Law Firm Strategic Planning 101: What Clients Do You Want to Serve?

Too many lawyers mistakenly believe that the strategic core of their firm is defined by their substantive expertise. If you ask them what their firm does, they say things such as, “We are business litigators” or “family law specialists”. And if they are at a bar association event or other venue where other lawyers are present, they define their expertise more narrowly. The accomplished business litigator might, for example, say that he “focuses on trade secret disputes.”

There is both an obvious and subtle problem with defining your firm primarily in terms of your substantive expertise. The manifest defect is that it provides no competitive advantage. It doesn’t begin to explain how you and your firm are at all different from all the other lawyers who claim to have the same substantive expertise as you do.

The more subtle problem is that it tends to devalue lawyers by artificially limiting the scope of the services they could provide. Lawyers who can handle trade secret lawsuits are generally also able to litigate a wide range of other business disputes including breach of contract claims, fraud, unfair business competition, and other business torts.

There is a better approach to defining your firm’s strategic center. Identify the clients you most want to serve. That’s what has contributed to the growth to the largest law firms in the country. For the most part, they don’t define themselves as having certain kinds of lawyers. They have grown because they serve large corporations, and as those corporations have become global, so have the law firms. As data privacy became an issue for these corporations, these firms developed an expertise in that area. Likewise, as intellectual property became a larger share of the value of these corporations, AmLaw 200 firms moved heavily into IP and especially patent litigation. And if, in the future, global corporations start using drone technology extensively, you can be sure that at least some of these law firms will start developing an expertise in drone law. Some already have.

It’s especially important for small firms to position themselves as serving the needs of certain clients. Among other benefits, it will make it much easier for them to have repeat business. For example, a business litigator I know worked with the top executives of several local businesses. She noticed that many of those executives owned second homes that fronted a series of lakes. When one of the executives called and asked for assistance involving a lakefront boundary dispute, the lawyer saw this as an opportunity to develop an expertise in such disputes. Had the lawyer defined himself as a particular kind of litigator, this opportunity would have been missed. By focusing on how to help a particular kind of client, she and her firm were able to grow and expand into an area that they had never previously considered.

Focusing on serving particular clients works as a business development strategy only if you take the time to learn about your clients and what is happening in their lives. Most service companies see this as axiomatic. But the culture of too many law firms is resistant to investing heavily in understanding their clients. They act as if it’s too salesy or unprofessional to do so.

In today’s competitive market for legal services, such an attitude can be fatal. In my consulting work, I have seen firsthand that positioning a firm as an alternative to those who merely tout their substantive expertise can be fun and profitable.

Law Firm Resolution: A 5,000 Billable Hour Year

It’s the middle of January and many New Year’s resolutions have already bitten the dust. In part that’s because setting annual goals is inherently unreliable, especially when the goal isn’t accompanied by a mechanism for reaching it.

Annual billable targets for law firms aren’t exactly resolutions. In most firms they are couched as requirements that are tied to compensation. Increasingly law firms are creating tiered billable hours targets. The lowest tier is set at a level that is necessary to keep one’s job. And higher tiers correspond to higher levels of compensation.

Too often, however, the billable hour target becomes a career development milestone for senior associates and non-equity partners. When you ask such lawyers what their goals are for the year, they answer in terms of meeting or slightly exceeding the firm’s targets.

The problem with this approach is that it tends to encourage incremental thinking and subtly discourage ambitious rainmaking. If you are locked in a system that pegs compensation to billing a certain number hours or collecting a certain number of dollars, it is hard to devise a system that significantly exceeds that figure. If the billable target is, for example, 1,800 hours or the expected book of business is $1 million, lawyers are unlikely to bill or collect much more than that.

