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Experts offer 5 ways to raise law-firm revenue

By: dmc-admin//June 8, 2009//

Experts offer 5 ways to raise law-firm revenue

By: dmc-admin//June 8, 2009//

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The way to survive these tough economic times is to either hike your rates or work more hours, right?

Wrong, say a number of law-firm management consultants. Perhaps those strategies worked in the past; but in the 21st century, lawyers must think more creatively about ways to stand out from the pack, as the smartest way to increase cash flow.

Joseph B. Altonji, a consultant with Hildebrandt in its Chicago office, says many law firms have cut back on how much they are increasing hourly rates. Based on information reviewed by his company, the average rate increase across many firms worked out to be 2 to 3 percent, compared with the 7- to 9-percent annual increases they had seen in prior years across the industry.

With regard to small firms providing mostly personal legal services, the fact is, most clients probably think your hourly rate is already high, says attorney Edward Poll, of LawBiz Management Co. in Venice, Calif.

As for working more, if you have the work and the energy, by all means, do it, Altonji says. The problem is, if you’re a real estate or mergers and acquisitions lawyer, for example, you might not have the work.

No. 1: Provide top-notch client service.

“You can only do the work you actually have,” says Altonji. “So it’s a really important time to be focusing on your regular-paying clients and taking care of them. Do the work on your desk.

Do it now. If you don’t, once the time has gone by, you can’t get it back. But if you get it done faster than normal, that generally does increase your revenue.”

“Ask the client what they want,” Poll says. “They’ll tell you. Most lawyers are afraid to do that, because they’re afraid of the answers they’ll get, and/or they’re so busy fretting about their own business and doing good work for the client, coupled with the limited hours in the day. All of that’s true. But you really need to ask how you can better serve your clients, if you’re committed to the success of your business — whether it’s law practice or a pickle business.”

If your workload is down, Poll and Altonji agree that you need to be putting more into client relations and marketing. Do more public speaking, more community involvement, or whatever it takes to make more rain because according to Poll, client growth is the number one methodology for increasing profits, whether that’s by increasing the number of clients, or increasing the number of matters you get from those clients.

No. 2: Be choosy with your clients.

You don’t need as many clients as you can get; you need as many high-quality clients as you can get, and can serve to meet or surpass their expectations.

Most times, you can tell if a client’s going to pay you from the very first intake meeting, says Poll. Other times, you start to notice delays in monthly payments as the representation proceeds. “If they don’t pay you, you need to fire that client. If they do, that’s the client you need to pay great attention to.”

The client intake is the most important meeting you’ll have with a client, adds attorney Arthur G. Greene, a principal with law-firm consulting firm Boyer Greene LLC in Bedford, N.H.

Determine the client’s objective. Describe the applicable law. Communicate a plan for the matter. Establish a method for the payment of fees and provide a realistic estimate. Make a point of discussing the potential difficulties of the case and the burdens it will place on the client’s life.

“Following the intake process, client communications become critical, and most particularly in situations where events occur that will affect the client’s expectations,” says Greene. “Let the client know of any change immediately. Let the client participate in any changes, particularly those that will affect the fee estimate. Never surprise a client with the amount of a bill.”

No. 3: Leverage expertise.

“Ironically, as clients have become less willing to pay for an inexperienced associate to work on a matter, they are more willing to pay high fees for the experienced go-to lawyers in any field,” says Greene.

Associates are your firm’s future, but they shouldn’t be seen as significant revenue sources, in his view. Rather, consider the use of properly managed, well-qualified paralegals to help you provide better client service at a lower cost, while at the same time providing greater profits for the firm.

This, of course, all depends upon your firm’s current circumstances, notes Altonji. If you’ve got work for them to do, it’s a great time to hire associates. You can find some very high-quality associates, that small firms in the past might have a hard time attracting.

No. 4: Cut costs.

This is popular because it’s totally within one’s control, as opposed to the client-focused strategy, says Poll. Look it from the viewpoint of what can be done more efficiently, and not just what can be cut.

Cutting expenses is always a wise idea, Altonji says, and firms of all sizes are doing it right now, with staff being cut the most. Look critically at the budget, line by line, with the understanding that there’s only so much you can do here.

No. 5: Experiment with alternative billing.

Clients have always favored predictability in attorney fees, but it’s especially true in a slow economy, says Altonji. That’s why now is the time to start moving your firm in that direction, if you haven’t already. Although many firms talk about it, few actually do it. If yours is one of them, it’s definitely more attractive to clients.

“You’ll lose your shirt on some matters, but you’ll make money on others,” he says. There are a number of alternatives, depending upon your practice area, Supreme Court Rules and the case. They range from the fixed fee, the contingency fee, the combination hourly rate and fixed fee, the combination hourly rate and contingency, and the combination flat fee and contingency.

Need inspiration? Greene says to check out the Web site for the Summit Law Group in Seattle, a 30-plus attorney firm. It uses a value-based system, where the bill reflects a flat-fee estimate of the matter, followed by a line for value adjustment — somewhat like the tip on a restaurant bill. The customer — it doesn’t like the term client — can decide to pay more or less than the estimate, depending on the value perceived. That firm’s experience has been overwhelmingly positive.

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