Five Business Functions of a Law Firm

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Business Strategy for LawyersThere are five business functions in every law firm.  As the leader of the firm you have a responsibility to focus on all of them.

Unfortunately, most attorneys don’t.   This limits their income, leads to overwork, and forces them to compromise their lives, their health, and their earning potential.

Take a look at each of the five areas of focus for a law firm leader.  Give yourself a grade on each of them.

The Practice of Law

This is everything you learned in law school plus everything you trained for as well as all the research you do.  In a typical law firm, this makes up ninety percent of the activity of the law firm owner.

Given the fact that law firms in the United States must be owned by attorneys, it is unsurprising that law firm leaders gravitate toward this part of their practice.  This is where your training lies.  This is where your experience lies.  This is where your academic career has taken you.

Unfortunately, focusing on this area is a recipe for disaster.  It distracts you from running your business.

What else is there to do?

There are four other areas where the return on investment of your time, money, and attention will lead to greater results.

Business Strategy

Few people in business give much thought to strategy so it is unsurprising that few law firm leaders give thought to the topic.  What do we mean when we discuss business strategy for law firms?  Here are a few strategic items:

  1. Selecting a Niche:  Many lawyers have broad practices that encompass divergent practice areas. While this can work, it is difficult for anyone in the firm to become a thought leader.  That’s where business strategy comes into play.   Selecting an area of focus allows the lawyers in the firm to differentiate their offerings and position themselves as experts.
  2. Formulating Fee Structure:  Everyone knows fees play a huge role in law firm profitability but they also play a role in the marketing of the firm.  Fees can be a strategic advantage and they can help with messaging.
  3. Creating a competitive Advantage:   What makes your law firm different from everyone else who does what you do?  You must provide your clients and prospective clients with a clear answer to this question.  Coming up with that answer is business strategy.

How much thought have you given to these three areas?

They are a small sample of the strategic decisions you must make on behalf of your law firm.

Client Acquisition

If you think about marketing at all, you probably think about attending a few networking events and maybe speaking at your local chamber of commerce.  These tactics are effective if they are part of an overall plan to attract new clients but if you view them as isolated and discrete activities, you will be wasting your time.

Here are three (of the many) things to think about when it comes to the client acquisition activities in your law firm.

  1. Attracting New Prospects: How do prospective clients think?  How do they make decisions?  What is most important to them when selecting a lawyer?  Who, in most cases, makes the decision to hire a lawyer in your practice area?  How can you get in front of that person as often as possible?
  2. Convince Prospects to Invest Trust:  Once you get in front of the right person, how can you convince him/her to invest his/her trust in you?
  3. Diversity in Acquisition Tactics:  If you want to be certain you attract clients in any economy and at all times, you must have dozens (if not hundreds) of ways to attract and engage prospective clients.  This requires constant generation of new ideas and constant testing.

Relationship Development

Clients are people.  They require care and attention.  Providing them with care and attention will lead to a deeper relationship that will help you make more money with less effort.  That requires your focus as a leader on several things, three of which I have outlined below.

  1. Maximizing Client Lifetime Value:  Your relationship with your client doesn’t end when you finish his/her first matter.  That’s just the beginning.  They have dozens and dozens of people they can refer to you during their lifetime.  There are many different matters you can handle directly for them.  How will you maximize this value?
  2. Maximizing Lifetime Value of Referral Sources:  The people who refer you business may lose interest in sending business your way.  They may forget about you.  They may think you do not care about them.  How will you stay relevant to them and remind them to send you business for the rest of their careers?
  3. Leveraging Capability:  Your team has certain strengths.  You can leverage these strengths to develop business in a way that enables you to profitably serve more clients.  You must constantly work on ways to leverage your firm’s capability.

Practice Management

While you practice law who is running the business?  Don’t think this is a full time job?  Here are three (of the fifty or so) things you need to think about.

  1. Day-to-Day Operations of the Law Firm: As your law firm grows you will hire more people.  These people will need to be managed.  You will also have processes and systems that must be managed and refined.  You will need to continuously increase the efficiency in your firm.  This is part of the day-to-day operation of your law firm.  Someone must focus on this or it will destroy your profitability.
  2. Financial Management:  You are in business to make money.  Your law firm is a business.  Someone needs to make sure the bills get paid, the clients get billed, and you put more into the bank than you take out.
  3. Risk Management:  There are many opportunities to make a mistake in the practice of law.  If you do not spend any time assessing and evaluating your activity, you will stumble into a hornet’s nest of liability.  Thinking about, and acting to avoid this liability is part of the role of a law firm leader.

This just skims the surface of the leadership challenges you face as someone who owns a law firm.  The complexity of this undertaking (the role of owner) is stressful enough without adding to it the fact that you are also a full time employee of this business.

The minute you begin to realize this, you can take steps to move forward.  Being a full time lawyer and business owner is never going to allow you to achieve your earning potential.

Put another way:  If you continue to practice law, day-after-day, you are simply investing in a full time job for yourself.

If you are ready to take the next step and become a business owner, I can help.

Click on the link below to receive my free CD on building a business that enables you to live the lifestyle you deserve.  This CD will help bring these issues into focus and it will provide you with some solutions to the stress and overwhelm you currently face.

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