Three critical factors limiting the growth and profitability of your law firm
If you want to grow your law firm or practice area profitably in the next 12 months, then your plan needs to take into account three critical factors that might otherwise stop you, writes Michelle Peters (The Business Instructor)
Growing a law firm or practice area isn’t easy.
But sometimes there’s more stacked against us that we realise.
And if we don’t have a clear picture of what’s stopping us from growing, it’s twice as hard to know what to do to overcome it.
There are three critical factors limiting the growth and profitability of most firms which, if you don’t take them into account in your growth plan, are likely to keep you struggling to grow, or keep you stuck where you are.
1. Model - the professional services model is broken
The conventional professional practice model is stacked against growth and profitability.
If your fee earners have to do lots of non-fee-earning tasks (such as marketing, networking, talking to potential clients, billing, etc.) and yet they only generate fees when they are doing fee-earning tasks, this restricts their ability to generate profits. And when they are busy with fee-earning work, they don’t have time for business development tasks, which means fewer new enquiries or new instructions for the firm, and an inevitable slump in the level of work in the near future.
2. Method - in most cases, the method used for growing a practice is misguided
Most firms focus on growth by looking at ways to get more enquiries from potential clients.
Some spend a lot of time and money on marketing to achieve this.
This method ignores the fact that the fee earners may not be converting as many of those enquiries into paying clients as they could be, meaning enquiries are wasted. If this is the case, time spent on improving conversion rates could give a much higher return than time spent generating new enquiries. It would also be a more cost-effective way to get more clients.
Focusing on new enquiries also ignores the other five ways of increasing fee income and profits without needing more enquiries, such as getting more work from existing clients.
Focusing on new clients at the expense of existing clients means your fee earners have to work harder or you need to spend more on marketing in order to get the growth you want.
3. Mastery - mastery of business development skills is often missing or not given the attention it deserves
If getting more clients and getting more work from existing clients is a key part of a fee earner’s role (bearing in mind the conventional professional services model), then it’s important they have the skills to do those tasks quickly and effectively. Otherwise it takes too much of the fee earner’s time to get the required results. This in turn means either too much time spent away from fee earning or too few new enquiries or instructions resulting from the time spent.
How can you overcome these three critical factors?
If you feel that the growth of your firm or practice could be limited by any of these three critical factors, then it’s important to assess:
1. What impact is it having on your firm’s growth and profitability?
2. What would be the effect of removing or reducing that limitation?
3. What steps can you take to remove or reduce it?
It’s critical that your firm’s growth plan includes the answers to these questions. For ideas about the steps you can take to overcome these limitations and grow your practice profitably, download your free copy of ‘9 Essential Strategies For Growing Your Legal Practice Profitably’.
Michelle Peters (The Business Instructor) is a former Magic Circle solicitor who helps lawyers to get more clients and increase their profits without working more hours. Find out more about Michelle, and discover complimentary resources to help you grow your practice, at www.thebusinessinstructor.com