Improving Margins in a Downturn for Professional Service Firms

COVID-19 is bound to be affecting workflows and margins.  Here’s a programme of activities to address this. Some are strategic and fundamental and others are tactical and operational.

These are the questions that need to be answered together with the steps that can be taken and the output from these actions:

  1. Are you doing the right kind of work? To answer this, review your financial data on profitability by work type.
  1. Are you doing the right kind of work, for the right clients? Review your financial data on profitability by client

The output from addressing these first two questions should help you generate a strategy for finding and delivering profitable work. You might decide to drop certain clients that are draining your profits. You may decide to focus on certain legal services and drop others.

  1. Are your partners selling the value of the work well (eg benefits to clients, risks mitigated etc)?To answer this I recommend analysing your financial data on profitability by lead person and I would talk to individuals to assess their approach. I have found wide variances in profitability in the same practice area.

The output from this analysis could be a best practice guide. Also training workshops could be offered on selling skills.

  1. Are your partners pricing the work properly? To answer this, I would talk to partners and review engagement letters

The output from this review could be a pricing manual showing how much this work has cost before. I also recommend brainstorming some creative pricing propositions. Again a training workshop could be devised to skill up key team members.

  1. Are your partners negotiating well at the outset and renegotiating if events cause the scope to change (eg review all leases rather than a sample etc)? To find this out, I would talk to the partners to assess the need. The output would be a training workshop to develop skills. 
  1. Are your partners managing the work efficiently? This requires a review of how the work has been resourced and I would talk to partners and associates. I find that the associates tend to be good at revealing what inefficiencies there are in the day-to-day activities.

The final output would be an improved matter management toolkit.

This may seem like a lot of work. To be honest, it is! Trusted outside consultants can help. They should be seen as objective and have no hidden agendas. The truth is that, given the drastic downturn in the economy, drastic actions may be needed.

This entry was posted in Business Development and Selling, Fee Negotiating, Leadership and Management, Managing Change, Strategy and tagged , , , , . Bookmark the permalink.

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