To Be A Good Law Firm, You Must Prove Value For Money
The professional services landscape continues to change, and gone are the days when a law firm could rely on a loyal client base returning for their unrivalled technical expertise; their superb client list; their ability to guarantee seamless delivery, hitting deadlines and solving problems.
Today, the power is more squarely with the client and law firms must prove that they have the most relevant understanding of their client’s business, their sector and the challenges they face.
Many law firms of course claim that they have this understanding, so can they ensure they continue to attract new clients and retain existing ones?
Proving Value For Money
A recent study by Claire Coe (Claire Legal Ltd) and Dr Steven Vaughan (University of Birmingham) discusses a shift in the balance of power from law firms to clients, and that the pressure to deliver Value for Money (VFM) services is increasing and responding to this may be challenging.
The real predicament is: how far can a law firm go in the race of competitive alternative fee arrangements and still make a profit?
Clients will constantly challenge the law firm, and by asking the simple question “so what?” of their lawyer’s proposition it will very quickly become evident how well the firm actually understands the client, their values, goals and challenges. And then if you succeed in confidently differentiating your service and expertise, the client still needs to like you. As this is of course a people business, and relationships matter.
A report from Deloitte on the future of law firms talks about client relationships and that they involve developing ‘softer’ skills and emotional intelligence among employees; suggesting a shift of skills and development of talent.
Taking an innovative approach to staffing will be important to stand out. By prioritising what the firm want to focus on to strengthen your position in the market, you can develop the right talent and have the right person at the right place to provide strong VFM.
How to stand out in a crowd
It’s up to the law firm to present proof of its expertise, knowledge and most importantly its differentiation. This can be very challenging, especially in an industry where professional advice is the commodity.
In these situations a client testimonial is invaluable, and a strong client reference on a matter can make a big difference in winning new work. However, more and more clients, such as large financial institutions, chose not to be mentioned publicly in relation to a law firm – and not just in contentious cases.
A recent Service Performance Insights (SPI) report shows that client referencing in professional services is declining overall. This can only mean that when a law firm has a strong relationship with a client, who is happy to be mentioned and quoted, the firm has a golden ticket.
Firms must be mature enough to move away from “selling anything to anyone”, and towards a more strategic and selective business development process so as to only go after the work that delivers a profitable and sustainable source of revenue.
The SPI report also suggests that firms should regularly analyse their client base to identify where the revenue is coming from, and that typically 80% comes from 20% of clients, suggesting that the firm is likely taking a hit on certain clients and mandates.
Turning data into profit
So what can law firms do to secure more referrals and repeat business, as well as winning new profitable clients?
The legal profession has been forced to adopt new technologies to keep up with competition, and by using the cutting-edge business performance tools available on the market, a firm can successfully measure its Key Performance Indicators (KPIs) and manage the financial bottom-line.
Tracking your KPIs allows you to answer those hard questions about your actual client profitability, which client you are best to focus on and invest time in, and who in your firm is best suited from a client relationship point of view to manage the strategic relationships and win the golden ticket.
To learn more about top KPIs for your law firm download our e-Guide Managing KPIs to Accelerate Your Business.