AS A PARTNER, YOU ARE AN OWNER OF THE BUSINESS. AND, LIKE EVERY BUSINESS OWNER, YOU HAVE THE RESPONSIBILITY TO GROW THAT BUSINESS.
Growing the top line requires a systematic approach that maximizes your available time and focuses you on the best opportunities. With greater clarity, you can be assertive in the pursuit of your financial objectives. With sustained focus on financial metrics, you stay in control of your book of business.
“You must have a Business Plan.” You hear this all the time. You receive templates. You participate in long meetings to develop “the plan.” You involve your team in the process. This results in a document that is often just a long wish list; it is rarely SMART- Specific, Measurable, Achievable, Relevant And Timely. (No offense but lawyers are so smart they can over- complicate even simple things.)
Then, you file away the plan only to look at it months later with a guilty conscience. You have barely implemented anything. Or, almost as bad, you have attended too many events and written too many articles, leaving you behind on your client work and with a depleted business development budget … often with very little growth!
Savvy lawyers start with the numbers. They define SMART goals, set themselves targets and track key performance indicators (KPIs). They focus on the data, monitoring cash flow, revenue and profit. They pay attention to their key clients’ figures. They check work in progress (WIP), accounts receivable(AR), and hours billed. Like business owners, they look at the numbers every day to make informed decisions.
What numbers should you look at?
What numbers should you ask for?
When should you check what?
Once a year, check the turnover you delivered for the three previous years, using the metric that your firm focuses on for compensation. What shape is the growth — flat, up or down? How much more do you want, or need, to deliver — 10, 15, 25 or 50%? What will your revenue target be? Write down a dollar amount. Then divide your dollar number by 10 — the 10 productive months of the calendar year. This is the average amount you and your team need to bill monthly — a target easy to track and manage.
Consider setting weekly billings targets for each client — it has been proven that frequent invoicing decreases write-offs and improves AR. By looking at what has been billed every Wednesday, you can more easily catch up by the weekend if you fall behind. If your practice does not allow for weekly billing, at least monitor internal billing against client matters; this also allows you to keep clients up to date with the amount of work done and flag, early on, any cost overruns.
Now that you have set a financial target, describe how you will achieve it. Start by considering your existing clients — 80% of your revenue is often generated from 20% of the clients — the Pareto rule.
Several questions to consider:
- Who are your largest clients?
- How many clients do you have?
- How long have you been advising them?
- Does any client represent more than 25% of your turnover? If so, is there a concentration risk?
- What is your profit margin for each key client?
- Are you working for nothing?
Your finance team can help you calculate the real value of your clients and your work for them. They can also provide greater insight into the firm’s profit metrics and financial boundaries.
For every important clients (your VIPs), set annual revenue and profit targets, then track the actual dollars versus budgeted amounts on a monthly basis. When you add up your VIPs’ financial targets and compare this amount with your annual dollar target, what is the resulting gap? How will you bridge it — by winning additional work from these key clients, by growing “smaller” accounts, by attracting more work from your internal network, or by winning new clients? Choose the best mix for you.
Be practical and give yourself SMART objectives for each category, focusing on a realistic number of relationships to grow. Once again, track progress on a monthly basis and change your tactics if one category is doing better than the others are.
Staying aware of your numbers is a simple process to set up. You can even involve your team in the project and seek assistance from other partners, from finance and the business development team. So, now you are clear where to focus your business development efforts. It is the start of your plan. Your next step is to decide the types of business development activities on which you will focus.
Consider scheduling quarterly review meetings with your VIPs, even if it means traveling to their location. Any relevant opportunity for face time with VIPs is worth hopping on a plane for. Spend half a day reviewing completed work, current matters, value adds and recent commercial developments. Know exactly the status of your client’s billings — they will be. This makes it is easy to ask informed questions like “what else are you looking to achieve this year?” or “why have we handled fewer matters than last year?”
Be clinical about the number of conferences you attend. Determine which ones have yielded leads you eventually converted into significant billable work in the past. Keep in mind that some of the best business development opportunities are found at conferences that other lawyers don’t attend. Choose only the ones that will make significant contributions to raising your profile and reputation.
Be diligent about performing business development activities daily and weekly. Set aside 18 minutes every morning to call, email, post and blog. Make staying in touch with your existing clients and your internal network a top priority. When you meet new people, follow up with them within 48 hours. Set yourself a weekly target for the number of coffees, lunches, cocktails and dinners you will attend. Don’t be afraid to say “no” to activities that don’t fit your plan.
Finally, track the introductions you make and the ones you receive. Write it all down and review regularly. Quantify the amount of business generated this way! For your practice to thrive, you must take ownership. Creating a clear picture of your key numbers makes it easier to identify when things are not moving in the right direction, diagnose the cause and adjust your course of action. The sooner you spot a blip in your metrics, the simpler it is to do something about it.
Consider working with an external consultant to help you when solutions are difficult to find or prove to be more complex to implement. They might help you increase your book by a million dollars with only a ten thousand dollar investment.
When you start owning your numbers, you are in a stronger position in client conversations and in firm compensation conversations. You are in control of your business.
This article was originally published in MARKETING THE LAW FIRM, May 2018.