Serving Smaller Clients Profitably
Ed Wesemann in his book, the First Myth of Legal Management Is That it Exists, suggests that small clients disproportionately drain the resources of law firms while providing a disproportionately small contribution to firm profits. I agree that the size of the client is important; everyone wants to serve larger clients.
And, the contribution of the client's revenue to the firm's total gross revenue may be an even more important concern. If your larger (however you define that - whether by number of matters of by dollars collected) client makes up a reasonably significant percentage (more than 10%), you are at risk even if the "drain" on your resources may be small and the contribution to profits proportionately larger. If that client should leave for whatever reason, you will experience a big hole in your revenue. If your client's contribution is only 1 or 2%, you then can afford to "fire" the client without severe consequences to you.
I am all in favor of seeking larger clients with more money and more interesting challenges. This effort, however, must be balanced to assure that the firm doesn't wind up with only a few clients, larger though they may be, who put the firm at risk if they should leave.
You may be willing to accept this risk for the short-term with the intent of getting more clients so that the percentage allocation to the "larger" client is reduced while maintaining the billings at the same level for the client.
But, be sure that no long-term capital or other expenditures are made at the behest of such larger clients without some type of assurance or guarantee that the business will stay with you until at least the amortization for the new expenditure is completed. In the longer term, a strategy based on fewer, larger clients will almost always lead to disaster.
