covid

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.

rws_01

Survey: Production returns; Billings fall; Firms need to find new ways for clients to pay

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Having reported a cliff-fall in new matter instructions post-COVID in its Legal Trends Report Briefing #1 in May of this year, June’s updated Briefing #2 by Clio shows a subsequent significant upward spike in new matter instructions that have, effectively, netted out year-on-year the number of new file matter instructions.

While, at first glance, a return to quasi-normal file opening matter numbers look to be good news for law firms, as the latest Briefing numbers also shows, if you scratch the surface you’ll soon see (diagram below) a far bigger underlying problem is starting to emerge – namely clients’ inability (or possibly unwillingness) to pay!

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While the above wheel-chart is, at first glance, alarming, it’s also worth keeping in mind that a client’s ‘ability‘ to pay a legal fee pre and post the pandemic is not necessarily the same as its ‘willingness‘ to pay that fee. Which is to say there may be (and likely are) other underlying reasons as to why clients are saying they are not willing to pay fees – including a re-evaluation on the part of the client in respect of the perceived value being provided.

Of more concern to law firm management, however, should lie in the second of these two charts, namely the fact that rather than chasing fees 25% of firms are electing to forfeit the revenue.

Again, there could be a whole raft of underlying reasons why a firm may decide it would rather forfeit some of its billed revenue, and without undertaking a root-cause analysis we left to guess these (including my favourite – trying to preserve the relationship), but we should be left under no illusion that discounting and write-offs will have the biggest impact on profitability*.

A willingness to look at alternative payment methods

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For me, a somewhat surprising take-out from the latest Briefing was the statistic that 72% of consumers would prefer to pay their legal fees via a payment plan. Again, the term “consumer” isn’t defined and so we are left wondering if this is B2C or B2B; but even then, that only 53% of firms are equipped to offer payment plans seems odd.

Take away?

So what’s my top 3 take outs from this latest Briefing from Clio?

  1. Once things settle down, law firms will be as busy as ever,
  2. Cashflow will be king and clients are struggling with their own cash-flow, so
  3. Think outside of the box when it comes to pricing and how you ask clients to pay and you should be okay.

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

rws_01


* N.B. If hourly billing is the way you work and you want to get a better understanding of the effect that discounting/write-offs has on your firm’s profitability, take a look at this post by Patrick Johansen that profiles Stuart Dodds’ ‘1-3-4 Rule