As the times change so do the threats facing the legal profession. That’s why it’s important to identify and meet these challenges head on. We asked our friends at LEAP to list the top five threats to law firm profitability and success, along with their solutions.
THREAT 1 – Communication Breakdowns
As George Bernard Shaw said “The greatest problem with communication is the illusion that it has taken place”.
When you are running a small law firm you always put urgent client interests first. As you become busier it is easy to overlook routine communication, conduct regular file reviews and keeping your clients informed. This can get you into trouble. It also wastes time and money. Historically 40% of the complaints against lawyers relate to communication breakdowns. Don’t be in the 40%! Avoid being complained about by implementing the following systems and procedures:
- Use an Electronic Matter and keep all information, incoming and outgoing correspondence including emails, and other documents in one place.
- Make fast contemporaneous notes in a Timesheet so that you have an irrefutable audit trail of all client and matter conversations.
- Have standard letters and emails setup so that you spend minimal time on routine reports to clients.
- Set Critical Dates so that you don’t miss anything that you will need to explain away to a client.
- Create workflows to prompt you to create important documents at the right time.
- Have good cost agreements in all the areas of law you practice.
- Bill regularly using contemporaneous note records (many allegations of communication breakdown relate to disputes over money).
THREAT 2 – Not Getting Paid
It is an unfortunate fact that although you love the law, you do have to spend a lot of time and suffer a lot of anxiety around getting paid if you are responsible for ensuring that salaries and overheads are paid every month. But there are practical things you can do to minimise the time and anxiety expended on getting paid:
- Provide your clients with flexible and easy payment options – online, BPAY, Australia Post, DEFT. The more options you provide, the quicker you will collect.
- Get a trust deposit before you start work whenever possible.
- Set a trust retainer limit – and regularly and routinely get it topped up.
- Set fee and cost estimates and know when you are approaching the limits.
- Produce regular bills for smaller amounts. As you know, a big bill at the end of a matter will create an unhappy client and an inevitable discount.
THREAT 3 – Increased Competition
The number of law firms continues to grow as more and more lawyers set up their own new firms with very low cost bases. This means increased competition and increased pressure on charge out rates. Firms must compete more effectively to hold up value in the market.
- Lower your cost base by doing more work with fewer people.
- Minimise non-productive administrative time by automating data processing and bookkeeping.
- Work more efficiently. Clients notice promptness, particularly when expecting a document or email.
- Provide a broader range of services and cross-sell effectively. Stop referring work away.
- Attract new clients with a great Google optimised website, perhaps have a Blog for more current matters of interest, and send Newsletters to keep client advised of your range of services. You can outsource this work to companies like www.liftlegal.com.au.
THREAT 4 – The Skills Shortage
With unemployment rates at 5%, it is increasingly difficult to find and keep good staff. In rural and regional areas firms are finding it very difficult to even find lawyers. But you can respond to this threat in a structural way:
- Put systems in place that enable you to do more work in more areas of law, but with fewer people.
- Attract the best staff by providing the best and most widely used software systems.
- Train and empower your staff to provide more paralegal assistance so that they earn fees for you and have more rewarding careers.
- Stop referring work away. Access great, proven online Step-by-Step Guidance and Precedents in all the common areas of law so that you can meet all of your clients’ legal needs.
- Do more work with the same number of people using productivity boosting software.
THREAT 5 – Over-Dependence on one Area of Law
After the 2008 downturn many firms found themselves overly exposed to the downturn in conveyancing volumes. Whilst volumes have returned, it is worthwhile remembering that a healthy small law firm needs a broad range of revenue sources to provide structural financial resilience. By choosing a range of common practice areas, the worst consequences of a down turn in the economic cycle can be avoided. And you will have a stronger business if you do the following:
- Practice confidently in a more areas of law;
- Use Instruction Sheets prepared by experienced solicitors so that you gather all the needed information.
- Use proven pre-configured Matter Types to capture all the information you need to run the matter.
- Have all the legal forms in all common areas of practice automated.
- Use author written and maintained legal precedents automated to work with your software.
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