INCREASING YOUR LAW FIRM’S PROFITABILITY

Increasing your law firm’s profitability is of great essence.  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. 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.

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 keyword 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:

• Client Satisfaction – Law firms need referrals and repeat business for maximum profitability. Dissatisfied clients don’t become repeat clients. They also don’t refer other clients to the firm. Client satisfaction KPI allows attorneys to gauge client satisfaction and identify areas for improved client relations.

 

• Marketing Expenditures – A marketing KPI helps attorneys review the firm’s marketing strategy on a regular basis, so they can focus their resources and efforts around strategies that yield the highest results.

Suffice it to say that technology holds power for all kinds of businesses. Law firms, especially, are areas where tech holds vast potential to revolutionize everything. From administrative tasks to remote work, technology helps staff members optimize their responsibilities and increase the firm’s profitability.

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.

Instead, 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, 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.

Of the technology that exists in the world, much of it helps businesses in general, like time-tracking software. However, law firms will also find that specific systems and software will go a long way for their specific needs. Both overlap in this list of tech:

They range from Time tracking software, Payroll automation, Remote work, Insights/metrics & Feedback tracker

1. Time Tracking Software: – can cater to the specific needs of lawyers and bill clients accurately.
2. Workflow Automation: – From payroll, to filing, to properly billing clients, these tasks have automated solutions. DocuWare and DropBox are two common examples of resources that can automatically categorize emails, invoices, documents and contracts into the right folders.

 

3. Remote Work: – The COVID-19 pandemic has shown that employees can work from home and the firm can still operate efficiently. To do so effectively, staff will need resources like Zoom, Slack and Google Drive. These online resources help optimize video conferencing, communication and cloud-based file storage and sharing. Everything happens in an instant and work can continue faster than ever.

 

4. Management Software: – Firm management software is one of the best ways to increase law firm profitability. Sources like Legalpedia Case Management solution provide scheduling, client tracking, bookkeeping and accounting, invoices, timekeeping and case management.

Having a system that can organize everything in one place makes it easier for the firm to understand its spending and how much clients will owe. Employees can then compare the overall profitability of each year.

 

5. Feedback:- One of the most critical aspects of any form of client-based work is communication. Getting feedback from clients is a necessary way to improve. For instance, if a client needs a service that a firm doesn’t supply, that could mean a loss in profits. Feedback could incentivize an expansion and thus draw more clients in.

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.

 

REFERENCES

https://www.lawtechnologytoday.org/2021/02/three-inefficiency-traps-that-drive-the-cost-of-document-review/

https://www.wolterskluwer.com/en-gb/expert-insights/increase-law-firms-profitability-working-smarter-not-harder

https://www.timesolv.com/blog/5-super-easy-strategies-to-substantially-increase-your-law-firms-profitability/