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Almost 20% of Australian law firms revenue is now coming from fixed fees

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It has been a full six months since the last CommBank Legal Market Pulse (conducted by Beaton Research + Consulting) was published and from what I can tell from this latest publication, not very much has changed in that time.

While some members of the Australian legal publishing world have commented on the rising optimism (note this is “perception”, and this has gone from awful to not quite so awful), what grabbed my attention was a piece towards the end of the report (page 19) that states:

“Revenue is still predominantly derived from hourly rates. However, almost 20% of all firms revenue, irrespective of size, is now coming from fixed fees.”

I don’t have to hand data from 5 years ago that would allow me to do a comparison to see what this means in real terms, but given that IBISWorld puts the size of the Australian legal market at $23BN, that’s a lot of fixed fee generated revenue.

Somewhat surprisingly, there doesn’t appear to be a huge difference in the percentage of fixed fee revenue being derived at “top-tier” and “mid-tier” firms – with fixed fees accounting for 19.4% of revenue at top-tier firms and 19.2% among mid-tier firms.

The types of work for which fixed fees are being agreed/charged is also very similar – 88% for transactional matters at top-tier and 89% at mid-tier.

Notable, and surprisingly, is that top-tier firms would appear to be much more willing than mid-tier firms to offer fixed fees for litigation work – 50% to 33%.

But the test is always in the tasting (for wine lovers at least): so how good are Australian law firms at fixed fee pricing?

Well, not very if the data is to be believed. Asked for the margin on fixed fees relative to hourly rates, the responses were:

  • higher: 13% top-tier / 15% mid-tier;
  • lower: 0% top-tier (which seems a little hard to believe) / 56% mid-tier (which is probably being too honest)
  • about the same: 75% top-tier / 19% mid-tier; and
  • not sure: 13% top-tier / 11% mid-tier (which should be worrying some managing partners out there).

As well as finding out that Australian law firms are not very good at fixing fees, the report also tells us that over 67% of all law firm revenue still comes from standard hourly rates or discounted hourly rates. Here though, over 25% of revenue comes from “discounted” hourly rates – which begs the question: when do you start saying your discounted rates are your real rates?

Lastly, almost 3% of all law firm revenue now comes from retainer arrangements (2.6% for top-tier, 2.8% for mid-tier). Now that’s certainly something worth keeping an eye on!

 

Loyalty programs revisited

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Back in March of this year I blogged that loyalty programs were likely an under-utilised means by which Australian law firms could differentiate themselves in a highly competitive legal market. I was, then, particularly happy to see that recently Australian Government Business (www.business.gov.au) blogged  on a similar issue – ‘Customer loyalty or reward programs‘ – which looked at, among other things:

  • What customer loyalty programs are.
  • The benefits and risks of a customer loyalty program.
  • Tips when implementing a customer loyalty program.
  • Legal and compliance issues for customer loyalty programs.

A lot of which is directly relevant to law firms looking to implement a customer loyalty program.

Why you should think of implementing a customer loyalty program in your firm

As far as law firms are concerned, the perennial question has been:

How do we make sure that our customers [clients] understand the benefits of being exclusive to our brand?

Here, while we have known for a long time now that the ‘customer experience‘ has been the bedrock of customer loyalty, it has only been in recent times that we have been able to show that loyalty programs can, and do, add to this overall customer experience.

But customer experience isn’t the only reason why law firms need to think carefully about implementing a loyalty program. Other benefits include:

  • gaining a better understanding of the customer buying behaviour – which practice groups are they using, when, how often, why? Are they using more than one partner in a practice group or the same partner?
  • increase you brand recognition within your existing customer base – putting in place a formal loyalty program should go some way to helping you promote you law firm internally within your client’s business; if for no other reason than water-cooler chat.
  • increase your word of mouth referrals.
  • provides an added incentive for clients to give you work rather than a like skilled and experienced firm (i.e., all things being equal).
  • can be used to help recognise referrers to the firm – if you include referrers in the program, all things being equal they will more likely refer clients to your firm than a competitor.
  • it can help you implement formal and informal customer listening and feedback programs (as part of the program offering).
  • it will help members of your firm get to know who your key customers are and what they do.
  • it should provide your firm with a platform to cross pollenate into other service areas without looking like a hard sell.

You could also find that putting a customer loyalty program in place leads to greater use of your much underutilised CRM systems!

All that said, a word of caution for those who are intending to implement a customer loyalty program in their firm:

  • customer loyalty marketing must start with the law firm demonstrating loyalty to the client. Much like the trust it is built on, you cannot expect loyalty from your client if you are unwilling to offer the same type of loyalty to your client,
  • the foundation of a customer loyalty program is a promise. If for any reason whatsoever you are unable to fulfil on that promise, then you shouldn’t implement the program, and
  • always keep in mind that while the lawyer inevitably gets the credit when things go well, it is the brand that gets the blame when things go wrong – so make sure that at the heart of you customer loyalty program is always a dialogue between you and your client.

