Having practiced law for many years, and as a coach, professional mentor and consultant for many more, I have concluded that there are 10 challenges that must be overcome, and 10 tactics for success that every practice can implement in growing its business. Successfully addressing these 20 items will help your business thrive.
Challenges of growing a law practice:
- Covering increased cash needs to fund expanded accounts receivable
- Funding the need for more educated personnel and lawyers as new sales revenue occurs
- Monitoring accounts receivable to ensure that clients honor the payment clause of their engagement agreements
- Determining if clients who fail to honor their commitments in the engagement agreement need to be let go
- Deciding whether to continue to do pro bono work for economically troubled clients
- Creating a line of credit with your bank to carry you during the shortfalls
- Providing a clear path for repayment of the line of credit
- Restraining the use of the firm's line of credit to pay lawyers' draws
- Restricting your intake to your firm's areas of competency despite the need to meet payroll next week
- Staying with your strategic plan or modifying it as need be and preventing your firm's rogue lawyers from going outside the firm's strategic plan
Ten tactics for success:
- Every law practice must have a business plan.
- Every lawyer must remember that the clients come first. They are the reason that your practice exists.
- Lawyers must sell solutions (i.e., provide value) to clients, not sell time as expressed in billable hours. The primary client concern is not how long it takes to find a solution; it is that their problems are being solved.
- Lawyers must begin each matter with a written engagement letter outlining the scope and responsibility of each party. The client must agree that it's a two-way street in which both the lawyer and the client have rights and responsibilities, including timely payment.
- Lawyers must prepare budgets for each matter: tasks, events, timing and resources to be used for the benefit of the client. This requires lawyers to analyze matters in the early stages of representation and have clients sign off on the budget, acknowledging consent to the proposed course of action.
- Lawyers must understand that their inventory is not "billed time," but the cash that time represents. The cornerstones are focusing on collection of accounts receivable and maintaining a high realization rate.
- Lawyers must practice effective cash flow management, getting funds into the bank as quickly as possible. The best course is never allow payments to accumulate beyond the day's receipts.
- Lawyers can achieve business and practice success more quickly by working with mentors and coaches than they can on their own.
- Lawyers must recognize that technology (emails, blogs, cellphones, dedicated extranets or otherwise) cannot replace personal relationships, personal integrity and rapport with clients.
- All lawyers and staff in the firm must think of themselves as part of a team —this includes treating the client as a team member as well. It's the only way to ensure that you are delivering the best service to match your clients' wants and needs.
Compiling and reading these techniques are the easy parts. Consistently implementing and following through on them, however, requires perseverance and tenacity. That is your part in this equation.
