Lawyers running a law firm already know they have the challenge of providing legal services to clients who have important legal matters. And, whether they know it or not, those lawyers also have the enormous challenge of running a successful business.
Law school prepares students to tackle legal issues. However, law school rarely equips the future lawyers with basic business tools (though, maybe they should).
The idea of running a business is often a foreign concept to much of the legal profession. Nevertheless, whether managing or starting a law firm, it is important to remember that a good law firm is a good business. The following 10 steps will help leading attorneys excel at running a law firm business.
Step 1: The Foundation
Like building a house or a building, the business foundation is immensely important if you want to manage a successful law firm. From day one, the processes and procedures of the firm are vital to its longevity.
Take time to map out the type of firm that you want to run. Will you be a solo practitioner? Will you be a small firm or medium size firm? Or maybe you are managing a large law firm.
No matter the type or size of firm, the sooner you implement the base platforms and systems the more likely you are to find success. Determine what ultimate success will look like for you, and take the necessary time to chart out the steps to attain that success.
Call it a roadmap, call it a business plan, call it whatever you want. At the end of the day, just make sure to have a defined goal with practical steps and identifiable metrics on how you will achieve that goal.
Step 2: Business Development
In order to manage a law firm, you need to be able to develop the business. Business development is more than just handing out business cards. If you are the business owner of a law practice, you need to identify the practice areas in which you and your attorneys intend to practice.
Once you have identified the practice area or areas, you should be able to relay that clearly to others when they ask you what type of law you practice. The more quickly and authoritatively you can answer that question, the more likely you are to instill confidence in your legal abilities.
Business development can include interacting with potential clients, as well as interacting with other legal professionals who may be potential referral sources. However, business development should also be focused internally. Set aside regular time to read, listen to relevant podcasts and develop your business skills in addition to your legal skills.
Step 3: Marketing
Marketing is important to any business, even law firms. While any small business would never hesitate to get its marketing in place to ensure growth, many lawyers are hesitant to market themselves or their firm.
While it is crucial that you check with your local bar association and rules of professional conduct in your jurisdiction, you should have no hesitation to market and grow your law firm. Find unique ways to connect with your target market by bringing potential clients into your firm’s story.
While a shiny new website is easy to fall in love with, be sure to find a trustworthy professional who knows how to build a functional site that maximizes things like search engine optimization and other essential elements of drawing eyes to your business.
Step 4: Intake
High quality intake processes will set you apart from the vast majority of law firms. Studies have found that the responsiveness of most firms is extremely poor.
Setting up a system of intake for incoming calls, emails and chats will set you up for success compared to your peers. The more responsive you can be to potential clients, the more likely they will become actual clients.
If you are not equipped or set up to answer and return calls regularly, you should investigate third party companies to handle call intake. Virtual receptionists and other answering services can often fill the responsibilities of an internal team.
In addition to responsiveness, you also need to have a system in place to maintain and track the information obtained from potential clients who reach out to your firm. Maybe you will create your own system for intake and customer relationship management (CRM) or maybe you will find a third party that serves your needs.
Step 5: Practice Management
After the intake process is complete and your potential clients have become new clients, you need to be certain to have a system in place to manage all the items relevant to the clients’ matters.
You need a system for tracking time (if you operate with billable hours). You need to manage dockets and calendaring. You need to have a system for maintaining files and correspondence related to client matters. In today’s law firm environment, it is vital that you are technologically competent.
Sometimes you can create your own tech stack that manages the entirety of your practice, or maybe you will find a single software. Whatever the case, it is crucial to implement a management system to run a law firm of any size. A good practice management system will contain some of the key metrics that you need to track to gauge the health of your business.
Step 6: Accounting
You’re an attorney, not an accountant. Nevertheless, it is important to the business of your law firm that you remain engaged with the basic accounting metrics of your firm. Know your expenses and revenue, and be sure to regularly track those key indicators of firm health.
Yes, you should find a good accountant that you can work with and can help you plan the growth of your firm from an accounting perspective. However, you cannot abdicate the responsibility of maintaining regular awareness of your financial data.
Once you have identified an accounting software and an accountant, set aside regular time to review your financials. Knowing those details are critical to your ability to make good decisions on whether or not to hire new employees, bring on a contract attorney, or reduce or increase expenses.
Step 7: Banking
Find a good local bank that you can work with and get to know. Yes, you will certainly need to set up a client trust account in addition to an operating account (and maybe others, depending on how you and your accountant decide to structure things).
One of the great things about offering a professional service is that it really does not require a great deal of upfront investment. Do not take on debt if you can help it (law school provided enough!). However, you never know when your KPIs might tell you now is the time to grow. Having a good banking relationship can assist you in obtaining necessary financial help.
Step 8: Key Performance Indicators
Key Performance Indicators (KPIs) are those important metrics that you identify as essential to measuring the success of your law firm. It is not enough to “go with your gut” and make choices on a whim. You need clear data points.
Law firm KPIs include many of the same indicators important to any business: revenue, expenses, accounts receivable, marketing leads, website bounce rate, and net promoter scores, just to name a few. However, law firms also have some key data points that are more particular to the legal industry.
Law firms often track billable hours or flat fee cases. Client trust account metrics are often a leading indicator to the future health of the firm. Law firms also often find it necessary to track open files and closed files, as well as utilization rate and other performance indicators.
Step 9: Tracking Data
As you can see, the amount of important metrics for measuring the success of a business and law firm quickly add up, and it might even begin to feel overwhelming. It is not enough to simply have access to all of the information. You have to have the means of aggregating all of the information in a manageable form.
Many small businesses owners know what it feels like to spend weekends and nights trying to gather all of pertinent information necessary for making good business decisions. Spreadsheets, notepads, or jumping from one software to another. All of that takes too much time, especially when you are also trying to practice law.
A tool like Smarter Firms provides a platform to pull together all of the necessary information and data whenever you need it, rather than spending hours trying to piece it all together yourself.
Step 10: Make Business Decisions Based on Data
Just as you care about your clients’ success and your legal skills, you need to care just as deeply about your business’ success. The more successful the business of your law firm is, the more clients you will be able to provide winning representation.
Once you have your foundation set and your path mapped out, once you have identified the most important metrics to the success of your law firm, and once you have all access to those data points and information, then you will be truly set up for success.
A law firm is a business. A good law firm is a good business. Take the steps today to get your firm on the path to success.