Pre-requisites to a law firm business development planThe Grey Matter Team
The success of any law firm depends on long-term growth from profitable clients. How do you then focus on the right kind of clients and marketing to support your sustainable growth objectives? This article will focus on the key essentials to be considered before developing a business development plan for your law firm.
What is the purpose of having a strong business development plan for a law firm?
Having a documented business development strategy drives the team to do the following:
a) Set Priorities for the Upcoming Year
One of the biggest impediments to meeting growth goals is a lack of focus and being spread too thin which leads to ineffective potential impact.
Once the priorities for the upcoming year are agreed upon, it becomes easier to concentrate on goal achievement as a lot of ad hoc marketing and business development opportunities get ruled out that would otherwise take a lot of time to examine. Only items that are consistent with the plan are taken into account.
b) Assess Prior Performance and Focus on Profitability
Devising a strong business development plan helps assess the prior performance of the firm and its practice areas and therefore, invest in areas (different kinds of clients, practice areas, and teams) that are more profitable/revenue-generating. After all, profitability is one of the key metrics to judge a business’s growth.
Let’s take an example – we are aware that some practice areas at a firm don’t initially appear to be revenue generators due to either their clientele, team, or the way they process their work, but they have good profit margins and realization rates. A business development plan aids in discovering such opportunities for further investments in practice areas that already have excellent returns on investment (ROI) and ways to improve underperforming practice areas.
c) Uncover Existing Problems and Rectification
A business development plan builds a solid discipline that can actually assist in identifying and resolving problems with practice management, or how clients are to be managed in different practices or individual issues with specific people. Additionally, it challenges you to think about client relationships differently than you might otherwise. Examining this leads to the discovery of patterns and abnormalities, which prompts you to investigate further to learn why.
What are the prerequisites to creating a business development plan?
Ideally, the best time to create a firm-wide plan is right before the beginning of a financial year. However, before that, you need to arm yourself with data that will aid in making decisions for the next year and have broader firm-wide conversations around the same in order to develop the right plan.
Data Points to be taken into account –
- A breakdown of all practice areas
Data Points required– breakdown of revenue across each practice area (Time frame – three years)
This helps identify which areas are growing and declining and also assists in having conversations about the reasons and underlying factors that may be leading to burnout.
- A breakdown of top clients (10 to 20) per practice area
Simply list down your top clients (broken down by fees billed). Factors to consider while evaluating your clients would be monetary value, reference value, client relationship and, quality of work.
Data Points required-
- Who are they engaging with within the firm?
- How are they being billed?
- How active are they across different practice areas
- Are there commonalities in these clients in terms of industries, business size, etc.?
- What do they look like from a reference value point? Would they be willing to provide testimonials or refer a friend or another business or are they already working in your targeted sectors?
- What quality of work do they seek from you? Is it sophisticated and complex or plain vanilla work?
- Do you have a sense of what their legal budget looks like?
- What is the likelihood of further work from each of the top clients?
- Many revelations will come out from the above data points. For example – clients you thought were your best clients may not have been your best clients for many years.
This helps understand the stability of the client base and the practice areas:
- by giving a sense of the depth of relationships your clients might have
- opportunities for cross-selling
- bridging the gap by building good efficient processes around repeat kind of work
For example – if a client hasn’t billed that much in the last few years in a practice area – this is an opportunity to work with them, cross-sell other services and identify underlying issues.
This exercise helps you look at your clients from different lenses. It gives you clarity on what kind of clients you work best with and those should be your priority targets which means they are the most important to your business and hence have to be taken good care of.
- Comparison of Work-in-progress (WIP) and Billed
Data Points- For your practice areas and top clients
- By reviewing and analyzing regular WIP and billing reports, you are able to recognize issues and gaps (such as poor efficiency of different teams, onboarding issues, or training issues, etc.) that may be negatively impacting the firm’s billing practice.
- It helps identify opportunities to create processes and improve work efficiency.
- Prior Business Development Expenditure
- It helps create a measurable plan and assign suitable people to execute the plan in order to avoid burnout.
- Dynamic factors to consider
- Dependent Practice Areas – Often in a firm, some practice areas will always rely on other practice areas for some percentage of their work – via internal referrals or cross-selling. For example – a corporate practice in a law firm very often cross-sells and refers work to employment, and intellectual property practice areas.
One needs to identify these reliant practice areas and consider more sources of work for them.
- Leveraging market opportunities or challenges
- Do you have a dedicated person who is tasked to track regulatory developments or economic factors?
- Is there a process followed to communicate this information with practice heads?
- Do you track the health of your client’s business?
For example, if you are exposed to a particular sector or client – are you aware of what is happening there? Can you leverage that sector-specific expertise? Or
If you notice with your top clients that assignments are dropping or bills are going unpaid, it doesn’t necessarily mean there is a problem with your firm. Maybe the client is struggling financially or has something else. Leverage the opportunity to reach out and ask what you can do to help or support them. Play the long game to gain loyal clients.
- SWOT Analysis
It is a framework used to evaluate your firm’s competitive position. It is a prerequisite to any strategic planning, no matter how big or small a law firm is, and also is an excellent way to uncover gaps and use the results as the basis of discussions and reflections.
- Strength – What makes the firm competitive or better than the competitors?
- Weakness – What are our limitations (firm-specific and practice area specific) compared to your competitors?
- Opportunities – What future factors or market trends could help improve the firm’s market position?
- Threats – What future trends or external factors may limit the firm’s competitive position?
Time to put pen to paper!
If you follow the above steps, you will have all the relevant information required to make the right decisions. By now you would have identified potential market opportunities, understood your practice strengths and market dynamics, and received clarity on your targets for the next year.
The next step is writing down your business development plan with SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound) goals (firm and practice area) along with action steps, budget, and a point of contact.
If you need any assistance with building your business development plan or your annual marketing budget, you can write to us on [email protected].