Given that legal markets are getting tougher, I think firms could do more to manage and improve the profitability of matters, as well as improve client service. Here are six suggestions.
1. Review profitability by type of work
Most firms do not know how much money they are making or losing doing certain types of work. To do this properly firms need to consider the costs of using central resources (eg Credit Control, HR, Marketing etc) which, for whatever reasons, are not charged to the client. Most firms find that larger matters, where lawyers are working solidly on them throughout the day, are more profitable because this way of working minimises the down time when files are picked up and reviewed
2. Negotiate more wisely with clients on fees
I know clients have a stronger negotiating position, but avoid capped fees if at all possible. If you cannot avoid being capped, project manage the work very tightly (see below). Offer estimated fees if you can with a clear statement of what work is included and what is not. This will make it easier to charge for any extra work. Demonstrate the value of what you are doing. Firms often seem too reticent in this regard and assume the client perceives the value of what you’re doing.
3. Define the quality standards for the work
Most lawyers tend to deliver work at a higher or different specification to that wanted by the client. Be clear how your client intends to assess the quality of the work (ie what is the relative importance of time, cost or thoroughness?). Make the distinction as to what work is essential as against desirable or just optional. Consider where value is added and where it isn’t. Consider where costs are added, though little value.
4. Plan your work better
Lawyers could learn from how specialist project managers do their work. Here are some basic tips:
5. Improved cash flow
Receiving your cash earlier can make a big difference in terms of profitability. Negotiate for money on account or monthly billing where possible. If you believe the client may be slow at paying (because of their track record), allow for this in your pricing or offer an incentive for prompt payment.