But there is a different and better way to set your billable hour goals or revenue goals for the year. When I advise lawyers who have been out of law school for 8 years or more, I suggest that they set for themselves the goal of generating enough work to keep at least three attorneys busy. This translates to generating about 5,000 billable hours in a year. Depending on the nature of your practice, the 5,000 hours could be divided among half a dozen of paralegals and other lawyers in your firm. From a revenue standpoint, 5,000 hours is roughly equivalent to a book-of-business of at last $1.5 million. In my experience, that is the level of production that provides attorneys with the maximum flexibility and control over their careers. At this level, there is an active market for the lawyer’s services and the lawyer can stay where they are, move to another firm, or start their own law firm.

In today’s dynamic legal market, it is common knowledge that a portable book of business provides career insurance. What is less appreciated is that the optimal situation is when you can keep at least three lawyers busy.

That’s why in 2016 you should seek to bill 5,000 hours.

Issue Spotting Isn’t a Law Firm Business Strategy

Lawyers have been traditionally rewarded for spotting issues. Most law school exams were of the issue-spotting variety. As a result, law school grades and law jobs are correlated with the ability to spot issues. That might seem logical or benign, but it isn’t.

As a business development tool, the ability to spot issues without more is at best overrated and is often harmful to a law firm. This is because the essence of issue spotting is the ability to identify what might go wrong in a given situation. It’s a valuable legal skill when applied to client problems, but it’s not a business strategy.

In fact, too often issue spotting is an important element of what ails law firms. When facilitating partner retreats, I often see a law firm partner try to shoot down a proposed business development initiative simply by verbally identifying potential problems with the strategy. Too often other partners react as if it’s difficult to poke holes in a proposed strategy. It’s always possible to do that, even for what proved to be the most successful business ventures of all time. It’s not hard or particularly useful to have been the one who told Bill Gates and Mark Zuckerberg that it was risky for them to drop out of Harvard before earning their degrees.

Moreover, lawyers who simply spot issues rarely articulate the risks of inaction. For example, they will complain about the costs of revising the firm’s website or expanding into a new practice area or opening a new office, but won’t assess the risks of standing pat. Thus, too often issue spotting becomes an all-purpose tool used to oppose any change. Given the dynamic landscape in which law firms operate, issue spotting by itself is of marginal benefit.

What’s much more important and rare is a culture that fosters and rewards solutions spotting. The hall mark of solution-spotting is rewarding those who take the lead in implementing strategies that are designed to grow the law firm. This often requires focusing on outputs (what actually gets accomplished) as opposed to inputs (resources such as time billed). Most importantly, solutions-spotting requires law firm leaders to support partners who led a business-development effort that fell somewhat short of expectations in the face of the issue spotters who say “I told you so.”

Growing any business involves embracing taking aggressive and calculated risks. Most law firms are a very long way from embracing a solutions-spotting culture. If you are looking to make an important and impactful change to your firm in 2016, you could a lot worse than making your firm more solutions focused.

Are Law Firm Holiday Cards Becoming Obsolete?

I received twice as many holiday cards from law firms in 2014 than I have so far this year. And an unscientific survey of law firms suggests that this might be a growing trend. For example, the managing partner of a firm that displays the cards it receives in its reception area also noted that this year’s allotment of paper holiday cards is way down.

So what are attorneys and law firms doing in lieu of traditional holiday cards?

If my experience is representative, they are sending electronic cards using Constant Contact, Vertical Response, MailChimp, or other service they use to send an electronic newsletter. These cards reach your in box and the body of the email contains a static color image accompanied by a message that you would typically see on a paper card. These cards have been primarily sent by my smaller firms.

Larger firms appear to be more likely to send animated e-cards that are accompanied by music. Some of them appear to be customized, such as the e-card sent by Fox Rothschild, which features the image of a red fox.

So what should we make of the sharp decline in the use of paper holiday cards by law firms and attorneys?

Overall this is a commendable trend. In a world where law firms can reach clients and referral sources through the year using a variety of marketing channels, holiday cards are especially likely to be tuned out. Moreover, on a per-unit basis, paper cards cost 50-100 times as much as e-cards.

