Survival Planning For “Accidentally Successful” Law Firms
1:49 pm September 30, 2008 by Brian J. Ritchey
Measuring profitability is more important now for small and mid-size law firms than ever. In the past, lawyers have been able to yield large profits without understanding or measuring the drivers of their profits. Some called it being “accidentally successful“. Regardless of whether you want to look at your firm as primarily a business or a profession, competition will be more fierce for dwindling reliable clients. Although a well positioned law firm can take advantage of economic downturns, improper management may cut so far into your margin that the firm doesn’t thrive – which can lead to an exodus of talent.
More and more regional and national firms are marketing heavily on the Internet that will be competing for your clients – and some of these firms can price you out of business. Flat fee and “value billing” firms have spent the time to determine the amount of resource cost each task takes and invests in technology to be the most efficient in producing. They then build in their margins to maximize profit. They advertise their efficiency as superior service (and it is in some compelling ways) and offer money-back guarantees. Clients then have the ability to forecast legal costs through cost certainty.
This is what I call the “walmarting” of the legal industry. Whatever you may think of these firms, they won’t do anything but take your best talent to man a local office and let your firm wither – much as the old hardware stores did once Walmart came to town.
Those who survive either adopt their methods or focus on client relationships to compete. It wasn’t long ago when the mantra was “those who don’t embrace technology won’t survive”. I believe that those who don’t embrace performance measurement, accountability and planning will have great difficulty surviving the altered marketplace for legal services that will be the result of both undesirable economic conditions and “value bill” law firms.
Even a simple strategic plan may be the difference between a firm that survives and one that fails. I recommend a book sold through the ABA called The Lawyers Guide to Strategic Planning. You can get a copy by clicking here.
No plan is effective, though, without management. Of Counsel Consulting is dedicated to helping law firm managing partners develop plans and implementing them, allowing fee earners to focus on practicing law and maintaining the rewards, both professionally and financially, of providing quality legal services.
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