law firm clients

Exiting the ‘Valley of Despair’: Tips on rebuilding a book of business

Valley of despair

source: Emily Carr:- ‘Practical Change Management for IT Projects

The ‘Valley of Despair‘ is a term used in IT process improvement projects to describe the period of time where productivity decreases immediately after the implementation of a new process. In essence it describes that period of time during which you shift away from what you know and are comfortable with to what is new and unknown (but which will ultimately, hopefully, results in better processes).

Although a term commonly associated with process improvement, to me this has also become a good way to best describe a growing trend in the modern lawyer’s life; namely that particularly difficult period during which a disruptive element impacts on their book of business. Examples would include:

  • economic: with the GFC most securitization lawyers lost their practices overnight.
  • panel: when your firm loses a panel appointment with your practice’s biggest client as a result of the client rationalizing the number of its panel firms.
  • relationship: the key contact at your biggest client moves to a company your firm has no relationship with; or, worse, is promoted to a role where they no longer have influence over who gets the legal instructions.

There are many others, but you get the gist: your performance hits a wall called ‘change‘.

In my experience, partners who face this scenario come face-to-face with Elizabeth Kuber-Ross’ “Five Stages of Grief“:-

Denial —> Anger —> Bargaining —> Depression —> Acceptance

To overcome the Valley of Despair you need a sixth element: a desire to move forward.

  • Step 1: Accept your fate

The first step in any recovery program is accepting you have an issue. Too often law firm partners stick their heads in the sand and refuse to accept that anything is wrong until the Managing Partner is knocking on their door asking them what their plans are for the future (wink, wink: it’s not with us!). By then, you are well and truly in to the ‘bargaining’ and ‘depression’ phases. If you want to rebuild your book of business you need to be much further ahead of the game than that.

  • Step 2: Do an audit

Here’s the thing: things in life are rarely as bad as they first seem. So, as soon as you become aware of a change agent – such as those above – get out your pen and a piece of paper and write down a list of who you know, when was the last time you contacted them, what type of work could you be doing for them, are you already doing that type of work, etc.

In short, take stock of what you have and who you could be doing it for.

  • Step 3: Make a plan

Alan Lakein is reported to have said: “Failing to plan is planning to fail“. I’m not sure if he actually did, but it’s pretty accurate and if you want to rejuvenate your book of business then you will need a plan of how to go about this.

This plan should include the obvious, like:

  1. what type of work do I want to be doing?
  2. who do I want to do this work for?
  3. what do I know [commercially] about these businesses [tip: if the answer is “not a lot”, get a research assistant on to it ASAP]?
  4. who are the decision makers at these companies?
  5. how likely are they to give you / your firm the work [tip: rank the likelihood from 1 – 5 (very – unlikely)]?

Your plan also needs to include things you may not think of, such as:

  1. will my partners give me relief while I try and rebuild my book of business? If so, how long?
  2. what level of fees do I need to generate (cost +, times 3, times 5)?
  3. what rates will I need to charge to generate that level of fees? will the target client accept these rates? if I need to discount, will my partners accept me discounting to win work when their clients are paying full freight?
  4. who is currently doing the work for the target and what am I bringing to the table that would make the target move the work to me?
  5. how will my competition react to me invading their turf?
  • Step 4: Execute on the plan

I’ve heard it said that: “a plan without an action is a wish“. In the world of professional services, we see a lot of wishing!

So, as soon as you have your plan in place you need to get out from behind your desk and start to execute on it. Look at what

  • inbound and outbound related activities you need to do;
  • networking events are taking place and when;

then set yourself a 30-60-90 day action plan to work towards.

Most importantly, always be responsive and never, ever quit.  Building a book of business takes patience and repetition, you cannot adopt a “lottery mentality” as one shot actions nearly always lead to failure.

So if at first you don’t succeed, try again. That way, you’ll give yourself the very best chance of rebuilding your book of business and moving forward.

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“Bill clients, get money”

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In my spare time, I’m a keen amateur photographer (note, I didn’t say “good” 🙂 ). Anyhow, because of this interest I follow a number of photography related blogs which, every now and then, include posts that crossover into my professional life.