And my personal sense is that nothing creates a worse impression than a badly designed or executed paper holiday card. I am more forgiving of the firm that sent the animated ecard that didn’t open or run very smoothly than I am of the firm that sent me a paper card that was unsigned and lacked any indication of who at the firm actually sent it. When the e-card malfunctioned, I attributed it to a computer glitch. Perhaps the card’s audio didn’t work well because I launched it on my smart phone. But sending out a generic, unsigned card seems comparatively more crass.

My judgments are of course subjective. Your mileage may vary. You may resent the rise of ecards and the demise of paper cards. Or perhaps the most important lesson to be learned about holiday cards is that, as part of a law firm’s overall marketing strategy, they don’t matter as much as they used to.

What has been your experience with law firm holiday cards this year?

Don’t Forget Your Exes & Your Near Misses

Law firm marketing efforts tend to focus on the new; new clients, new practice areas, and new lateral partners. At many firms, marketing efforts directed to the old often take the form of electronic newsletters and, this time of year, holiday cards. In this context, old primarily refers to former clients and referral sources.

If this describes your law firm’s marketing strategy, you are probably overlooking a more promising target audience than many of your new prospective clients. Rather than focusing exclusively on the bright, shiny, new potential client, devote some of your marketing efforts to client relationships that turned sour and those that considered retaining you and went in another direction. These are your exes and your near misses.

If you read the last paragraph and cringed, you are in good company. Thinking about exes and near misses brings back unpleasant memories, and it’s only natural to want to avoid pain and focus on the promise of a new, unspoiled, client relationship. It would be a natural reaction to avoid reaching out to clients that previously fired you and those who refused to retain you in the first instance. It would also be a mistake.

Marketing to exes and near misses has one dramatic advantage over marketing to new potential clients. They already know you and at worst they came close to retaining you. And that in turn means that on average it will be cheaper and faster to market to them than to a stranger. It’s not as if you have a 100% success rate with new potential clients and referral sources. Thus, it’s not a valid criticism that many or most of your repair efforts might not be successful. That’s the nature of marketing.

To be sure, some client relationships cannot be salvaged. But that misses the point. I’m not suggesting that you will repair every past relationship. My experience, however, is that it is profitable to identify relationships that require some repair. Most often, these are relationships that broke down because of a bad result that was achieved on a particular matter. If a relationship was generally solid and mutually beneficial before the break up, it is a good candidate for your repair list. This is true even if the break itself was difficult, painful, or dramatic.

The case for following up or staying in touch with near misses is even more compelling. In contrast to exes, these are folks who usually don’t harbor strong negative associations against you. They simply preferred someone else.

When reaching out to former clients, be mindful of the ethical rules in your jurisdiction regarding contacting a party that you know is represented. You certainly don’t want to run afoul of rules regarding impermissible solicitation. Most of the time, however, the solicitation rules don’t come into play because the best approaches to rekindling a broken relationship do not begin with a direct request to be retained.

If you want to reach out to an ex or near miss, make the first communication positive, short, and non-demanding. Thus, for example, I have seen a simple request to connect on LinkedIn restart a dormant relationship. Likewise, it can be effective to send an email congratulating the ex or near miss for an accomplishment that is part of the public record. This time of year, strongly consider sending holiday cards to exes and near misses. You want to make it as easy as possible for the ex and near miss to respond in some way.  That’s why the LinkedIn request works well; they simply have to click once to accept your request to connect.

In many cases, repairing a broken relationship will require face-to-face interaction and perhaps more than once. But you don’t have to start there. In fact you generally shouldn’t start by asking someone you haven’t seen in a while to join for you lunch. That’s often too big of an initial step for them to take.

You need to undertake an individualized analysis of what is likely to work in each situation.  The key, however, is to start and make sure that your ongoing marketing efforts include some exes and near misses.

Selling By Lawyers 101: The Most Common Sales Mistake

If I gave you all the time in the world to decide whether to purchase a non-essential service, would you tend to buy it quickly? This question has a self-evident answer that leads to a bedrock principal that underlies a lot of sales training programs: If you want to improve sales, establish some sense of urgency for the potential client.

