Revenue is good. Very good. Every law firm needs revenue - clients spending money for your services. But revenue is different from profit. Profit is the real winner. Unfortunately, many practice owners focus a great deal of time on upping the revenue without considering the level of profit it will bring.
Here’s a really simple (and true) example. A bankruptcy attorney put himself out of business because he was able to make his revenues climb but decreased his profit so deeply that he was losing money hand over fist! His firm was mismanaged, overstaffed, and inefficient. He wasn’t good at squeezing every dollar possible out of all his resources. And so he eventually wound up closing the doors to his practice. It sucked for everyone involved, especially because there were ways to avoid that end result.
Fortunately, you are in the right place to discover ways to avoid the bankruptcy attorney’s fate. You can put yourself on a path to maximum profit by intervening now rather than later. It’s important to have a plan for profit before you start growing your practice. You don’t have the luxury of a company like Amazon which ran on a policy of pushing revenue higher and waiting for profits to catch up. You don’t get paid if that happens!
Here are three key ways to improve the profit you earn in your law firm and ultimately increase the amount of money you take home.
1: Target Higher Value Clients (and Raise Your Prices)
Mark and Alexis Breyer are personal injury attorneys in Phoenix, Arizona. They are phenomenal attorneys and helps many, many accident victims in their community. They’ve hired a lot of people in the area and are the parents of nine children. But they wouldn’t be where they are today without making a big decision almost a decade ago: they decided to stop taking soft tissue cases. This was a big leap at the time. They handled a lot of these small cases, but the cases just weren’t profitable enough. Mark and Alexis felt like they were running on a hamster wheel. After hearing about the idea of being more selective about their cases, they took action. Immediately, they decided to stop taking soft tissue cases altogether!
What happened? It freed Mark and Alexis to start focusing on attracting just the bigger cases. Instead of marketing for fender benders, they could put all their efforts into marketing for big accident cases. The type of client they wanted was more likely to respond to advertising specifically addressing his or her concerns. It was an incredible transformation. Mark and Alexis grew their practice leaps and bounds over the following years and continue to scale up in their community, providing jobs and high-level service along the way.
Bob Battle is a DUI and reckless driving attorney in Richmond, Virginia. Many attorneys believe these small criminal defense cases are subject to immense price competition. They keep lowering their prices, and their only marketing message is “hire me ‘cause I’m the cheapest.” That’s pretty bad positioning and a tough way to make a living as an attorney. Bob went the other way. He kept raising his prices until he became the most expensive attorney in his community!
The results? During the first two years after Bob made this change, he quadrupled the revenue of his practice. He started attracting high net worth clients who were more than willing to pay for his expertise. His clients now include professional athletes, business executives, and government contractors who don’t want to lose their security clearances. Every one of those people gladly pays the needed expense to have things handled by a reliable professional. As a matter of fact, research suggests raising your prices can actually help you attract more clients. It usually happens because you are better at targeting a specific type of person and figuring out the service-value equation better.
The only thing holding you back from raising your prices or being pickier about the clients you do accept is your personal feeling about it. If you spend more time focusing only on the best clients for your practice, you will attract more of them. Your marketing messages will be tailor-made for the right clients, because you’re not trying to get anyone else. The perception of your services will improve, because you are focused on a specific type of case - and specificity creates the perception of expertise and authority. There are plenty of attorneys in your community who will compete on price or who are willing to take on any client. There is no need for you to be one of them.
2: Re-negotiate Contracts and Re-examine Subscription Expenses Regularly
I can’t tell you how many times members of Great Legal Marketing have reached out to me with a question along the lines of “how much should I be paying for this or that service” and shocked me with the amount of money they are paying right now. Even the little things like your office copier (if you lease it) can add up. When was the last time you examined, much less re-negotiated, the contracts you have with vendors? You might be paying too much for design work if you haven’t bid out a project to a different recently. Or you could miss out on significant savings by testing a new phone answering service. Unfortunately, the status quo can be a sticky situation, and it’s not particularly fun to deal with these little details. You probably just want them to keep working as is with minimal muss and fuss. Even if it might drain you of a couple thousand extra dollars each month.
If you are an entrepreneurial attorney, then you have a tendency to move forward at all times. There is little time spent going over things from the past, because the future is far more interesting. Does that sound like you? If so, you’re probably paying for a number of recurring expenses that no longer make sense. I remember a discussion with a member about his subscription to an image gallery service. He used it once to add a couple images to a report he wrote to hand out at seminars. Of course, at the time he wrote the report, he was really excited about the idea of writing more reports in the future! And he would need more images for those reports, of course. So, instead of purchasing a couple of inexpensive licenses for the three images he needed, he subscribed to a monthly plan granting him 10 images per month. Basically, he paid nearly $1,000 for three images when they would have cost just $150 if he purchased just those at the time. Crazy, right? We all have these expenses in our lives. You can quickly add profit to your law firm by taking a look at what is auto-billed and making sure it’s meeting your return on investment expectations. (I can guarantee that membership with Great Legal Marketing will exceed your return on investment needs! After all, there are few things more valuable than bringing in more clients.)
3: Stop Wasting Money on Bad Advertising!
There is good advertising - the kind that actually brings you clients. And then there is everything else. Here’s the bottom line: if you don’t know for a fact your advertising is bringing in new clients, you are at huge risk of just losing money.
Too many attorneys spend money on so-called “branding campaigns” to establish their name in the community. Unfortunately, this kind of advertising requires tremendous investment in order to gain the potential benefits. It is ill-suited for solo and small firms. You can’t develop a brand in your community for less than $50,000 a month (usually needing much more, frankly). Even then, it is a tenuous position at best and teetering on a ruinous cliff’s edge at all times. Competitors will just outspend you, blocking you from the benefits of being the biggest brand.
Fortunately, there is an excellent alternative. Simply known as Education-based Direct Response Marketing, or DRM, it combines the public-servant mentality of being an attorney with the sound business principle of tracking your return on investment. The entire concept is simple: you create informational bait for potential clients to request from you; then, track the response you receive to all the marketing offering this bait to see how many responses you receive, along with how many of those responses turn into actual clients. That probably sounds pretty intuitive to you, right? I’ve literally seen the eyes of attorneys grow wide with excitement when I tell them about this idea. Imagine the possibilities! You’re no longer trapped by the normal advertising constraints of talking about your years in practice, the associations of which you are a member, or the silly slogans and tag lines used by so many other attorneys. Instead, you get to offer people something of immediate use: information about their legal issue!
By being a center of information in your community, you position yourself as the go-to authority in your practice area(s). This provides tremendous leverage and marketing advantages to your firm. I’ve seen it happen in more practices than I can count. And you will finally get a handle on the financial benefits of your marketing. That’s a big bonus to using direct response marketing.