Five Ways to Improve Matter Profitability

Project Management


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:

  • Itemise tasks (ie what needs to happen in what sequence to deliver the required output). Allocate a time budget for tasks (eg 7 hours to review property leases) otherwise specialists are likely to put too much time on the timesheet – time which will have to be written off, thereby reducing profitability.
  • Assign staff to carry out the tasks who are neither too experienced or inexperienced – if too experienced, staff will be bored and if too inexperienced work will need to be re-done.
  • Consider having members of the client team assigned tasks – this will help keep costs down and might build a stronger ‘partnering’ relationship
  • For more complicated matters, consider appointing a member of your team to be the project manager. I know of one magic circle firm who recruited an interim project manager (who wasn’t a lawyer) to manage a substantial litigation case.
  • Brief staff properly as to what the overall matter is about, exactly what output is required of them, deadlines etc
  • Supervise appropriately – this does not mean going over areas of work that do not need to be reviewed.

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.