customers

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.

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* 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

 

‘Imposter syndrome’, how it effects your pricing, and what you can do about it

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Imposter syndrome‘:  “The persistent inability to believe that one’s success is deserved or has been legitimately achieved as a result of one’s own efforts or skills.”

For some time, sparked through the conversations I’ve had on the topic with Katherine Mountford, I’ve been interested in the concept, theory, and roll that imposter syndrome plays within the legal profession.

My interest was given a nudge over the past week by a LegalSpeak podcast that included some great thoughts by both Albert Farr and Jay Harrington, who talked about their experiences with imposter syndrome in the early part of their legal profession [noting that Farr is actually just starting out his career in law] (Calming the Imposter Monster: You Don’t Know Everything, And That’s OK.) and a post by Susan Harper on the issue of ‘What is Imposter Syndrome and How May It Be Affecting Your Leadership?‘ which looks at the broader implications of imposter syndrome at a more advanced stage of your legal career.

Read together they give a pretty good balance on some of the major crisis of confidence issues that can plague lawyers.

What am I worth?

While I am in no way qualified – nor do I profess to be – to talk to the diagnosing and/or treating of any medical conditions associated around imposter syndrome, or mental health issues in the legal industry more broadly, with over 20 years’ experience in the industry, I have no doubt whatsoever that most lawyers wake up in the morning and ask themselves (if no one else) ‘What am I worth?‘ – ‘What is an hour of my labour worth?‘.

Adding to these frustrations, and doubts, is the fact that, in private practice, in most cases, a lawyer’s intrinsic value is not determined by them. Nor, importantly, is it determined by their clients in recognition of their craft.

No, more often than not, a lawyer’s worth is determined by the Accounts Department and/or a Senior Management committee who have worked out [this should probably read, “been told”] how much the capital [equity] partners want to be paid this year (including bonus). Having determined this we then work backwards and determine the number of hours that will need to be worked in order to achieve this, taking account of historic realisation rates, and minus any leave, and then looking at the relevant leverage and required multiplier needed to ensure that the required amount is met.

All of this is then wrapped around a completely meaningless ‘industry survey’ that costs a fortune and suggests your law firm’s hourly rates are 10-20% less than your competitors and you really should be doing a better job!

If this sounds convoluted and over complex, or if you have any doubts about my sincerities here, read ‘Associates Want a Break on Billable Hours as Pay Cuts Roil Law Firms‘ by Dylan Jackson.

Little doubt then, in my opinion, as to why lawyers would suffer from imposter syndrome (or mental health issues more broadly).

Taking back control – how to demonstrate value to your customers

Adding insult to injury, having not had much say in the hourly rate they charge, and with little or no training, lawyers are then asked to go to market and justify why they are worth the amount they charge.

So can lawyers take back some control?

The short answer is: ‘yes’; there are several ways that lawyers can take back that control – one predominately relates to internal processes and the other to external communication.

Change the internal process: Establish a Value Council

If you want to adopt greater transparency and conversation around the amount that your lawyers charge – relative to the value they are delivering to your customers – and at the same time get greater collective buy-in from your lawyers, then I would suggest you take the power away from your Accounts Department and establish a Value Council.

The mission statement of your Value Council should be to establish:

‘a collaborative platform to discuss and exchange views and information about value to ensure outcomes that are mutually beneficial to all.’

Progressive law firms will include customers of the firm in their Value Council and consider adopting a Pricing Charter.

To be effective, it is suggested that your Value Council consist of no less than six and no more than 10 participants who, crucially, are willing to invest time in the process.

Change the external communication

For years lawyers have liked to brag about the hourly rate they charge. It’s up there with the mount of billable hours they have worked this year as ‘badges of honour’. The reality that most lawyer’s Average Billing Rate – the amount clients are actually paying for that lawyer’s time – are nowhere in the region of that lawyer’s hourly rate is conveniently forgotten.

But there is an alternative. Rather than going to market bragging about how much you cost, why not change the conversation up and talk about how much value you bring to your customers. How you help your customers? How you change outcomes to their benefit.

Dare I say it, you move the conversation away from you and onto them. In doing so, it is hoped you will take a critical step down the path of the Value Conversation; because, as John Chisholm wrote back in 2018:

“Before we price, we need a scope of work; before we have a scope of work, we need to have a scope of value and you cannot have a scope of value without first having a value conversation.”

