#BizDevTip

Business Development – ‘I didn’t learn that at university!’

The number of senior business development people, including Director level roles, I have spoken to over the years who “fell” into working in business development roles for professional services firms is remarkable! Yes, in most cases they had a relevant applicable skill-set that could be transferred and used in the new role: whether that be as an ex-lawyer, marketing graduate or communications professional; but, by and large, I think it’s fair to say that almost none of us saw a career advisor at school and asked what undergraduate and post graduate degrees we need in order to have a career in business development for a professional services firm*.

So I was really glad to read today, via the Legal Cheek blog, that Slaughter and May are to launch a business services grad scheme.

Although Slaughters are one of the few Magic Circle firms I never worked at or for, I have really admired them from the sidelines. Their focus on their core strategy is commendable. All of which, in my opinion, is reflected in their newly announce two year ‘Business Services Academy‘ program.

In a similar vein to grad rotations, Legal Cheek is reporting that the Academy program will consist of four rotations of six months each among:

  • people and operations
  • technology legal ops and project management; and
  • clients and business development.

Now, the very clever people you are, you’re think 4 into 3 doesn’t go – and you would be right. But, apparently the forth rotation is with the team you have enjoyed the most on your previous rotations and want to consider a career with, and I kind of like that!

So once again, the team at Slaughter and May are blazing a path, but please do we really need to say this:

It’s worth noting that this scheme does not lead to qualification as a solicitor.

Anyhow, if you are not fortunate enough to work at Slaughters – or, as Legal Cheek points out Addleshaw Goddard or DWF (who have similar programs), and really need to learn a thing or two about how business development in law firms actually works in practice, reach out to me!

rws_01

* I would also add that a lot of that same thinking applies to lawyers trying to do business development, in that they have had no formal training in this skill!

A lesson in pricing from Tesla

Tesla, Elon Musk’s EV carmaker, published its Q3 results earlier today (Australia time). Profits plunged 44 per cent. But, from my perspective this was the interesting part: “after it cuts prices to boost sales“.

Let’s unpack that for a second: Tesla “slashed prices by around 25 per cent in the United States during the last year” – “putting the priority on sales rather than profit“.

As it happens, this is also a common trait of professional services firms: prioritizing getting the deal done over making an actual profit – including agreeing to heavy “volume discounts”.

As the Tesla results show though, any price discount you give comes directly from profit – not sales revenue.

So the price discount you offer your clients is essentially compounded on your bottom line – 10% is not 10%, it’s more like 30%.

Or in the case of Tesla: a 25% price discount has resulted in a 44% plunge in profit.

Something to think about when you are next thinking about what pricing options you have available to you.

And please, don’t follow this advice:

“I view it as a way to defend market share at the expense of margin” .

Kevin Roberts, director of industry insights and analytics at CarGurus, an online auto sales site

In professional services firms, market share should never Trump (pun intended) profit.

As usual, if you need any help with any of this, feel free to reach out.

rws_01

Where’s the value in client feedback sessions?

This is a REALLY telling – and valuable – statistic from ‘Building client feedback programs that lawyers love: What CMOs say‘ by Jen Dezso – Director of Client Relations / Thomson Reuters:

  • Law firms that conduct formal client feedback programs can earn nearly twice the share of a client’s external legal spend than a firm not engaging in feedback;
  • in 2023, only 27% of clients were asked to participate in a client feedback program by their outside law firms. 

Let’s get a realty check on that: Law firms that have a client experience (CX) feedback program can earn nearly twice the share of a client’s wallet, but less than one in three clients have been asked to participate in a client feedback program.

In business development we often talk about “low hanging fruit” and this seems like a ‘no brainer’ to me!

Get in touch if this is something that interests you. And, frankly, why should it not!

rws_01

#TBT: Why your law firm doesn’t need to hire a head of pricing

This week’s #tbt (Throwback Thursday) recommendation is a post I wrote back in August of 2018 – ‘Why most law firms don’t need to hire a head of pricing‘.

The reason I’d like to suggest that you go back in time and read an article I wrote back in 2018 is because of something I read on law.com earlier this week: ‘How Law Firms Are Still Losing Millions, Even After Hiring Pricing Specialists‘ by Andrew Malocussion.

If you don’t have time to read Andrew Malocussions article, and I suggest you do because it’s actually very interesting, the long and short of it is that the reason why big (read global) law firms are losing millions in revenue (opportunity) is because…

… their pricing teams are too small.

All I have to say is, “seriously”!

Do yourself a favour, go back in time 5 years and work out for yourself whether or not the fact that law firm pricing teams are too small is the real reason they may or may not be losing millions of dollars in revenue.

For my part, this type of thinking doesn’t pass the pub test!

Feel free to reach out to me if you want to talk through any pricing strategy related issues/questions.

rws_01

On average, it now takes 3229 days to make partnership

3229 days – on average that’s how long it will take you to make partnership in 2023. And when I say “partnership”, I’m not talking about equity partnership.

