Growth and Profitability Are Keys to Success
Q: Q: How can I make my practice more profitable?
A: Businesses grow and become successful based on the growth of their customers. If you’re blessed with good fortune, you attract clients who grow, need more of your services as well as refer others to you.
This happened in a family business with which I was involved. Our company grew because, first, we had a good product; second, our service was second to none; and third, one buyer for a growing chain of stores liked our products and us — his growth ensured our growth. His reputation was such that others followed his lead as well. Thus, we grew.
Many of today’s large law firms grew in the same way. They provided an excellent product – high quality legal work; they were/are very responsive to their larger clients; and those clients grew both nationally and internationally. Thus, these firms grew based on their clients. A firm doesn’t need a lot of such clients to be very successful.
A management consultant I know publicly acknowledges that his wealth can be tagged to four major clients over the years. As they grew, they provided him with more work. His reputation grew with that. But, he says that he can identify much of his growth to those four major clients.
Lawyers must look for clients who have growth potential. "Commodity" work will not result in high and profitable growth … unless you have a large volume of such work. Highly focused and "high end" work will result in higher revenue and profits. When the work you do is perceived by the client as having high value, you will be able to charge more … even a percentage of the value of the work. This will get you out of time billing and into value billing, where the profits are significantly higher.
It’s simple Business 101 – but too many law firms ignore the lesson.
Also, monitor your fee structure. Be sure that your fees are consistent with market conditions. Don’t lag behind. Once you lag, it’s difficult to catch up and rarely can be done in one fell swoop. Large increases tend to be rejected, even if justified.
Don’t assume that clients will reject higher fees. Analyze whether your services, skill and experience justify a fee increase. Look at current market conditions and competitive pressures in your geographic and practice areas.
If you believe your strengths and your market justify an increase, choose a time that places the client at the peak of the “satisfaction curve,” after you’ve won a motion or negotiated a favorable deal – even if somewhat before or beyond your normal billing date. There are other ways and times to increase fees.
Those clients who believe your service provide value to them will accept higher fees and remain with you.Tags: Cash Flow - Finances
Categorized in: Cash Flow - Finances