Profitability in Law Firms - Insight and Analysis

Profitability – on the face of it – should be simple enough to determine. But once you start to lift the lid, there is much more than meets the eye. 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.

List of 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

About the author

By Toby Brown; Steven Campbell; Tim Corcoran; Mark Santiago; John McCarthy; Shaun Jardine; Richard Brzakala; Stuart Dodds; Phil Nixon; Wayne Hassay; Madhav Srinivasan; Richard Martin; Jack Kingston; Michelle Peters and Mitch Spradlin

Product details

• Authors: Toby Brown, Richard Brzakala, Steven Campbell, Tim Corcoran, Stuart Dodds, Wayne Hassay, Shaun Jardine, Phil Nixon, Mark Santiago, Madhav Srinivasan
• Publisher: Globe Law and Business Ltd
• Languages: English
• Product format: Paperback / Softback
• Released: 31.01.2024
• EAN: 9781787429970
• ISBN: 978-1-78742-997-0
• No. of pages: 211
• Dimensions: 235 mm x 155 mm x 20 mm
• Weight: 452 g
• Subject: Social sciences, law, business > Law > General, dictionaries