That seems like a good place to put a line in the sand to this week’s post. I will add though that if you are one of those lawyers who questions their value, who may question if they deserve to be where they are or who suffers some form of imposter syndrome, keep in mind that around 90% of the profession is right there with you (and listen to Episode #182 of the Soul of Enterprise) .

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Which would you prefer: the customer you attract, or the customer you pursue?

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This blog post is based on a #2020futureoflawthought I posted last week on social media – ‘Who pays you better, the client you attract or the client you pursue?’.

It occurs to me that law firms are much more willing – and even better resourced – to pursue customers than they are to attract them. We have dedicated pursue customer resources to hand – such as bids, tenders and pursuits teams. And we are willing to offer discounts and other ‘value adds’ to new customers that we would never think of offering to existing and loyal customers.

And what do we get for throwing all these resources and efforts in to pursuing customers?

If we are honest, and have a really good bid/tender/pursuit team to call on, somewhere between 50%-70% win conversion rate! Which is not to say that conversion rate is profitable, because in many cases to get us across the line it isn’t!

Create distinction

Recently I started listening to Scott McKain’s daily ‘Project Distinction podcast. It’s a great podcast that lasts around 10 minutes; around the same time as I made my social media post, Scott ran a week long series on how the ‘hard sell’ had had its day (the $55 million dollar ‘lost’ sale is a funny listen and a serious lesson in to why the 7 touches sales method is dead IMO).

Scott is also the author of ‘Create Distinction’, a book I have just started reading on the back of his daily podcasts that I have really enjoyed.

Anyhow, both Scott’s podcast and what I have read of his book so far have made me come to the realisation that the traditional law firm approach of pursuing a customer is actually the wrong way of doing things. Instead of pursuing customers with great value adds and discounts, we need to get much better at attracting customers – to our areas of expertise and to our superior service delivery.

Become a person of interest
Timely Andrew Sobel – one of the greats in my opinion – also touched on the issue of attracting versus pursuing customers in his blog post last week: ‘C-Suite Strategies Part IV: Become an Irresistible Person of Interest’.

In the post Andrew asks:

What if, however, the situation were reversed, and senior executives were *drawn to you*? What if, instead of you waiting in the long line outside their office, they were waiting in a line to meet *you*?

Fair question: what indeed?

Andrew then sets out six ‘strategies’ (more like ‘tips’ in my opinion) on how to become a person of interest, that include:

  1. Sharpen your expertise while expanding your knowledge breadth
  2. Develop your thought leadership
  3. Be seen as someone who is at the crossroads of the marketplace
  4. Become a person with interests
  5. Build an eclectic network
  6. Develop, manifest, and communicate your core beliefs and values

Something to think about this week then: would you prefer to be attracting or pursuing customers?

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

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How to spot a bad client and knowing when you should fire them

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I’ve long been a fan of Ron Baker’s ‘Baker’s Law: Bad Customers Drive Out Good Customers’. His comment that:

By viewing your firm as an airplane with a fixed amount of seats, you will begin to adapt your capacity to those customers who appreciate—and are willing to pay for—your value proposition.

is spot on.

But it really wasn’t until last week, when I read an article in smallbiztrends.com, that I’d come across a comprehensive checklist of ways to identify those bad customers from the good ones.

The article –  ‘How to Spot Bad Customers – and How to Deal with Them’ – sets out ’10 Ways to Identify a Bad Customer’. They’re great and should be pinned on every lawyers homepage:

  1. They Don’t Pay On-Time (Or Ever)
  2. They Don’t Pay Enough (Or Don’t Want To Pay)
  3. They Have Unclear or Changing Demands
  4. They Want ALL the Attention
  5. They Aren’t Available
  6. They Aren’t Honest
  7. They are Abusive or Threaten Your Staff
  8. They Make Unreasonable Demands
  9. They Complain to Anyone Who Will Listen
  10. They Don’t Listen to You

How many of us can identify with most, if not all of these!?!?

It’s a great post. As is Baker’s. Read them (while noting that there is a 13 year gap between the two posts and not a lot has changed!)!

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

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