Even as a law firm strives to achieve justice for its clients, it’s paramount to remain profitable. In any case, how can they meet their mandate of justice for all if they aren’t making substantial profits to keep them going?
It doesn’t matter if you are a solo practitioner or in any level of partnership, operating efficiently to ensure profits is necessary. It actually can propel your team to provide a better experience for your clients. Here are some steps a law firm can take to increase profitability;
1. Identify the Key Levers of Profitability in Your Firm
Every law firm is different, depending on its type, its stage of growth and, probably, location. For instance, a solo practitioner and starter firms may not have a lot of budget for operational costs. However, they can still work on freelance basis offering legal counsel to large clients, using client’s offices and staff for document processing or management. Such practitioners won’t worry about the management of staffs and documents or rental fees, but their client relationships and pricing to make more profits.
Large law firms, on the other hand, have various areas they can check to increase profitability. Is cost containment going to make your firm perform better? Do you need to weed out underperforming associates or acquire non-equity partners? Can you outsource administrative tasks to reduce costs or use software to improve processes? The key here is to identify key drivers of profits in your firm and concentrate on strengthening them.
2. Invest in Marketing
Marketing is the most effective avenue of spreading the word about any business and netting new clients. If a law firm doesn’t invest in promotional activities, it will only rely on word of mouth, which may not bring in clients at a satisfactory rate. To stay competitive in a market that has numerous options, law firms have to look for ways to promote their services.
Fortunately, there are numerous cost-effective marketing methods a law firm can use today. For instance, a social media platform like Facebook has advertising programs that enable businesses to reach millions of its users daily. What’s more, it enables you to choose your target demographics on the basis of their gender, location or interests.
Now, make sure you create engaging and entertaining content carrying your message. They could be videos, images, or text posts that Facebook will promote to your target demographics. You can get similar opportunities with platforms like Twitter, Instagram, LinkedIn, and Snapchat, or use traditional channels such as TV networks, local newspapers, and pamphlets.
3. Adopt a Centralized Management
Instead of running a firm where every partner can dictate on which clients they want to serve, it could be profitable to adopt a centralized management model. In this case, the law firm has a managing partner who scrutinizes every new client in terms of their ability to pay, profitability, or potential of success with the legal case. They also have the mandate to say no to cases that are risky in terms of reputation and credit. Similarly, partners can be compensated in terms of their performance, making them responsible for their actions. A managing partner will also oversee the creation of the firm’s strategic plan and its implementation.
4. Use IT and Modern Technology to Aid Profitability
Old methods of managing documents, client database, and invoices have proven ineffective. Other than holding on to endless paperwork, why not invest in modern law practice management software that will restore sanity in different business processes? It also cuts down on labor costs, mitigates reputational risks by safeguarding client information and ensures efficiency. All these are factors that can impact positively on the profits of a law firm.
Today, we have accounting systems for billing and managing invoices, client relationship management software for keeping tabs on client information, document management systems to keep all legal docs in place, among others. Some of these come with added features such as embedded communication tools, calendars, etc. Such systems will give an edge to your law firm in a competitive world we are in.
5. Conduct Regular Research and Analysis
Today’s businesses need to sit down on a regular basis to assess their investment, their position in the market, client base, and competition. Law firms cannot stay behind if they are to improve profitability. They also need to conduct continuous research on market trends. Research and analysis help businesses in defining their best cause of action to improve profits.
The current legal market is changing, forcing law firms to implement ways that can help them remain profitable. The changing technology and shaky global economy have a hand in the current demands on legal firms. A law firm may not set up the above changes at once, but can choose a beginning point and see their practice stand the test of time.
Scott Blumenshine’s expertise is based on years of experience representing people in personal injury and underinsured and uninsured motorist claims, arguing the facts and law in court, writing on the subject and presenting materials at continuing education seminars. Scott has been practicing law in Chicago for over 20 years and is currently a partner at the Law Offices of Meyer & Blumenshine. You can learn more at http://mbpersonalinjurylaw.com.