A post I read this morning from the DIYphotography website (I say “from” because I use feedly as my rss feeder and read all my morning updates on the Ziner app) is just such a post. Titled, ‘3 Vital Tips To Help You Set Your Photography Pricing‘ by Gannon Burgett, the post takes up a call by Sue Bryce that:

“You can’t price yourself when you have no self worth.”

and goes onto suggest that photographers follow the approach of photographers Sue Bryce and Tiffany Angeles and, I quote,:

  1. Charge what you’re worth – be confident in your abilities and know what it is you offer, both in terms of products and aesthetics
  2. Never set yourself at market value – part of knowing what it is you offer helps you better understand what it is you can charge. Don’t base your price purely off of competition. Don’t be afraid to charge more.
  3. Value yourself and your work – this is more all-encompassing than a specific tip, but without the confidence and self-value, it’s going to be a much tougher job to set your pricing.

Amazingly simple and straightforward advice that many lawyers could benefit from – a fact brought home to me in the very next post in my Ziner app, ‘The deep discount attorney and other cautionary tales‘ by Carala Del Bove on the LexisNexis Business of Law blog.

In this post, Del Bove quotes from real life case studies Ms Ann Guinn cites of lawyers willing to offer discounts to clients because, to quote:

“it just felt greedy to me [not to].”

In the post Ms Guinn offers the following two pieces of advice I wanted to share:

“Don’t try to get into your clients’ heads, cautions Ms. Guinn. In other words, don’t let your clients determine the value of your work.”

rather, discuss this with them upfront when you are first asked to quote on the instruction; and

“Instead of worrying about what discounting legal fees will mean for your client, think about what it will mean to you as a small business owner.”

All in all, two excellent posts on understanding the value of the service you provide clients and the dangers you face if you don’t price, bill and collect revenue on your work appropriately.

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ps – I’d also like to credit Ms Guinn with the title of this post.

Report: Do high growth firms share common traits?

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This month saw publication of the 2016 High Growth Study by Hinge Research Institute. Although not limited to law firms, law firms (along with “Healthcare & Other”) made up 12.9% of the 968 respondents who answered Hinge’s survey and, therefore, the Study’s findings help provide some insight into whether or not “High-Growth” firms share common traits.

First, “High-Growth” was defined as being a firm with:

“Over $1 million in revenue and had an average yearly growth rate of at least 20%”.

Not exceptional. Having said that, of the firms surveyed:-

  • 30% generated over 88% of new revenue growth and were 45% more profitable than their No-Growth counterparts

so most definitely desirable.

So, did these High-Growth firms share any traits? In short, “yes”; and these included:

  • Target Clients: High-Growth firms are 75% more likely to have a highly specialized practice – i.e., not all things to all people or full services firms
  • Client base: High-Growth firms are more likely to target the larger clients (over $10 million in revenue)
  • Research: High-Growth firms are 2X more likely to conduct research on their target client
  • Differentiation: differentiators favoured by High-Growth firms are twice as likely to be easier to prove and are more relevant to clients. Importantly, these don’t include “reputation” and “awards won” (favour of No-Growth firms) and do include “culture” and “people”
  • Marketing investment: High-Growth firms invest 23% less in traditional marketing than No-Growth firms. This is because what marketing High-Growth firms do is targeted and measured

While some of these may surprise, they reinforce that in order to grow in today’s market firms need to have a clear understanding of who they are, who they work for, who they would like to work for, and the value/benefits they provide. In short, they’re focused.

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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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Report: ‘HSF bets growth on Asia’

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The Australian‘s weekly Legal Affairs section is reporting (subscription required) today that global law firm “Herbert Smith Freehills will seek to more closely integrate its Australia and Asia practices.

Sorry to be blunt, but what!?!

According to the Lawyers Weekly website, HSF officially merged on 1 October 2012 to open as the “largest fully integrated law firm in Asia Pacific based on number of lawyers“.

That was 3 years ago.

This begs the question: are all of the recent global law firm entrants to Australia going through the same issues?

My guess here is “yes”. Even though nearly all of them (arguable K&L Gates used US-Australia as its strategic reason for opening in Australia) made specific mention of using Australia as a springboard into Asia, pretty much none of them – to my knowledge – has a specific liaison Business Development Manger person (or higher) located in Australia who assists with joint business development activities.

