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Does your firm use data as a profitability management tool?

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I’ve just finished reading the latest Altman Weil ‘Law Firms in Transition 2020‘ report.

With all things COVID the Report (as it has done in any event for the past decade) makes for interesting reading.

But, the response(s) to one of the questions in this year’s Report  I found particularly concerning.

When asked:

“Which of the following statements describes your firm’s use of profitability data as a management tool?”*

16.2% of respondents replied:

“We don’t want to use the data because it is potentially controversial or divisive.”

16.2% of respondents believe sharing and using data in 2020 can be ‘potentially controversial or divisive.’

I find that rather sad.

And don’t even get me started on how it is possible that over 13% of respondents don’t even know how to use the data!

As always, the above just represent my own thoughts and always interested to hear the views of others.

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* see page 50 of the Report

[This post first appeared on my LinkedIn feed Thursday 2 July 2020]

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

 

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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