Gin &Profit for Partners & their Law Firms!
Want to know how to increase your firm’s profits by focusing on external referrals, cross-selling, and price hygiene in a different way?
If so, here are some of the TOP TIPS taken from Alex Barr (owner of Third Bounce), our expert guest speaker, from our recent Legal Leaders Breakfast.
Tops Tips to Increase Profit
1. Avoid relying on the Gin & Tonic of External Referrals
Around 40% of law firms typically receive new work from external referrers. The approach taken to nurture these relationships, is usually to take them out for a social once a year, and trust that this is enough. However, it is rarely monitored to see what prompts an increase, or when it starts to go down! Often that opportunity for change is left too late. To make a difference, here are three things you can do instead:
- Segment your referrers into gold, silver, and bronze referrals and plan accordingly.
- Notice increases and decreases. Both in terms of quantity and quality. Explore what has occurred. Money is rarely the incentive, so find out what is. Quality is as important as quantity. We often accept work, that isn’t a good fit, so as not to cause offence. Having a conversation with our referrers, about what a great client looks like, helps. If you know someone who would want to take on that work instead, let your referrer know.
- Agree a 12-month plan with referrers to include:
- Mapping out key contacts within each organisation. One firm had a great relationship with two members from the referrer’s team, however, there were six others who could also have become referrers. Likewise, it often happens that those referring, don’t know enough about what work we are interested in. Many of us have faced the after-the-event comment ‘oh I didn’t know that would be of interest to you!’.
- Include socials of course; ensure that these are activities that will be of interest to them. At the same time, ensure there is an ongoing educational process (lunch and learns for example). Ongoing education of each other’s work, ideal clients, processes, challenges and so forth.
- Agree on how you will communicate and share information. How often do they want to be updated, and when?
- The best method of referral is a key discussion. An email introduction is best, with the potential client copied in. Referrer’s giving a potential client your phone number, is far less likely to succeed, as the potential client must then phone a stranger.
2. Price Hygiene
Clarity on pricing and profitability, across the firm, is crucial for billing and profit. Some key points to consider, or actions to take, include:
- Review what processes and mechanisms, of your existing price strategies, are being stuck to or ignored. What needs to be adjusted?
- Look at profitability, not just the top-line numbers. This includes actual working hours (including that not recorded, such as work outside of office hours) against billing.
- Complete file reviews specifically against price and profitability. Use it to educate, coach and mentor. This might include looking at what could make it cheaper, more expensive, or be streamlined. Were there opportunities to cross sell?
- In your pricing strategy documents, include buying scenarios /case scenarios to follow. Use your 3,4,5 most common pieces of work. Demonstrate pricing and risk considerations. Again continue that ongoing education, it needs regular conversations. Not created once and never referred to again.
[Additional note from me, it is also important to look at money mindset. Solicitors are often uncomfortable charging for all their time. Yet this aspect is rarely discussed. Take time to explore what areas cause solicitors to feel uncomfortable. This will help them avoid undercharging or inconsistently charging. This might include discomfort in charging for certain tasks, certain types of client (age, income, company or individual and so forth), or for certain types of matters. Look to see if there needs to be some work to develop confidence in charging clients (which may include pricing/costs of the firm education/or money mindset confidence) or if anything needs to be tweaked in the pricing structure itself.]
3. Cross Selling
We know that cross-selling is another cost-effective way to increase profit within any multi-disciplinary firm. Indeed a client who takes up more than one activity, is also likely to spend three times as much within a practice, will stay longer, and are less likely to complain to the Legal Ombudsman.
However, despite this, solicitors are often reluctant to refer, or are unaware of when to refer.
Three areas to focus on, so to improve this, are:
- Monitor – notice who, what, and when, so that you can notice the gaps or the successes [Additional note- if someone is doing it well, find out what they do, and encourage others to do more of that, or ask them to help educate the team. If people aren’t referring find out why specifically. It could be knowledge/control (see below), or it could be personalities or trust issues, which could hopefully be resolved.]
- Review – what can be done better. Perhaps the timing of the cross-referral needs to come before the end of the transaction, rather than afterwards. Or perhaps it helps to actively make the appointment, or referral, when the client is with you, rather than having the client initiate the approach (see also above).
- Educate – for people to cross-refer, they need to feel confident in doing so. And this means being comfortable in a legal area that is not their own. To help achieve this, the following needs to be considered:
- Bring people from multi-disciplinaries together to jointly map out their client journeys (post-it notes are great for this, for their flexibility.
- Educate each other on what a great client looks like for them.
- Teach each other the important questions to ask of clients initially, or things to look out for.
We also discussed initial conversations. We talked about ensuring fee earners are discussing the value of the work, not just the process, nor leaping into the advice, at the outset, and before clients agree to the fees. Notice the language being used. As our speaker pointed out…beware if every quote comes with a free apology! “This will cost is £6,000, I am so sorry.” What does that say to your client about your work? That someone else can do it cheaper without loss of quality?
In all aspects of growing our firms, we need to ensure that we are monitoring and reviewing what we are doing. We wouldn’t put a social media campaign in place, and then not monitor it, or tweak it, if it isn’t working. Nor do we do it once, and expect it to be enough. The same is true for referrals and pricing education.
We need to have regular conversations to explore where the gaps are and explore how we can close them. As our speaker reiterated. It is either skills, process or a plan (for each department) that we need to focus on.
To find out more about increasing profitability around these three areas, please do get in touch with Alex Barr email@example.com.
If you keep putting off your business or marketing projects, get in touch so that we can explore what, in addition to ‘time’, could be holding you back firstname.lastname@example.org