Last week (15 August 2023), Marlene Gebauer and Greg Lambert interviewed Laura Leopard, founder and CEO of Leopard Solutions, on their ‘Geek in Review‘ podcast. It’s a really interesting chat around law firm partner succession plans (or lack thereof), which was actually the primary topic of their conversation.

But, it was an insight that Laura shared at the 13 minutes and 21 second mark that had my hair standing up:

  • In 2023, on average, it takes 3229 days for a new entry level hire to make partnership.

Two things to note here:

  • this figure reflects those making partnership in 2023 (as opposed to new entry level hires in 2023 – see below for why this is important)
  • as Laura and Greg discuss, this reflects ‘partnership’ (i.e., salary partner), not equity; which could take you a further three years to acquire

So what? After all, this information is useless unless put into context. What I mean here is this: Has this number changed at all over the past 10 years?

Well, as it happens, Laura shares this with us too.

  • In 2012, on average, it took a new entry level hire 1353 days to make partnership

On average then it is now [2023] taking new entrants about 5 years longer to make partnership than 10 years ago!

What can you do to make the path to partnership shorter?

Okay, you’ve decided you want to be a partner: What can you do to make the path to partnership – which, let’s face it, is growing by about 6 months every year – easier / quicker?

Here are a few tips you may want to consider to help make that happen:

  • Know what your offering / sector expertise is
  • Learn your firm’s economics / financial metrics – what is realization / utilization / leverage / write-offs / average billing rates? If you don’t know you need to learn this quick! “Play the game”
  • Look at / speak to your existing network – both internal (referrals) and external (referrals and clients)
  • Grow your professional network – for example, join industry associations and attend relevant industry conferences
  • Speak at industry conferences / events (that are relevant to your core area)
  • Build your personal thought-leadership brand (LinkedIn)
  • Understand and communicate your value proposition

Most importantly though, have a plan and if you think it will help hire a business development mentor / coach to help you reach your partnership goal.

On the rules of compound interest, a one hour talk each month with someone who knows how to build a book of business will take you a long way to achieving your goals quicker than the industry norms.

As always, feel free to reach out to me for a free chat if you want to talk through how I can help with this.

rws_01

REPORT: Dynamic Law Firms consistently invest more in Business Development than Static Law Firms

The numbers have been crunched and the results are in: ‘Dynamic Law Firms’ invest considerably more in their business development and marketing activities/departments than static firms are willing to do.

According to the latest (8th) iteration of Thomson Reuters Institute’s 2023 Dynamic Law Firms Report, Dynamic Law Firms consistently invest greater sums in their business development and marketing teams than Static Law Firms:

As you can see from the over graph, in 2022, on average, this investment by Dynamic Law Firms in their business development and marketing teams accounted to over $12,000 per lawyer. Roughly $2,500 more per lawyer than Static Law Firms.

Importantly, this investment in business development pays off:

With Dynamic Law Firms consistently outpacing Static Firms in all growth Key Performance Measures; but, most notably from a business development perspective, in both ‘worked rates’ and ‘fees worked’.

So why is this? After all, business development and marketing is a ‘cost-center’.

Well, as the Report itself states:

“The first goal of MK&BD investment is to raise top-of-mind awareness of the law firm.

Research conducted over the course of many years by the Thomson Reuters Institute has shown that top-of-mind awareness is a vital first step toward winning work – a process that will see a firm move along a continuum from awareness to being viewed favourably, to being considered for and ultimately winning work, and hopefully, to a point where the firm has gained enough experience with the client that they garner credibility in the board room and can begin to box out competitors.”

A fact backed-up by the authors of Simple Heuristics who, in their principle of “recognition” [firm brand or lawyer], state that recognition is number one in any client’s decision process around whether or not to buy something.

And so it goes without saying that this ‘awareness‘ factor is critical in the ‘buying cycle’. If we don’t have this advantage, then we need to hope to hell the other providers aren’t a known commodity so we can proceed to the next level in the buyer’s decision process (typically experience – have they done this before?; then can I trust them not to mess this up and make me look stupid! – SIDE NOTE: price isn’t in the top 3 decision making selection criteria.).

Which is why, if you want to make sure your firm stays one step ahead of its competition, you actually need to be investing more, not less, in your business development team right now.

Yep, the evidence is in. It’s undisputed. Business Development and Marketing is not a ‘cost center’ (not that I ever thought it was). They not only pay for themselves, but they ensure your firms stays ahead of its competitors and earns more $$$s.

So the next time you think to yourself: “I need to cut costs, I’ll cut my business development and marketing budget” – I’m here to tell you that’s dumb – think again, because not only will it hurt you but it will take you on a journey to blandness.