Too many lawyers assume that selling involves some sort of improper manipulation. That’s an ironic position for a profession that is deeply intertwined with the ability to be persuasive. And some attorneys go further and take perverse pride in avoiding anything that smacks of being salesy. But as my friend and best-selling author David Newman of Do It Marketing is fond of saying, “Better to be salesy than brokey.”

The easiest way to establish urgency is to avoid ambiguity as to the timing of the next step in the process. For example, the potential client who needs a tax lawyer to file or prepare an amended corporate return promises to track down key documents. If the potential client doesn’t provide those documents promptly, how long should the lawyer wait before following up? A week, 10 days, or a month?

The best strategy is to avoid having to deal with the underlying problem. Rather than guessing as to how long a wait is appropriate, obtain the potential client’s consent to be contacted if they don’t contact you by a particular date. So if they promise to get back to you by next Wednesday, you simply ask, “if for some reason that doesn’t happen, is it ok if I call or email you by the following Monday?”

In my experience advising lawyers and law firms, potential clients almost always agree to be contacted or provide concrete information about when they will be available (e.g., “I’ll be out of town on Wednesday and Thursday, so Friday would be better.”). Business clients in particular aren’t going to be offended by the lawyer’s question or feel that it’s pushy. To the contrary, lawyers who set specific deadlines during phases of the sales process are doing what many business persons already do.

Moreover, lawyers who allow the sales process to drift tend to create the impression that their time isn’t valuable or that they aren’t busy. Many business clients aren’t in a position to evaluate fully a lawyer’s skills or overall effectiveness. But they do form sophisticated judgments about whether attorneys run their practices in a business-like manner. Thus, if you want to increase your perceived value in the eyes of potential clients, set and maintain a reasonable amount of urgency during the sales process. It’s what thriving lawyers, law firms, and all manner of successful businesses do.

Three Rules For Law Firm Holiday Gift Giving

If your law firm is planning to do this holiday season what it did last holiday season, please reconsider. Gift giving is a way to recognize and reward those who have been unusually important to your business by giving them one of your most precious gifts—your time and individualized attention. Too many lawyers view the process of giving gifts as yet another non-billable task that should be completed with bloodless efficiency. This misguided approach confuses gift giving during the holiday season with sending out bland, mass produced, forgettable cards.

Holiday cards have their place. When an attorney or law firm wants network with hundreds or thousands of people, a standardized holiday card can be a cost-effective and reasonable way to convey a safe and pleasant year-end greeting. There’s nothing wrong with it. But such a card is not a gift. And if you want to stand out and cultivate and strengthen relationships, there is no substitute for a gift.

Rule 1:  Gifts Are For VIPs

Every firm and every lawyer within the firm has VIPs. These are the 20 or so key people who most contribute to an attorney’s or firm’s financial success. Most commonly, VIPs consist of your best clients and referral sources. But VIPs aren’t necessarily lawyers. The firm’s banker can be a VIP. The gatekeeper who works for the client or the spouse of the client may also be a VIP. If you haven’t done so already, the first step in the gift-giving process is to identify your VIPs.

Rule 2:  VIPs Deserve Personalized Gifts

Too many firms send the same standard gift to every client. Typically it’s a bottle of wine or fruit basket. And when I’ve asked lawyers how do they know the client even drinks wine or likes the kind of wine you sent them, too often I get that deer-in-the-headlights look that is a sure giveaway that the gift was at best mediocre and at worst offensive to the recipient. A good gift doesn’t have to be customized, but it should be personal. It should show that you spent time thinking about the recipient and you have paid enough attention to sense what they like. So the second step is to brainstorm what gift each VIP would like and that would be appropriate.

Rule 3:  A Good Gift for a Business VIP is Rarely Expensive

One test of how well you know someone is whether you can buy them an inexpensive gift that they will really appreciate. Such a gift really requires you to pay attention. That’s what makes them great gifts.

