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Many lawyers who own their own firms are frustrated by a lack of growth compared to other firms. I often hear “It’s too hard,” “That firm has a secret sauce,” “They get better cases” or “Law firms that grow quickly must be doing something underhanded.”
None of that is true — except maybe the secret sauce. And the sauce is not that secret.
When it comes to scaling their businesses, I often see the same five things that slow law firms’ growth. When you know what these things are — and how to address them — you can grow quickly, sustainably and, most important, profitably. Here’s a rundown.
Cash is always an issue for law firms, especially while growing. The key is to have both short-term and long-term plans in place. Initially, at a minimum, have your bookkeeper prepare a week-to-week cash flow projection for six to eight weeks in the future. This will help predict if a cash crunch is coming so you can do something about it. Long term, have a line of credit ready at the bank. Banks like to lend to people who have money, not those who need it, so apply before you become cash-strapped. (Related: “Seven Words to Know Before You Ask for a Loan.”)
Lawyers who have fast-growing firms understand how the different parts of their business work together. Here is a hypothetical:
On average, every lawyer needs one paralegal, three-quarters of a legal secretary and 500 square feet of office, which includes space for support staff, a file room and conference area. This helps define a “team.” Once you know how many cases that team can handle in a given timeframe, what each of those cases is worth, and how cash flows during the life of the average case, you can predict the next bottleneck.
Lawyers at rapidly growing firms also dig into how they get their cases. For example, if your goal is to hit $1 million this year, and have an average case value of $10,000, then you need to get 100 new cases. That equates to approximately two cases a week.
The answers to these questions will help you figure out how many marketing activities you must complete (networking, speaking, even pay-per-click ads) to reach your goal.
In my experience, the lawyers whose firms grow the fastest already have a clear goal and know they must create the plan to get there. You can reach your goal by reviewing your firm’s numbers and using appropriate mechanics to plan the staffing and space you will need to hit key milestones. An effective plan will even help you know when you need to hire that staff, so your team doesn’t get overloaded.
If you don’t have a plan in writing, well, Winston Churchill said it best: “He who fails to plan is planning to fail.”
With just a few points of information, it’s easier to predict what is going to happen in a growing firm over the next several weeks. For example, the number of scheduled consultations helps you predict how many new cases you will take on, which indicates hours billed in the future. Examples of other key metrics to track include:
Having this information can make decision-making quick and easy.
So you know what is happening with your cash, you understand the mechanics that drive your firm, and you have a plan with goals. You even have forward-looking metrics to help you make decisions. But something is still missing: a consistent review of all these things.
Every month you must assess what is and is not working. Compare what you projected to what actually happened. You’ll be able to find and fix places where you went off course early. Maybe parts of the plan need to change, or an outside force affected your progress. Perhaps you were guessing because you didn’t have enough information, but now you do.
It’s more effective to look at a marketing campaign’s results monthly than it is to let it run for a year before analyzing whether it’s helping you. I once worked with a lawyer who ran TV ads that cost $5,000 a month. After three months, I recommended stopping the ads. Why? Because we tracked the results of the campaign and the $15,000 she spent had not converted a single new client.
Growing a law firm isn’t about luck or good cases. It’s about understanding how your firm works, measuring important growth factors and reviewing them often.
Brooke Lively is the CEO and founder of Cathedral Capital, a consortium of CFOs and profitability strategists committed to equipping entrepreneurs and small businesses with the tools and expertise to take their business to the next level. Leading with her competencies of financial expertise and executive coaching, Brooke thrives on nurturing her clients’ growth, whether in the bottom line or their impact in their communities and industries. Follow her on Facebook, Twitter and LinkedIn.
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"Productivity Hacks" has hundreds of tips aimed at helping you use tech to your advantage, schedule your time wisely, and get better organized. Here's a sample.February 15, 2019 0 0 0