Get it right though and a well implemented and executed customer loyalty program could be just he thing your firm need in order to differentiate itself from the market.

Australian-based law firms are failing to sell Australia as a forum to Asian clients

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Today [29 July] the Australasian Lawyer has a post detailing a recent report by Baker & McKenzie that:

“cross border IPOs in the Asia Pacific region have increased by 75 per cent in the first half of this year.”

 Wow, Capital Markets and Corporate teams across the Region have really struggled since the GFC and seen a lot of layoffs in their teams so this must be music to their ears!

But what about Australia?

Well, it appears the news here is not so good. According to David Holland, head of Baker & McKenzie Corporate Practice in Australia:

“Australia didn’t see much activity and the regional boom is unlikely to have any significant effect on the Australian market specifically”.

Sorry but this is not acceptable.

Australia not only has a robust principal stock exchange in the ASX, but we can also offer traditionally family run Asian companies access to a very friendly IPO forum in form of the National Stock Exchange (NSX) of Australia, pitched as being:

the market of choice for SME and growth style Australian and International companies.”

Listing and reporting rules for both are pitched as being much less onerous than is the case with other stock exchanges across the region.

So, why are we missing the boat here?

To my mind the answer to this question is this:-

Australian law firms and government bodies are failing in their duty to sell Australian law as a viable forum for international business.

Yes we missed the boat on selling Australian law as the governing law for international agreements – the English and Americans (New York) beat us at to that. But in this case we have a very distinct advantage that we are simply not pursuing or pushing.

To be clear, we’ve known for some time that Asian governments (particularly China) have been advocating for their domestic companies to list overseas in order to show transparency. We’ve known for a long time that control remains a massive issue for Asian companies (particularly family run businesses) and IPOs are, as their name suggests, capital raising exercises.

And what have we done about it?

Pretty much nothing. Few, if any roadshows. The occasional newsletter. Maybe the odd seminar.

In short, nothing.

Looking for a silver lining?

Luckily for us there is one in an ABC article from February of this year “China-based companies to list on ASX to avoid Asian stock market costs and free float requirements“, which points out that:

“Smaller Chinese companies are looking to list on Australian stock market operator the ASX to avoid the cost and free float requirements of larger Asian exchanges.”

All we need to do now is get out there and spread the message!

How well are we doing at exporting #Auslaw?

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Finally, some years after the Australian Government first announced and then consigned to the dustbin  its ‘Australia in the Asian Centurywhitepaper, a fair amount is being written around the issue of exporting Australian professional – read, ‘legal‘ – services, including:

While it is undoubtable that the export of Australian legal and professional services is a trending issue on an upward trajectory, it is still probably a little early to say (as the College of Law post does) that “Australia is now trending on a global scale” (vis-à-vis the export of our professional services) – although, to be fair, the export of Australian lawyers (to which the College of Law would have a particular interest), particularly to the UK and New York, has been ongoing since the early 1980s and continues to this day.

Moreover, given that the Australian International Disputes Centre (AIDC) was established way back in 2010 (with the assistance of the Australian Government and the Government of the State of New South Wales) and still lags behind both the Singapore International Arbitration Centre and the Hong Kong International Arbitration Centre, the export of #Auslaw has undoubtedly been a slow burn.

So while I for one applaud the latest chatter around an impetus to export #Auslaw, I hope that this time we are serious and take the time to have a robust conversation about whether or not we wish to seriously promote (and lobby) the export of #Auslaw overseas. And, assuming we decide we do wish to progress with the export of #Auslaw overseas, we put in place concrete national plans to move this initiative forward rather than taking the lacklustre state-based approach we have to date.

A quick test to help determine if you’re providing value to your client

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In today’s legal world you often here people talking about “doing more for less” and/or that they are providing “value” to their clients, without much of an explanation as to what constitutes “value” – with the best shot usually being:

value, like beauty, is in the eye of the beholder“.

Indeed many thousands, if not millions, of words have been written about making sure you “add value” – not to be confused with “added value”, which is a whole different subject – but very few of those written words have made any real attempt [from what I can see] to try and nail down a definition of “value” from a client’s point of view.

And while there is little doubt that every single person’s definition of value will be different – and in many cases, each individual person’s definition of value will alter depending on the circumstances they face at the time they are asked to define “value” to them – the following two-part questionnaire suggested by Nathaniel Slavin (of Wicker Park Group) in his recent post on the Bloomberg Big Law Business website, ‘The Perception of Value Differs Among Clients‘, probably goes closer than anything I’ve seen so far to answering this conundrum:

  1. Does my lawyer understand how I define success and all the myriad components that impact that success?; and
  2. Do they accomplish that goal in a manner, financially and otherwise, that helps us further our business goals?