Moreover, buying a gift that is perceived to be too expensive can be counterproductive. It risks making the recipient feel awkward or that you are trying to curry favor. This is particularly an issue for in-house counsel or government lawyers, many of whom are required to report to their employer gifts that exceed a certain monetary value. And nothing says happy holidays like forcing your VIP to fill out a bunch of forms or spend time thinking about returning your gift.

It is hard to generalize about how expensive is too expensive for a particular VIP. Last year a client of mine sent a gift of a bottle of single malt scotch that cost in excess of $200. But my client knew the recipient for many years. Most importantly she knew that the recipient was a connoisseur and that there was something about that bottle that the recipient would appreciate that had nothing to do with its price. That particular bottle was related to a specific conversation that took place months earlier.

I also know of a situation where a $15 thermos received rave reviews. A member of the media had mentioned that in the course of his frequent travels he struggled to find a compact travel thermos that didn’t leak or lose its heat. The VIP mentioned that he had heard about a particular brand of thermos but couldn’t find it. So the gift-giver took the time to find and deliver the sought-after travel thermos. It wasn’t expensive, but it showed that the giver had paid attention and sent a gift that was specifically intended for the recipient.

It’s fun to give such gifts and see the reactions they trigger. And most of all, no one succeeds by themselves, and the folks that have most contributed to your business success deserve a gift that truly reflects your appreciation for their efforts on your behalf. It’s not too late; you still have time in 2015 to get this right.

Why Being A Good Lawyer Isn’t Enough To Succeed Financially

I still come across lawyers who feel that the distinguishing feature of their practice is their technical skill as a lawyer. Most recently that sentiment was conveyed to me by a business litigator with about ten years of experience who feels that many of the lawyers he encounters aren’t as technically proficient or reliable as he is. He wanted to make that a central piece of his marketing strategy.

I understand the appeal of this message, but there are at least three reasons why it’s likely to have limited success attracting more clients.

First, lawyers are hired before they provide their services. Thus, the decision to retain a lawyer depends on whether the client trusts the lawyer, not whether the lawyer will in the future be technically proficient.

Second, It is exceedingly rare for one lawyer or law firm to have a material advantage in technical knowledge over all of its competitors. This is especially true for lawyers based in large US cities who serve business clients.  No lawyer has a monopoly or anything close to it on any aspect of legal knowledge. Clients almost always have the alternative of substituting in another competent lawyer.

Third, it is possible for clients to perceive that one law firm is the go-to firm in their community for a particular service or legal problem. But a law firm doesn’t reach that status by proclaiming that its lawyers or level or expertise is superior. That message largely needs to come from others. If enough lawyers and clients and members of the media and other arbiters of taste identify a particular lawyer or firm as distinctive in some superior way, then that firm has created a brand.

But  look around. How many  law firms outside the AmLaw 200 have a brand identity? If you just mention their name that evokes a sense of higher quality lawyering. That kind of brand almost doesn’t exist in American legal services. Individual lawyers have established a personal brand, but even there the brand isn’t built on the lawyer saying they have  better technical skills than their colleagues.

This is not to suggest that it isn’t important for a lawyer or law firm to be experts in their field. Expertise obviously matters once you are in a position to serve a client. And doing good work for a client is the best marketing strategy for keeping them as clients. What too many lawyers fail to appreciate, however, is that doing excellent work doesn’t constitute an effective marketing message for folks who have never retained you before. Part of the message to prospective clients involves your expertise. It is a necessary element, but it is not sufficient to attract new clients.

Being a lawyer in today’s turbulent times increasingly requires sophisticated marketing strategies and messaging.  Lawyers who above all prize their technical expertise often don’t like to hear this message.  But that doesn’t make it any less true.

What’s Wrong with Law Firm Marketing Budgets

How much would you spend to promote a service that generated a $500,000 profit?

There isn’t one single correct answer, but so long as you didn’t have more lucrative options, it certainly wouldn’t be irrational to spend $100k in marketing to generate such a profit.

