By ED POLL, Special to Lawyers Weekly
Law firms seem compelled to focus marketing time and resources on where the money is not – constantly dispatching teams to give new business pitches for a wide variety of prospective clients, most of whom will not pan out.
Certainly looking for opportunities with new clients is important. But it is far more essential for any firm to assess the clients it has, define the clients it wants and focus revenue generation on the optimum combination of the two.
In many law firms, 20 percent of the clients produce 80 percent of the revenue. Yet those important existing clients typically receive little of the firm’s marketing attention.
Client retention is often regarded as something outside the boundaries of marketing and as only a minor factor in compensation. Yet the revenue-generation goal should not be mere retention, it should be expanding the level of business with top clients.
Every firm should know in exact detail the work done for its largest clients, how profitable that work is for the firm, and what opportunities exist to get more work based on knowledge of the client’s business and needs
The best way to assess this is to use existing accounting and billing data to create a simple spreadsheet listing the top clients on one axis and all practice areas of the firm on the other. Each cell should show the revenue for clients in terms of the fees collected yearly.
This shows which practice areas the client has been paying for, which practice areas are not utilized at all and the variations in practice area revenue.
Some specialized practice areas may not be suitable for all clients in this assessment. However, the firm that has an active employment law practice yet is not asking whether its top clients need such services is likely missing a major marketing opportunity.
Leveraging the firm’s existing capabilities into new marketing areas is a second alternative, when properly planned.
Here is an example of what can be done. The ABA’s Rule of Professional Conduct 1.7 says that a lawyer cannot represent two parties who are directly adverse in the same matter; yet the rule also says that a lawyer may generally represent clients whose interests are opposite if the lawyer gives “competent and diligent representation” to each client.
This stipulation opens the door to representing opposite types of clients, broadening the firm’s revenue base within a given area of law. For example, a plaintiff firm might well find substantial advantages in undertaking insurance defense work that would even out cash flow and matter dependency.
The example of the Heller Ehrman firm, which failed several years ago, is instructive: the firm primarily handled litigation defense, and when a number of large cases suddenly settled, there was no new business in the pipeline to replace it.
Such a planned revenue-generation approach facilitates an effective cash-flow plan as a financial guide for prioritizing, anticipating and allotting revenues and expenditure of funds.
The firm that has effectively targeted revenue generation from its existing clients and planned market-niche expansion can better match that revenue to expense, prioritize when and how to make adjustments – and take charge of its financial future.
Poll is the principal of LawBiz Management, a national law firm practice-management consultancy based in Venice, Calif. For more information, visit www.lawbiz.com.