And if, as a private practising lawyer, you can answer “yes” to both those questions – while you cannot be certain you are delivering “value” – you can be pretty sure you are delivering overall client satisfaction levels that are going to get you as close as you can possibly get to a modern day definition of “delivering value to your client“.

 

Your law firm’s brand recognition: How much does it really matter?

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Earlier today Dr George Beaton (@grbeaton_law), Partner in Beaton Capital and an associate professor at the University of Melbourne, posted the following question to Twitter:

“Which firm is the ‘world’s strongest’? Skadden or Baker & McKenzie or Jones Day. Confusing”

George I

With a twitter pic link to an article on the Global Legal Post website that contains links to the following “Related stories”:

George II

Leaving aside the issue of financial strength, as George’s tweet clearly infers brand strength, the question I always ask when I see news items and survey responses of this nature is this:

Does it really matter?

And the answer to that really depends on what my firm’s overall strategy is.

Taking a step back, whenever I’m asked in my role as a business development consultant by law firm partners of the importance of such survey findings I will often respond by asking them the following question in return:

Imagine we are on a long distance flight on an important business route – say Sydney to London or Tokyo to New York. Now, say I give out a questionnaire to all 300 plus passengers on that plane asking them the simple question of whether or not they have heard of your firm. Would you prefer:

A. a greater percentage of passengers in first class to have heard of you?

B. a greater percentage of passengers in business class to have heard of you? 0r

C. a greater percentage of passengers in economy class to have heard of you?

Now if your firm’s business plan is to be doing “premium work for premium clients”, then my guess is you’d want a greater percentage of first class passengers to have heard of you. Similarly, if your business plan is to be working with the top ASX 200 companies, then I would hazard a guess you would want to be known by both first class and business class passengers, with the edge being on the greater brand recognition among the business class passengers. Finally, if your firm’s business plan is to be a leading B2C law firm, that I’m guessing you wouldn’t mind if your brand is widely recognised by the economy class passengers.

A very simplistic way of looking at this issue? Very much so.

But, at the end of the day, despite headlines that read ‘Top legal brands grow 45pc faster than others over last four years‘, I’m very much of the view that surveys of this nature fail to ask a more critical question, namely:

Do you regularly, or have you ever, instructed one or more of these firms you have heard of in the last three years?

Because, does it really matter if you have heard of me but never given me any work (ie, fed me)?

And all of this is before we get into the even more interesting discussion of whether or not you instruct individual lawyers (lawyer name [brand] recognition) – either at my firm or elsewhere – regardless of which firm they work for (lateral hire movements)?

After all, we have a long flight ahead of us…

Does your law firm have a ‘Big Ideas Project’

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Last week I read about ‘The Big Ideas Project‘, a product of the Progressive Change Institute. I have to admit to being an admirer of projects like The Big Idea Project; but news today that Clifford Chance had appointed Amsterdam managing partner Bas Boris Visser as its first ‘global head of innovation and business change’ got me to thinking:

I wonder how many law firms have adopted a Big Ideas Project to help them decide what innovation and business change they need to be adopting and implementing if they’re to be more client-facing?

And, more specifically,:

If law firms aren’t adopting something like this internally – why not?

#BizDevTip: 15 ways to find new business development opportunities in 2015

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On the basis that all lawyers are, ultimately, responsible for sourcing and securing their own book of business, the following are 15 ways you and your law firm could find new business development opportunities in 2015:

  1. RSS feeds: we will start off easy, set up an RSS drop box email account (I use Gmail) and sign-up to as many news and industry sources as you believe you need to give you as much relevant market information as possible. Keep in mind that if it’s in the “papers” you’ve most likely missed the boat, but you can still find the odd nugget this way.
  2. Apps to read on the go: in addition to having RSS feeds, I also have a number of news and blog feeds that I read on my iPad on the way to work through the Ziner app that are fed through Feedly. Previously I used to play solitaire on the train, but I’ve actually had some real wins since doing this.
  3. Network internally: if your firm has an intranet site, make yourself visible on this. Offer to publish updates or other useful information that will increase your profile internally. I’ve found this particularly useful in multiple jurisdiction and cross-border firms where you might not always get the opportunity to meet with your colleagues and show them firsthand how great you are! Even if you work in a one office firm though, increasing your profile internally – via the old water-cooler chat – can help build your profile and the trust your peers have in your abilities.
  4. Be present on Twitter: not only is Twitter a lot of fun, but it also offers you a free and easy way to increase your profile and network globally. And you’ll be surprised how often someone in your network (of Twitter followers) is asked by someone they know (but you don’t) for a recommendation in your jurisdiction, and guess who they will be recommending!
  5. Blog: again, a free (or at worst relatively cheap) and easy way to highlight that you are a thought leader in your area of expertise. It may also lead to other publishing opportunities that will help to promote your brand as widely as possible. And it doesn’t even have to be that long or complicated a post on your blog – just make it authentic and consistent.
  6. LinkedIn: I suggest people be ‘present’ on LinkedIn. This means using this platform as more than a modern rolodex for contact cards. Join and participate in industry groups that are relevant to your practice. Better yet, join and participate in groups your clients or target clients are active in. And if there are none, start your own!
  7. Publish: publish articles and materials that showcase how brilliantly you know your subject matter and how it applies to your clients businesses. I would suggest that you don’t do this in peer-to-peer [lawyer] publications, but find out what publications your clients like to read and try and get published in these – even if that means you are publishing updates on the automotive industry in a car magazine!
  8. Participate in client relationship management teams: you would be surprised what you can learn from CRM team meetings. I’ve seen millions of dollars generated in these groups over the years. But here’s the thing: you and your firm need to be engaged and willing to share information in order for it to work.
  9. Sector group meetings: same as 8 above, only along the lines of a sector rather than a specific client. Here, think back to how successful study groups were for you at high school or university – where you all shared information to help each other improve. Well the same principle applies, only the rewards can be [financially] much greater!
  10. Be visible: offer to spend one day a week or month working in your client’s office(s). Don’t charge them for it, just ask if you can use an office there. Then let them drop by for a coffee and a chat. You’ll be surprised by how many potential new matters you’ll have by the end of the day!
  11. Industry events: attend and participate in as many as you can. Not only are they great for networking, but they’re also good for insights from business leaders into the direction the market is heading. So, if you haven’t already, head off and join your local chamber of commerce or industry body organisation.
  12. Study: study broadens the mind. It also brings you into contact with likeminded people who might need your help. So if studying is your thing, this is an excellent venue where you can not only build your reputation as being a knowledgeable thought leader, but also bring you into contact with people who may need your help.
  13. Be social: don’t spend every waking hour at the office, be social. Attend your local sports or drama club events, because you never know who you might meet at these venues and the next person you meet could well be your biggest client this year!
  14. Accept feedback: always be willing to accept feedback as this will likely result in: (i) a platform where trust can be built, in that if your client sees that you are willing to listen to their feedback and improve your service delivery based on that feedback, they’re more likely to trust your abilities going forward (and this is true even where you make mistakes), and (ii) you being more aware of forthcoming work than you might otherwise have been.
  15. Always be willing to ask for help: lastly, always be willing to ask for help. That can be in the form of a mentor, coach, business trainer or rainmaker. It could be as simple as asking for help being introduced to someone you don’t know but want to get to know. How it’s done is not the important part, it’s in the asking: keep in mind that everyone, and I do mean everyone, has or will need someone else’s help at some point. And at some point, someone will ask you for your help – so give generously if you can!

There you go then, 15 ways for you and your firm to find business development opportunities going forward this year  – and if you can think of any more, let me know via the comments section.

In 2015 the challenge we face is ourselves

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Happy New Year to you all.

At this time of year you’ll likely read your fair share of articles predicting what the year ahead will bring. You may even read the odd article or two on the trends that are likely to impact on our business during the course of this year.

I should state for the record that I enjoy reading these articles and in many cases the predictions are not too far off the mark.

Indeed,  in previous years I would have been one of the first to gaze into my crystal ball and give you my prediction on the 10 or so issues that we are most likely going to face in 2015.

But not so this year.

To my mind the biggest challenge we, as business developers, face in 2015 is the fact that our business development efforts have been missing their mark in recent years.

To be clear, this is not a message I’m sending out there as a business developer.

I wish.

No, this is something our clients are telling us loud and clear.

In short, we, as business developers, have not been listening to what our pay masters are telling us.

Crucially, in 2015 we are also likely to see our marketing and business development messages lost in the noise surrounding chatter around AEC, ASEAN (as the region decides whether 2015 really is the year) and other such regional and global initiatives (Free Trade Zones being one).

While each of these will undoubtably be important factors for our business over the next 12 months, it is my belief that none is likely to lead to our down fall.

For the answer to that question, again we only need look at the resounding message being sent to us by our clients (yes, our clients), over a prolonged period now:

business development activities by law firm [in Asia] in 2014 missed their mark.

In 2015 then, we business developers need to be lifting our game and constantly asking:

what can we, as a law firm, be doing differently that will help our clients win more work, generate more revenue, and earn them higher rates of profitable return?

Alternatively, carry on as normal in 2015 and don’t be surprised if, at year-end, this is the result:

“If you always do what you’ve always done, you’ll always get what you’ve always got.”

-Henry Ford