Too many aspects of law firm marketing and budgeting aren’t evaluated in terms of their projected or actual returns. Instead, law firms create preferred and forbidden zones of marketing that often have no relation to the returns they generate.  A partner wants to take someone out to lunch or dinner? No problem, that expense will be approved. The firm has been sending its lawyers to bar association events for years?  That sponsorship will often be renewed whether or not that event has generated a decent lead since the turn of the century. There is a seemingly unwritten rule that certain kinds of marketing are just what lawyers or law firm do.

This approach to budgeting is especially pernicious when applied to the marketing budgets that some firms allocate to individual partners. I have encountered numerous firms with 50 or more attorneys that allocate marketing budgets to partners in dysfunctional ways. One firm rewarded partners who had larger books of business; they received larger marketing budgets. Numerous firms enacted policies that allocated the same amount to partners, often between $5,000 and $10,000 a year. And like many government budgets, partners needed to exhaust that budget before year end or risk getting a reduced allocation the following year.

Together, these policies cause firms to misallocate and under investment in marketing, especially for projects and clients that have higher than average returns. A partner who can only spend $5,000 on marketing in a year will be deterred from going after a very big fish, whatever that term means for that particular firm.  And given that it generally doesn’t take ten times as many marketing dollars to bring in a case that generates ten times the revenues, this creates exactly the wrong incentives.

If firms want to increase their ability to grow rapidly, they need to make strategic choices to invest in marketing decisions that have the potential of generating high returns. And like a well-balanced investment portfolio, law firm marketing budgets should be diversified. They shouldn’t just replicate low-risk strategies that have been used before. Nor should firms solely rely on speculative strategies that might hit a homerun.

I can tell you from personal experience that it can be a challenge for law firm leaders to try to measure ROI on marketing expenditures. The very act of asking this question can be perceived as threatening. But there is a reason why ROI is a universally accepted concept in the business world. It has its drawbacks, but law firms would greatly benefit by evaluating marketing budgets on a ROI basis.

New General Counsel: Not Like the Prior GC

Too many corporate law firms are missing a startlingly obvious message when a company hires a new General Counsel.

When a new boss is on board your basic reaction could fall into one of two camps. You could subscribe to the theory that, “the more things change the more they stay the same.” This is sometimes also described as, “meet the new boss; same as the old boss.”  Or you could assume that the hiring of a new general counsel signals that “a new sheriff is in town.”

Recent survey data suggests that outside counsel aren’t fully appreciating the significance of the recent crop of newly hired General Counsel, and aren’t taking adequate steps to please them.  Specifically, a survey conducted by the BTI Consulting Group, which is analyzed in an August 5, 2015 blog post, shows that more than a third of new General Counsel have terminated longstanding outside counsel in the last year, up from 23% the prior year. And often times, the changes takes place within 15 months of the new GC’s arrival.

Given the seismic changes that are taking place in law firms that serve the business community, it shouldn’t be necessary to point out to outside law firms that the arrival of a new general counsel is potentially big news. But apparently some law firm leaders need this remedial explanation. Here is how the BTI blog put it:

Consider any announcement of a new GC a wake up call. Working styles, goals, objectives, and law firm preferences are going to change. The biggest complaint from new GCs: Law firms continue to work in the style their predecessor liked—and the newcomer doesn’t. This does not bode well for leaving a client-focused first impression.

Perhaps it would be easier if lawyers analyzed this from the perspective of a replacement of a judge in the middle of trial. No competent lawyer would assume that the presence of the new judge was immaterial. It would be prudent to learn something of the new judge’s preferences, including perhaps talking to lawyers who have previously appeared before the judge.  The same kind of preparation is an absolute must when a new GC is hired.

The fact that this kind of analysis needs to be shared is itself an indication that some lawyers still haven’t gotten the message. This is also a signal to law firms of all sizes that they shouldn’t discount their chances of unseating an incumbent law firm. There is little to lose by trying to making a personalized and specific approach to the new GC. Perhaps you will be competing against a sleepy incumbent firm that fails to appreciate that a new sheriff is in town.