As always, feel free to reach out to me for a chat if you want to talk through how I can help with this.

rws_01

The Hourly Rate is alive and well: there is no such thing as Alternative Fee Arrangements

If you are wondering what types of Alternative Fees Arrangements (AFAs) in-house General Counsel are asking their private practice suppliers to provide them with – or, to flip the coin, what AFAs private practice lawyers are charging their in-house GCs, then wonder no longer. The latest market report from the Association of Corporate Counsel (ACC) sets this out in a nice clear table:

Some take-aways:

  • The #1 AFA fee request of outside counsel is Discounted Hourly Rates. No less than 100% of companies with revenue over $20BN or more use Discounted Hourly Rates with their private practice lawyers! When, oh when, will we learn that Discounted Hourly Rates are NOT a fee structure? On this point, I have been arguing for years (literally, the linked post was from 2018!) that there is no point having a pricing function in your law firm if all you are going to offer clients is discounted hourly rates! Seriously, save yourselves the money.
  • Say what you want, the #BillableHour is far, far from over if it is the preferred billing method of over three-quarters (77%) of all in-house GCs participants in the survey!
  • Capped fees are dumb! They are a lose-lose: both for the law firm who if they come under the cap can only charge what is on the clock and if they go over the cap have to wear the additional cost; but also for the in-house team who will get under served as soon as it becomes clear the cap cannot be met (and probably never was going to be). So why are they so prevalent? I can only assume capped fees are driven by the CFO wanting “cost certainty”.
  • Given the continued popularity of hourly rates, Blended Hourly Rates are nowhere near as popular (at 37%) as you would think. On transactional matters in particular, you would think this rate of use would be a lot higher.
  • The use of Success Fees is woeful. Is this a reflection of the amount of M&A and privatization work actually being done (where you would expect it to be prevalent, or is it an actual fact that in-house counsel don’t like/understand the benefits of this arrangement? Or could it be, every deal is getting done so why take the uplift risk?)?
  • An understanding of Performance Based Holdbacks has a long, long way to go.

Importantly though, despite talking about implementing AFAs for over two decades, we are still a long way off actually using them in practice.

Again, take a look at my linked article above where I talk to Patrick Johansen’s Continuum of Fee Arrangements™, where Patrick sets out 16 different types of fee arrangements that can be used:

  • Hourly
  • Volume
  • Blended
  • Retainer
  • Capped
  • Task
  • Flat
  • Phase
  • Fixed
  • Contingency
  • Portfolio
  • Hybrid
  • Holdback
  • Risk Collar
  • Success/Bonus
  • Value

And ask yourself, how many of these are being actively used in this latest report from the ACC?

Notably missing from the list above? Value Based Billing!

Yes, despite what you may read and hear elsewhere, in practice we are long, long way away from understanding and implementing the appropriate (a term I learned from Toby Brown) use of relevant fee arrangement for the task at hand.

In-house or private practice, if you’re struggling to get to grips with this issue, feel free to reach out to me for a chat.

rws_01

‘Customer service’ vs ‘Customer experience’

Ever wondered if there is a difference between ‘customer service’ and ‘customer experience’?

I was fortunate enough to come across this quote by Paul Roberts, CEO at My Customer Lens that, frankly, sums it up better than anyone else I have seen lately:

“It’s important to define the difference between customer service and customer experience. I like to define customer service as what you do, and customer experience is how you make people feel.”

Too often in professional services firms we concentrate on the ‘customer service’ at the expense of the ‘customer experience’; when the reality is that we should be much more focused on the customer experience than we are on the customer service.

As the article states:

“Improving the client experience is about looking at the entire client journey, from initial enquiry through to case completion, and beyond. It’s a rethink and review of every customer touchpoint throughout your organisation; from the way the phone is answered, to your hold music, reception waiting room and website home page.”

Spot on advice.

If you or your firm is struggling to get a grip with this, feel free to reach out to me for a chat.

rws_01

Happy New Financial Year!

Happy New Financial Year to all in #Auslaw.

It’s that strange time of the year when we start all over again as if the previous 12 months didn’t happen. Only it is not quite as simple as that. From today:

  • most lawyers will be charging clients 10% or more extra for their services, with little or no explanation about where the extra value is being delivered and with the new fee rate being completely and totally justified by the date in the calendar and CPI rate increases.
  • judging by the LinkedIn notifications I have been receiving, a fair number of lawyers will be promoted to new roles – “congrats all”. Along with those promotions comes increased fees charged to clients!

So while we are all enjoying the various EOFY parties over the next few weeks, or simply enjoying some downtime over the school holidays: keep in mind that you need to have a carefully crafted value message to explain to your clients why you justify that higher fee rate; and if you want to ensure that your realisation rate stays healthy I suggest it be better crafted than “we are in a new financial year”.

And if you are struggling with any of that, feel free to reach out to me for a chat.

rws_01

Shoutout to Christine Jou on Unsplashed for the image