CRM

The pointlessness of the ‘billable hour’ set out in two charts

Overnight, Australia-time, the Center for the Study of the Legal Profession at Georgetown University Law Center and Thomson Reuters Legal Executive Institute, relying on data from Thomson Reuters Peer Monitor, published the findings of its ‘2018 Report on the State of the Legal Market‘. Reviewing the performance of U.S. law firms in 2017, as well as looking at the trends expected in 2018, this annual report is typically the “first” big report publication of the year and so a trendsetter of where we may be going as an industry over the next 12 months.

As has been the case in other years, the first chart I typically like to see in this annual report is the one setting out ‘Collection Realization against Standard Rates by Law Firm Segment‘ – Chart 9 in this year’s publication – to hopefully give me an indication of how an industry that largely relies on increases in hourly rates each year to boost top-line revenue is fairing.

As you can see, yet again the results here can best be described as ‘disappointing’:

Chart 9

AM Law 100 firms are tracking an ever declining realised recoveries of circa 80 cents in the dollar. All others aren’t doing all that much better at circa 85 cents in the dollar.

Either way, those levels of realisation would have most bank managers in a panic. And the reason they don’t comes down to one small issue: in law firms this collection rate – other than telling you that the market doesn’t see your hourly value as highly as you do – is absolutely meaningless.

What it is, is pie in the sky internal budgetary metrics against market reality cash in the bank.

So we turn to my second “go-to” chart: ‘Collection Realization against Worked (Agreed) Rates‘. This year this is represented in Chart 10:

Chart 10

As the name suggests, what this chart is showing us is “Collected v Worked (Agreed)”. I’m   assuming the “agreed” here is upfront, and I’m accepting that the picture is far from perfect, but there is a far better flatline realisation rate here of 90-ish per cent, or 90 cents in the dollar.

So, what’s my take-out from the two charts?

If you want to try and get a better handle on your projected cashflow, no doubt better to have an upfront conversation with your client about how much you are going to be charging them – however that is (fixed fee, hourly rates, etc) – than having an arbitrary, and less and less meaningful, ‘billable hourly rate’.

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Medibank Idea Exchange

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For my sins I am a member of Medibank Private Health Insurance. I understand it has something to do with having a young family and the Medicare rebate. Anyhow, regardless the reason I get a lot of emails from Medibank that have always gone to straight to my trash folder. That is, until this morning.

What makes this morning any different? Well, I received an email inviting me to join the Medibank Idea Exchange community. In part wondering why they were suggesting the singular rather than the plural, I thought I would take a look.

What did I find?

Well, while I have no intention of joining, what I found was an offer to join an ‘invite only’ community where I will be able to share my thoughts and ideas on a variety of different topics and issues and:

  • Contribute to discussions and surveys – so you can tell Medibank what you think and help shape future business decisions,
  • Talk with other members – so you can share experiences and handy tips,
  • Earn rewards for participating – that you can redeem on a great range of products and services.

and I thought to myself: “there might be something in this for law firms to learn from“.

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#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.

Can a falling A$ make selling Australian legal services easier overseas?

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As regular readers will know, I have written a fair amount in the past (see here and here) about how a depreciating Australian Dollar (A$) is likely to be unkind to the Australia-based partners of international law firms operating here. It was, therefore, pleasing to see a post ( ‘Will international firms still call Australia home?’) on the Australasian Lawyer website yesterday that largely echoed many of the comments I had previously made.

So, with (1) the Australian legal press and a number of eminent managing partners echoing my views, and (2) an A$ hovering around the 87c on the US$ mark, a new question now comes to mind:

Can a falling A$ make selling Australian legal services easier overseas?

The answer here will depend on your law firm, its culture and client base. But, assuming that your firm actively encourages cross-border collaboration (and there is a whole different post there), the short answer should be yes.

If that’s the case, then some of things you need to be considering include:

  • How recently did I update my website profile/CV? Are all my deals Australian-based? Am I showing regional experience? Indeed, am I using regional keywords in my website profile or only local Australian used ones?
  • What sectors in Australia are likely to benefit from a falling A$ (tourism?)? Do I have expertise or a story to sell here?
  • A falling A$ should make assets in Australia more attractive to international purchasers (case in point: pension funds looking at real estate?). What am I and my colleagues doing about this?
  • What is the Australian Government’s current policy towards a falling A$ and foreign direct investment (FDI)? Is there a story to tell here (and there most likely is if you look closely enough)?
  • Are there regional developments that I could take advantage of (for example, development of arbitration courts in Singapore and HK?)?
  • Are there any free trade agreements (FTAs) in pace that make the falling A$ attractive (export markets?)?
  • When was the last time I talked with my clients to see how they were being affected by market/currency fluctuations and what steps they are putting in place to get the most out of this (manufacturing/FMCG?)?
  • Is there any way I can help my clients out with the current environment (put them in contact with clients in Asia?)? Maybe I can/should attend a regional trade or industry conference.
  • How often am I communicating with my colleagues in Asia, US and Europe to discuss work opportunities (including the chance to work in US$s?)? [time differences may have put this off before; but if I can bill in US$s, suddenly 2am conference calls don’t look so bad!]
  • What local or regional opportunities (tenders, capability statements, etc) are my business development team working on? Is there any way I can get in on this?
  • What regional panels are my firm on and can I look to develop these? If so, who is the relationship partner?
  • Should I be considering a secondment to another office in our firm network or to a client outside Australia (Asia, Europe, US) [especially if I can charge US$ for it!]?

Clearly you will need to make sure that you are meeting your clients’ expectations. You will also need to make sure you have in place a fee mechanism that is considerate of the exchange rate, while being beneficial to you and your firm, and also allowing everyone to prosper from the situation.

But, at 87c on the US$, the value proposition of an Australian lawyer active outside of Australia (such as in Asia) should have become a lot easier to communicate today than it was a year ago.

Now for a word of caution:

if you have been billing a client (especially one outside Australia) for several years in A$s, now is not the time to suddenly, and without notice, start billing that same client in US$s.

Strange as it may seem, clients will quickly see through this move. So make sure you give this issue careful consideration (as clients have also been known to talk with each other!).