When Targeting New Revenue, Don't Overlook Existing Clients

Law firms seem compelled to focus marketing time and resources on where the money is not, constantly dispatching teams to deliver new business pitches to a wide variety of prospective clients — most of whom will not pan out.

Looking for new client opportunities is important, but it is far more essential for any firm to assess the clients it already 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, but 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 performed for its largest clients, how profitable that work is for the firm, and what opportunities exist to get more work based on the knowledge of the client’s business and needs.

The best way to assess that 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. That 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 the assessment. However, the firm that has an active employment law practice yet doesn’t ask 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.

The American Bar Association’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.

That 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 find substantial advantages in undertaking insurance defense work that would even out cash flow and matter dependency. The example of Heller Ehrman, 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.