Law firms are some of the most consistently and increasingly profitable institutions on the planet. Contrast that with your business. The pandemic has meant many businesses have faced cutbacks, lay-offs and lower revenue. How is it possible that law firms had a banner year?
Here’s a hard truth. Client behaviour hasn’t changed and it’s driving law firm profits.
Law firms respond to clients, and there’s no need to change if clients don’t demand it.
You can, and should, demand better.
- Picking up the phone – Law firms thrive when clients are in a rush. Instructing a partner over the phone usually leads to the default behaviour of just running the clock. No defined budget, no assumptions, no structure. Arguing about the bill at the end and getting a 10% discount might feel like you’ve won, but you could have saved a lot more by engaging the firm correctly from the start (and who likes to haggle over bills anyway?). It’s also worth noting that you can still be extremely fast and have a good engagement process.
- Fail to Plan, Plan to Fail – When you’re hiring a law firm, you’re hiring the people. Firms can, and should be clear about who’s actually going to address your needs. This has a double benefit as it gives you certainty and it forces the firm to think through how it’s going to do the work. You’d be amazed at the efficiencies you can achieve with a bit of forward planning to get things done in the most efficient way.
- Your Tech Stack – Too much legal tech promises to lower costs by taking a chunk out of law firms. The problem is that law firms aren’t stupid, they know exactly how to get around these systems. All this does is create a performative dance whereby both sides waste an enormous amount of time pretending to optimize the wrong things. Holding firms to account after the fact is a fallacy. It’s time to move to technology that creates better outcomes from the start of every matter.
- Rates – Rates don’t matter. Everyone thinks they’ve gotten the lowest rates the firm has ever offered. By definition that’s almost never true. It also ignores the fact that you have to multiply those rates by how much time it takes to do a task. Ignoring efficiency and outcome based pricing in an effort to minimize rates is a game firms love to play. Lowering rates and arguing about them means that you’re distracted from what you’re actually going to end up paying and what you’re getting.
- Your Confidence – ‘I know what this should cost’ is a phrase law firms love to hear. Law firms are fixed overhead businesses that price based on capacity utilization. The price of a service can vary massively on this basis, which is why it’s so important to avoid complacency and continually push firms to deliver their best pricing to you. Law firms spend a lot of time trying to reinforce client beliefs, because questioning assumptions may very well lead to a different, and better approach.
- I Know the Firms That Do This – There are 250 law firms that will bill more than $250m this year. The market is so fragmented that the firm two streets down may have already solved the problem you’re trying to address for another client, and can therefore do it for you quickly and cheaply. Standardization is the enemy of firms (not inherently, but because of the ‘bill by the hour’ revenue model). Finding and selecting firms in a better way can help you take advantage of this to drive better outcomes.
There’s a better way.
Your firms can be profitable and you can get more.
It’s about running a process that makes everyone successful.
Let’s talk about a different approach.
Up to you,
Christopher Thurn
Founder – Alacrity Law