As I understand it, there may be cost related issues involved in this (who pays for the resourcing – Australia or Asia). There may also be personnel issues involved.

Who knows; but the short answer is that for the life me I cannot understand how 3 years or more (in some cases) on from when the global firms arrived in Australia they still don’t seem to:

  • have dedicated Asia-wide practice and support teams
  • be able to tell you the number of referrals across jurisdictions (inbound and outbound)
  • be able to tell you which partners are referring work [championing] across jurisdictions
  • be able to tell you how many referrals are going to other firms within the jurisdiction where they have an office – particularly where there may have been a relationship prior to the merger (in Australia’s case, would you like to take a punt that Gilbert & Tobin gets referrals from international firms with an on the ground presence in Australia?)
  • know which of their clients are referring work to them across multiple jurisdictions.

To me, this says that both the back-end and front-end operations of the merged firm are still working in geographic and practice group silos (which they most certainly would appear to be from today’s article).

Don’t get me wrong, it’s great that HSFs is seeking to more closely integrate its Australia and Asia practices. I hope other firms follow suit. I’m just frustrated that this initiative is probably about 2 and half years late!

Forget the Gadens merger, the big news today is Olswang’s announced ‘Revenue Share Scheme’

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Pretty much all anyone involved in the Australian legal sector will read about in the industry news today will be the reported three way tie-up between Global behemoth Dentons, Australian law firm Gadens and Singaporean firm Rodyk & Davidson, which is still subject to a partner vote but you assume is pretty much a done deal.

Although this may have a profound effect on the Australian legal market in years to come, in much the same way as the K&L Gates / Middeltons merger has hardly set the sector alight, I somehow doubt this merger will too.

There is, however, another piece of news being reported this morning that could very well have a massive effect on the local market – and that is the news that Olswang has established a ‘Revenue Share Scheme’ that it hopes will incentivise staff (it is being reported the scheme is open to all employees at the firm, from partners through to business services staff) to refer clients to the firm through a referral bonuses scheme that will pay an employee who introduces a new client who subsequently spends more than £20,000 in the first year instructing the firm, 10 per cent of the instruction fees in the next year.

I worked under a scheme very similar to this is Asia just after the Asian Financial Crisis and I can vouch that provided you get your conflicts worked out (because trust me, this leads to a lot more potential conflict situations), then this type of scheme can be very incentivising.

While I doubt this type of scheme will be introduced widely here in Australia too soon – after all, why do we get paid salaries, I can see this becoming more prevalent and certainly having a more profound effect on market practice globally.

It’ll be left to the test of time however to see whether – in five years time – everyone is discussing their 10 per cent bonus or the Gadens-Dentons tie-up!

‘Drive for show, Putt for dough’

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According to a post earlier this week on the LexisNexis Business of Law Blog:

“A new legal spending trends report finds big law billing rates grew notably – pushing a 6% increase in the gap between the top two tiers of law firms, by attorney headcount, from 38% to 44%.”

Indeed:

“Median partner rates at the “Largest 50” law firms – those with more than 750 lawyers – rose to $711 per hour, based on 12 months of data ending June 30, 2015. That number is up from the last report where median partner rates came in at $675 per hour for the 12 months ending December 31, 2014.”

As I have posted before, however, this [rising headline hourly rates] is absolutely meaningless if your realization rates are in decline – an issue this particular report appears to remain silent on.

I have never understood, beyond ego, why a partner would be more interested in their hourly rate than their average realized billable rate (ARBR). After all, the ARBR amount is the amount that clients are willing to pay you – money in the bank – and is a more accurate reflection of your true worth/value.

Eventually you have to ask yourself which you would prefer: a headline charge-out rate of $1,000- with an ARBR of $700-, or a charge-out rate of $800- with an ARBR of $800-?

And that’s without going into how much easier it is to have the conversation with your clients around rising your realization rather than informing them on 1 July each year that you will be raising your rates by 10% again this year!

Alternatively, you can keep on driving for show and not worry too much about the dough you’re making.