|Centurion Consulting Group||
|Market and Communicate to Grow Your Firm|
For the past several years, Centurion Consulting Group has conducted a survey at the California State Bar Annual Meeting on how attorneys operate their law firms for optimum profits. This years results had some surprises. While planning is considered a key element of success, only one firm of the total respondents had a written strategic, business or marketing plan. Yet, research indicates that firms can increase their profits by over 150 percent with a marketing plan. With the end of the year upon us soon, now is the time to begin a strategic planning process for 2002.
After the big picture strategic plan is completed, then build a business plan to support the strategic plan. The business plan has two components: Marketing and Finance/Operations. Without a plan, marketing may be a haphazard approach rather than a well planned concerted effort. On the finance side, lack of planning leaves a firm with no cash flow projections and budgets.
Tracking how clients are generated is a worthwhile task that can point the way to successful marketing. Yet only about one sixth of the survey participants monitor how clients are referred to their firms, missing an opportunity to capitalize on important data. The analysis of historical data (in descending order of client revenue) including referral source industry, client industry and matter should be analyzed over a three-year period to determine areas of growth. For example, you may recognize that a specific client industry is outpacing growth in all other client industries. This is an area on which you should probably focus.
Develop an action plan and spend, at least, 15 to 20 percent of your time on marketing.
Marketing is segmented into relationship and reputation. Relationship is the one-on-one marketing that you do by having breakfast/lunch/dinner with individuals or inviting them to a sporting/social/arts event. Reputation marketing is writing for industry publications and speaking at industry organizations and associations. Articles and speeches enhance your credibility when you meet the individuals who can use your services. Carefully select the individuals to whom you market. Dont waste time with people who cant use your services, dont make the decision on engaging you or cant pay you.
Only 50 percent of the survey participants monitor their accounts receivable aging. Since a dollar today is worth more than a dollar next month, money should be collected as fast as possible. Keeping track of aged accounts is critical in determining where to put your collection efforts.
Most partners still make their own collection calls foregoing the example set by the physicians who dont taint relationships with patients by dunning them. Lawyers would be better served having a bookkeeper make collection calls or hiring a part-time collection person. Most attorneys shun the collection process and, consequently, collections fall to the bottom of the list of things to do. When attorneys contact the client about fees, the conversation may be more emotional than business. A collection person, on the other hand, is a professional, who establishes fee schedules and routinely follows-up. Especially in a recessive economy, collections need to be closely monitored.
Half of the respondents track their profits yet only one attorney monitors his profit margins, which should be at least 30 percent for a mid-size firm and can be 60 to 80 percent for a small firm. So after all expenses are paid, partners should be pocketing 30 percent of their revenues on average. To calculate the profit margin: Subtract expenses from revenues and divide by revenues. This amount is the profit margin percentage. If you are below 30 percent, you need to take a hard look at your operations.
One of the fastest ways to increase the profit margin is to cut expenses. Each line item of expenses should be reviewed to ensure that the expense is a necessary expenditure that cannot be eliminated. Compare your expenses to the average expenses of law firms your size. For example, your rent should be only ten percent of your expenses for the average law firm. Expenses that weve seen out of line include delivery services, dues and subscriptions, and supplies. Use mail, rather than more expensive delivery services; examine your dues for organizations whose meetings you dont attend and your subscriptions for publications that you dont read. And monitor your supplies, which are sometimes depleted around back-to-school time.
In the uncertain months ahead, now is the time to evaluate your business to ensure that its efficient and generating optimal profit for you.
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