Full Description
Profit. What a simple term. To determine it, all one needs to do is take revenue and subtract costs and there you go: profit. From there it's easy to determine a percentage and margin. So what's so hard about law firm profitability? Profitability in Law Firms: Insight and Analysis provides practical and proven strategies for law firm leaders and managers who want to take their firms to the next level of performance and profitability.
How can they increase their profitability and efficiency without compromising their quality and reputation? How can they leverage the power of technology, data, and innovation to create value for their clients and themselves? Law firms are facing unprecedented challenges in the current financial climate and therefore need profitability strategies to survive and thrive in a competitive and changing market.
Contents
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
About the authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv
Chapter 1: The law firm profit primer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
By Toby Brown, CEO, DV8 Legal Strategies
Let's get started . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Moving right along . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Putting it all together . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Core challenge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Chapter 2: KPIs for aligning strategy to enhanced client value and partner profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
By Steven Campbell, consultant, Acumen KPI
Avoiding unintended consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Don't confuse margin (net income) and profits per equity partner (PPEP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Dashboards should focus on areas of greatest impact . . . . . . . . . . 14
Vision drives strategy - strategy drives effective KPIs . . . . . . . . . . . 17
Example law firm mission, values, and vision . . . . . . . . . . . . . . . . . . . 17
Non-financial KPIs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
New tools to help measure and prioritize strategic action . . . . . . . 20
Effective KPIs should inspire action . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Chapter 3: Applying battlefield lessons during peace time - learnings from the COVID-19 pandemic . . . . . . . . . . . . . . . . . . . . . . . . . . 25
By Tim Corcoran, BringinTim
The standard playbook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
The onset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Lessons learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
The long view . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Chapter 4: Linking partner and associate compensation to the achievement of a firm's strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
By J. Mark Santiago, managing partner, SB2 Consultants
Vision and strategy development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
How did we get here? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Compensating the rain dancers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Contribution roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Individual partner goal setting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Assessment and evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Communicating pay decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
The partnership compensation system . . . . . . . . . . . . . . . . . . . . . . . . 55
Closing the loop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Chapter 5: Pricing approaches and firm profitability . . . . . . . . . . . . . . . . . 59
By Shaun Jardine, founder, Big Yellow Penguin
Business development, clients, and positioning strategy . . . . . . . . 63
Understanding clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Create a pricing strategy and vision . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Lead the change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Chapter 6: The roadmap to £1,000,000 extra profit in three years . . . . . 79
By John McCarthy, profit coach, Summit Business
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
The P.R.O.F.I.T. system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
The nine-step roadmap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Implementing the P.R.O.F.I.T. system . . . . . . . . . . . . . . . . . . . . . . . . . . 83
The business blueprint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Not following the business blueprint . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Following the business blueprint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
How poor cash flow almost sank a law firm . . . . . . . . . . . . . . . . . . . . 89
The five cash flow levers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
The five cash flow levers being implemented . . . . . . . . . . . . . . . . . . . 93
Profitability and efficiency first, marketing second . . . . . . . . . . . . . . 94
Profit exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Implementing the profit maximizer . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Don't do what many other law firms do . . . . . . . . . . . . . . . . . . . . . . . 99
Focusing on effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Putting this into practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Closing thoughts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Chapter 7: How a sound matter pricing strategy canelevate law firm profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
By Jack Kingston, account manager, BigHand
Bringing in the best matters for your firm . . . . . . . . . . . . . . . . . . . . . . 104
Differing approaches for payment of legal services . . . . . . . . . . . . . 105
Chapter 8: Questioning the value of law firm rack rates . . . . . . . . . . . . . . 111
By Richard Brzakala, senior director, Global External Legal Services
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Why RRB discounts are so attractive to CLDs . . . . . . . . . . . . . . . . . . . 112
The credibility of cost savings based on RRB data . . . . . . . . . . . . . . 113
The utilization of supplementary fees . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Zero negotiation strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
What are CLDs looking for? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Law firm reliance on pricing specialists and business intelligence tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
What CLDs want to see from firms utilizing a RRB strategy . . . . . . 118
The importance and value of transparency . . . . . . . . . . . . . . . . . . . . 120
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Chapter 9: The next frontier in pricing strategy - capturing value from legal technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
By Stuart Dodds, principal, Positive Pricing
Making sense of the legal technology landscape . . . . . . . . . . . . . . . 126
The partner's perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
The client's perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
The pricing professional's perspective . . . . . . . . . . . . . . . . . . . . . . . . . 130
Pricing approaches adopted to date . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Key considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
What we can learn from the early adopters . . . . . . . . . . . . . . . . . . . . 136
Chapter 10: Harvey Specter - the ghost of a law firm reality yet to come . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
By Phil Nixon, senior sales executive, Elite Technology
What is available and how will this impact legal services? . . . . . . . 141
Will you take the blue pill, or the red pill? . . . . . . . . . . . . . . . . . . . . . . . 143
Building the foundations for technological success . . . . . . . . . . . . . 143
Can technology actually help us become more profitable? . . . . . . 144
Improving profitability and WIP to cash with technology available today . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Improving profitability and WIP to cash with one eye on the future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
A technology roadmap - getting your house in order . . . . . . . . . . . 150
Chapter 11: AI and what it means for law firm profitability . . . . . . . . . . . 155
By Wayne Hassay, managing partner, Maguire Schneider Hassay
The ethics objection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
The fear of change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
The risks and emerging power of AI . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Making a smarter, more profitable, law firm . . . . . . . . . . . . . . . . . . . . 161
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Chapter 12: Sustaining success along the profitability journey . . . . . . . . 165
By Madhav Srinivasan, CFO, Proskauer, and Mitch Spradlin, pricing director, Hunton Andrews Kurth
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Goal setting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Matter management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Matter lifecycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
Resourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Chapter 13: The seven profit zones formula for higher profits - without working more hours . . . . . . . . . . . . . . . . . . . . . . . . 175
By Michelle Peters, former practicing solicitor and founder, The Business Instructor
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
A different approach - the seven profit zones formula for profitable growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
Getting practical - how to increase each profit zone . . . . . . . . . . . . 182
Beyond ten percent increases - doubling your profits without doubling your clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
How long does it take to double your profits? . . . . . . . . . . . . . . . . . . 193
The implementation paradox - information vs action . . . . . . . . . . 194
Getting started . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196
Chapter 14: The human cost of boosting profitability . . . . . . . . . . . . . . . . 197
By Richard Martin, principal consultant, Byrne Dean and CEO of the Mindful Business Charter
Mental health in the legal profession . . . . . . . . . . . . . . . . . . . . . . . . . . 197
A couple of caveats before we start . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
Why lawyers become lawyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
Where's the balance? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202
How profit is increased and the impact of that . . . . . . . . . . . . . . . . . 203
Doing more work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
Reducing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Charging more or differently for work done and improved financial management . . . . . . . . . . . . . . . . . . . . . . . . . 206
A different approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
About Globe Law and Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
