holds.

But isn’t that why we, as business developers, are hired? To try and give some insights to our partners on how the industry might look?

With that in in mind, for what it is worth , here are my two cents on some of things we may look forward to over the next 18 months:

  • The industry will remain fundamentally the same – as it was pre COVID-19 pandemic days unless there are structural changes to the business model. And, as I understand it, the trust partnership business model that is currently used in most common law jurisdictions makes the talk of change easier than the reality of change (in that nobody today would likely start a new law firm under a partnership trust structure).
  • Technology and working from home will play role – it goes without saying that both technology and working from home will play a part in the future, but how big that role will be in an industry built on presentism still remains to be seen.
  • Uncertainty will feature heavily –  we are flying blind here and most of us have no experience to drawn on. Even those of us who have been through this several times have now come to accept this time is different.
  • Consolidation will likely feature prominently – with The Law Society Gazette (England and Wales) reporting in the past week that ‘71% of high street firms face collapse‘ I would foresee a similar scenario playing out here in Australia. Only I doubt it will apply to high street firms, who should do well out of the expected growth in wills & estates and family law matters, as much as it will likely apply to the middle market where there still remain far too many firms representing far too few clients.
  • There will be an increase in lateral hiring – for the reasons above.
  • Cashflow/credit facilities will help – Warren Buffet is reported to have said that “Only when the tide goes out do you discover who’s been swimming naked.” Well, the tide has never been lower and we will see in the coming days who still has the ear of their banker. Arguably those with big trust accounts and/or on the panel of one or more Big4 bank panels will benefit.
  • How much office space do law firms really need? – it will be interesting to see if rent footprint decreases. Rental space – and whether to remove parts of the business to less expensive rental footprints (see Herbert Smith Freehills to Macquarie Park and McCabe Curwoods to Chatswood for example) – has been an issue for some time and one of the big take outs from this may well be a lot more Hot-desking!
  • The Big4 see opportunity – as EY reported this week, the Big4 are not going away. If anything, as this chart shows, they’ll be upscaling their charge

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  • A need to be even more client and sector focusses – with the team at Adam Smith, Esq looking at the following areas of need:
    • Insolvency, restructuring and distressed assets
    • Private equity (I’m not 100% sold on PE in Oz)
    • Regulatory investigations and dispute resolution a/k/a litigation
    • M&A
    • Tech and all the ancillary practices it spawns, including IP

From an Australian law perspective I would add Insurance law (going to be more claims made) and all forms of Government (Government will be spending big on Infrastructure, Health, Education and others).

But all of the above are my views and so to finish this post I’m going to turn to one of the great take-outs of this week for me – a post by Trish Carroll who interviewed 12 final year law students to find out how they were feeling in the middle of Covid – ‘Is Covid-19 the mother of all disruptors for the legal profession?‘ – and this is about as close as we will get to how the future of law will look.

As always though, interested in your thoughts/views/feedback.

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Has the timesheet been thrown a new lease of life with COVID-19?

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Leaving aside for now whether or not you agree with the billable hour; Most law firms, including many of those that work on fixed/flat and other alternative fees, still require their fee earners to fill-out and submit daily timesheets.

For a small, but ever growing, number of us however there was hope – a light at the end of the tunnel so to speak – that the efficiencies that technology was bringing to the profession would eventually reduce the need to complete timesheets. After all, tasks that used to take several hours of [billable] time (e-discovery for example), with the help and use of technology, could now be completed in less than 15 minutes: so why bother with an outdated measure of productivity such as the timesheet?

And then we had COVID-19…

And so what effect do we think COVID-19 may have on timesheets?

Well, as Cal Newport wrote in his excellent blog post of 12 April, ‘Task Inflation and Inbox Capture: On Unexpected Side Effects of Enforced Telework’:

I’ve spent years studying how knowledge work operates. One thing I’ve noticed about this sector is that it tends to treat the assignment of work tasks with great informality. New obligations arise haphazardly, perhaps in the form of a hastily-composed email or impromptu request during a meeting. If you ask a manager to estimate the current load on each of their team members, they’d likely struggle. If you ask the average knowledge worker to enumerate every obligation currently on their own plate, they’d also likely struggle — the things they need to do exist as a loose assemblage of meeting invites and unread emails.

Ouch, but the killer blow comes with Carl’s next comment:

What prevents this system from spiraling out of control is often a series of implicit friction sources centered on physical co-location in an office.

I had not heard of “friction sources” before reading Carl’s post but he is absolutely right:

When you suddenly take a workplace, and with little warning, make it entirely remote: you lose these friction sources.

And what are those ‘friction sources’ exactly?

Well, as Carl writes [quote]:

  • If I see you in the office acting out the role of someone who is busy, or flustered, or overwhelmed, I’m less likely to put more demands on you.
  • If I encounter you face-to-face on a regular basis, then the social capital at stake when I later ask you to do something via email is amplified.
  • Conference room meetings — though rightly vilified when they become incessant — also provide opportunities for highly efficient in-person encounters in which otherwise ambiguous decisions or tasks can be hashed out on the spot.

[/unquote]

Carl writes like someone who has worked in a law firm for decades and his thoughts give food for thought to those of us considering what the future of law might look like post COVID-19 and why the new normal may not look a whole lot different to the old way of doing things.

As always interested in your thoughts/views/feedback.

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ps – If you want to Buy Me A Coffee, you find me hanging out here