Increasing law firm profitability is arguably one of the most important topics of great interest to every lawyer. We are discussing showing today how to increase your law firm’s profitability.
In today’s competitive economy where clients are demanding more for less, lawyers may find themselves forced to increase their offer in terms of service and efficiency. And with the challenge of remaining competitive comes the added challenge of remaining profitable without working under immense pressure, around the clock!
Profitability is a key motivation behind starting a company in the first place.
While many law firms are good at growing revenue, they aren’t historically strong at monitoring and making sure profit after expenses stays solid. This lack of focus on profitability is actually a leading cause of fundamental business model issues that are threatening the long term viability of the typical law firm.
But if a law firm buys into the argument that profitability is important, that we have historically neglected focusing on it, and that we need to focus on it now in order to build a long term, sustainable business model for our profession, how does a firm actually improve profitability?
The key word here is “metrics.” To promote profitability, attorneys must keep a constant eye on the financial well-being of their practice, so metrics are extremely important. This can be accomplished by running financial reports and reviewing them for patterns.
Key Performance Indicators (KPIs) are quantifiable measures to gauge a company’s performance. By using them, attorneys can learn and analyze vital information about various aspects of their company. Some of the KPIs that law firms should consider include:
Too often, law firms lose money in subtle ways. If lawyers and consultants don’t keep track of time with clients, for instance, they may lose billable time and the profitability of the firm will decrease.
Using technology for every need, in and out of the workplace, is what will boost the firm’s efficiency and make sure it’s accurately bringing in more revenue than before.
Statistics from 2017 to 2018, show that 68% of tech-oriented law firms were able to increase their profitability. Without technology, this feat would not have been possible. It’s time for all law firms to adjust to this level.
Law firms will also find that specific systems and software will go a long way for their specific needs. They range from Time tracking software, Payroll automation, Remote work, Insights/metrics & Feedback tracker
Feedback shows progress – whether forward or backward.
These technologies each fall under the categories of automation, artificial intelligence (AI) and big data. They have the potential to revolutionize a law firm of any size. For instance, using the metrics and data these systems produce, firms can view trends and predict what will come next, preparing to go where the profits are.
With each of these steps in place, law firms cover all their bases. The combination of tech tools and resources is what will ultimately drive a drastic increase in law firm profitability.