Firms that want to land work from larger clients need to understand those clients and what they’re looking for. Then, they need to tailor their operations to provide the highest value for those clients.
But, how can your firm do all this and stay profitable? The strategies for modernizing your firm to fit the current marketplace will take a little work. But putting them into practice won’t require a lot of time. In both the short and long run, they’ll enhance your firm’s profitability while helping you deliver the level of service that today’s demanding clients require. These moves can also help keep your firm competitive in what has become an intense battle for business.
Be proactive about ensuring the profitability of incoming work
Taking on new work from larger clients only makes sense if it’s good, profitable business. That might seem like an obvious point, but determining whether new work will enhance your firm’s bottom line isn’t always so clear.
Every firm needs to establish a set of clear metrics that measure the productivity and profitability of both staff and clients. To optimize performance at every stage, competitive firms are implementing digital solutions that allow them to create specific metrics that track profitability at both the client and management levels. By increasing knowledge and efficiency in these areas, a smaller firm can position itself as the lean, nimble, and responsive business partner that larger clients are demanding. (That’s especially true for corporate clients, by the way.)
So, what should a firm be measuring? We typically think of profit as a net of revenue minus expense on a P&L. It’s an essential and useful metric, to be sure. But by itself, it might only paint a portion of the picture. That’s because it doesn’t measure other elements that determine a firm’s productivity.
Among the metrics that can provide a more thorough picture of how well your firm is performing are those that measure the profitability of every timekeeper and every matter your firm works on. Deriving a complete timekeeper cost rate includes not only direct costs such as salary and benefits, but also indirect expenses such as technology and rent.
Once you have accurate timekeeper cost rates, you can use them for profitability calculation and matter pricing analysis. Use these measures as your firm looks at budgeting, client profitability, and other metrics that can help you determine how well your firm is performing – and where it might need to make operational changes. (This kind of data can also help your firm determine whether certain clients are worth keeping.)
Position your firm to be more profitable
Profitability metrics like these — among others — can show you where you can become more efficient. This, in turn, can help make your firm a more cost-effective partner to larger clients. Nimble firms are finding ways to do the work more efficiently, accurately, and cost-effectively – so much so, that even clients with in-house legal departments see the advantage of outsourcing work to these firms.
If your firm can demonstrate the ability to produce high-quality results at lower costs, it will be well-positioned to win that business. Ultimately, your efforts will add value to the firm-client relationship. And added value is what larger clients are demanding.
If your firm works to ensure that your operation and incoming matters are geared for maximum profitability, you’re much more likely to be successful in earning more lucrative clients. Download the new white paper to gain a deeper understanding of the steps your firm can take to prosper in the new legal landscape.
