Setting goals is not enough. Anticipating potential obstacles to success is the best way to ensure law firm sustainability.
Positioning Your Practice to Succeed
Lawyers are inherently risk-averse — paid to identify, manage and mitigate risk for clients. Lawyers also face an ongoing existential threat of making a mistake and exposing themselves or their firm to negative consequences associated with risk.
It is precisely this mindset that makes for a good attorney and a lousy businessperson.
To be an effective leader and astute business owner, it is essential to reconcile fear with a willingness to take on risk. Unfortunately, law school does not teach this, nor do associate training programs, which presents a formidable challenge to partners charged with running a successful firm. All law firm owners, including equity partners, are de facto entrepreneurs. It is your role to make all business decisions related to the firm, including potentially risky ones such as acquisitions, hiring, firing, pricing and marketing. Each of these responsibilities requires skills and an entrepreneurial mindset that must be learned and applied.
No wonder so many firms struggle with efficiency, strategic growth and profitability.
As we approach a new year, it is a good time to identify goals and undertake an honest examination of the mindset among partners to understand whether or not the firm is positioned to succeed. Both exercises are foreign territory for many small to midsized firms, yet they are critical to law firm sustainability.
Identifying and Setting Goals
A good place to start is to put pen to paper (or marker to whiteboard) and set goals. These should include:
What are the firm revenue targets for 2024? How are they broken down? What are the profitability goals? Are there goals for improving overhead costs? Is the compensation system due for an overhaul? What does this look like?
Are the right people in the right seats? Where do you need more talent? How do you evaluate the right fit? How will you find new hires? What are your retention goals? What about training goals? (Read “The War for Talent: Three Retention Strategies.”)
How many clients does the firm want to acquire in 2024? Are there clients that the firm should sunset? Are there particular industries or verticals that the firm should explore? How will the firm deepen client relationships?
Should your firm consider reducing or enlarging office space? Are your systems and technology well-positioned to help the firm reach its financial and personnel goals?
LATERAL GROWTH GOALS
Is this the year of growth by acquisition? What types of firms do you want to consider? How will you find them? How will you vet them? How will you approach the deal? How will you successfully transition the newcomers into the culture of the firm?
What do the next five years look like in terms of succession? Is it the year of designing and beginning to implement a plan? How is the rapport among partners? Is there an opportunity to improve alignment, communication, and collaboration among the partners? What will be the outcome and how will you measure it?
Anticipating and Mitigating Risk
Goal setting alone is not enough to move the needle. To accomplish these goals and objectives, firms must anticipate potential obstacles to success. Here’s where the ability to project and analyze risk is paramount.
Some examples of risks and potential mitigation strategies for consideration:
THE RISK OF MALPRACTICE
Every lawyer fears making a mistake, but there are factors that increase this risk, and they need to be recognized. These include:
- High pressure to bill clients with little understanding of what constitutes a legitimate charge and what doesn’t.
- Fostering a culture of intolerance for mistakes, which ironically creates more mishaps due to fear.
- Little formal training on technique, decision-making, conflict resolution or legal practices.
RECRUITING AND RETENTION RISK
The war for talent rages on and shows no signs of slowing. The only way a firm can endeavor to win is to understand what lawyers want and need and then invest in supporting their journey to success. (Read: “Retention.”)
ACCOUNTS RECEIVABLE RISK
If your firm continues to have a nagging AR problem, it’s time to consider mitigating this risk by raising retainers, improving communications with clients, dropping deadbeat clients, and improving the billing hygiene of your lawyers.
The cost of everything has gone up over the last year, and so should your rates. Even if you have increased your firm’s rates at some point over the last few years, January is the perfect time to reassess and start charging based on value, not market or comfort level.
REAL ESTATE RISK
Hybrid work is not going away, and 2024 is a good time to reassess your office space needs if you haven’t already done so. Maintaining fancy and expensive office space is no longer a necessity for client acquisition or attorney retention.
No matter how confrontational attorneys may be on behalf of their clients, when it comes to managing internal conflict, most partners will avoid any potential altercation with their colleagues. This is one of the biggest risks to any law firm’s success because it breeds mistrust. Too many firms suffer from a dearth of trust among partners, and the negative effect of this trickles down into every aspect of the firm. If your firm’s partners are misaligned, the discord will reverse any and all efforts to improve the organization. (Read: “No Trust, No Firm: Vanishing the Elephant From the Conference.”)
Strategy for Law Firm Sustainability
Taking a comprehensive inventory of individual and collective goals while paying close attention to risks that pose potential threats to progress is the best way to embrace the new year and all its possibilities. A little strategy combined with intentionality, accountability and out-of-the-box thinking will go a very long way in securing sustainable success.
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