How can your law firm improve efficiency and increase profitability?
Law firm profitability and efficiency have always been key areas for continuous improvement however, in light of recent times, even more focus is being placed on these. Profitable growth has been a challenge for firms, even before the pandemic, with the top 10 firms’ UK net profit margins falling for the sixth consecutive year in 2020 and 42% of Top 100 firms experiencing falls in net profit last year1. As the legal sector adapts to the new digital economy, a more profitable and efficient law firm is one that is able to reduce costs while embracing change to improve service to clients and grow the firm.
We look at four areas for improving efficiency and profitability and provide some top tips for law firms:
- Sustainable cost-savings – what have we learnt during the last 18 months?
- Attracting and nurturing new clients
- The role of legal technology
- Measuring and monitoring success
1. Sustainable cost savings
During the challenging lockdown period, there has been some positive learnings for law firms. Over the past year, there’s been significant cost and time savings demonstrating just how lean law firms can be. Remote working, video meetings and virtual court hearings may have created a few teething issues but the time fee earners have saved on travelling and reduced expenses has helped keep costs down. Furthermore, with virtual meetings now an option and something clients are more open to, fee earners can arrange meetings at times more suitable for clients, such as in evenings and weekends, which increases efficiency and is more convenient as neither client or solicitor/lawyer need to travel. Given the benefits seen by fee earners, the firm and the client, video technology and virtual meetings should continue to be used moving forward.
Another noticeable cost saving has been the reduction in printing and postage for law firms. The legal sector traditionally has been a very paper-heavy industry but with staff working from home and clients unable to go into offices to sign documents, this had to change. Putting this into context, David Sparkes, of Milbourn Ross, points to one top 50 law firm that cut its printing costs to just £200 in April 2020, compared to £12,000 in April 2019. Those who saved thousands on printing and postage after going paperless (or at least paper-lite) should now be looking to make permanent changes. One firm we work with has removed half of its printers and moved the rest upstairs - so less accessible - encouraging staff to think twice about using them2.
2. Attracting and nurturing new clients
With competition rising and the digitisation of some legal services breaking down geographical barriers, law firms need to diversify their offerings and attract new clients to maintain or grow market share. The increased competition is coming from a variety of different sources including non-legal businesses selling legal services (e.g. online will writing, document review specialists, etc.), changing customer demand (price-driven, willing to shop around more and more receptive to online services) and regulatory reform (e.g. personal injury reforms making that area of the market less profitable so firms move into other areas).
In a world now dominated by digital, raising brand awareness and online marketing for law firms is essential. With over 33% of clients starting their search for a lawyer online and 96% of people looking for legal advice online to begin with3, robust digital marketing strategies for law firms can attract new clients to boost revenue. Read our recently created blog ‘Law Firm Marketing – 7 top tips to market your firm’ for more detail and ideas relating to this topic.
The next area of growing importance is CRM for law firms. Customer Relationship Management (CRM) systems are vital for keeping all the information on a client or prospect in one place which improves business development and client management. From the CRM system, a law firm can nurture and profile prospects, optimise the lead-to-client journey and engage people in a way which builds strong relationships. Some key features law firms should look for in a CRM include lead status tracking, source tracking, links back to the case management system, mobile access, marketing automation, social media integration and configurable workflows.
Another very helpful feature for nurturing potential new clients is a workflow built into your case management system. An example of this is Access Legal’s case management system which has a built-in opportunity module to manage incoming enquiries and report metrics on conversion from enquiry to client.
3. The role of legal technology
A positive impact of the pandemic on law firm professionals has been an increase in legal technology adoption and a ‘new-found nimbleness’. A survey of lawyers who were asked what pressures would impact their firms most in the next few years found the increasing importance of technology at the top of the list (76%)4, followed closed by meeting changing client and leadership expectations (74%). Traditionally, the legal sector has been relatively slow to technological change and advancements but now the huge benefits and potential provided by new tools and systems is being realised in every area of a law firm. From pre-population of legal documents, digital dictation and automation of manual tasks to cloud-hosted technology, customisable workflows and self-serve client portals, law firms are beginning to understand how legal technology can make them more efficient, reduce costs and free up time for fee earners to work on billable matters.
Using legal technology to complete non-billable tasks can help ensure your fee earners are making the most of their time, streamlining process and procedures as they work cases and matters. An example of this could be e-billing or cost drafting which software can assist with bill creation, from layout and calculation to the production of a red line bill, enabling you to extract maximum value from fee earners’ time, with more streamlined daily processes. Technology can also be used for billable activities, meaning tasks can be completed quickly and easily which in turn allows fee earners to potentially take on more cases without increasing workload. An example of this could be customised workflows that ensure the management of the case is consistent and automated where possible, enabling the fee earner to focus on value-added services rather than administration.
Even before the lockdown, cloud hosting was becoming more and more prevalent but since the need for remote working and greater cybersecurity shot up many firms priority list, this technology is now being implemented or considered by many. To understand the benefits of cloud hosting for law firms you can watch our video ‘Is it time your law firm moved to the cloud?’ or read our blog ‘Cloud hosting for law firms’.
On top of the clear efficiency and profitability benefits for law firms. Technology adoption and use is becoming an expectation of clients. According to the Solicitors Regulation Authority’s (SRA) Technology and Legal Services report 2018, nearly 50% of consumers and a third of businesses, who are familiar with using online platforms and apps, were beginning to demand a similar online technological solutions for legal services. Given this report is a few years old and the pandemic has increased the use of digital technology, these findings are very likely to have risen.
4. Measuring and monitoring success
Arguably the most important element when trying to improve a law firms efficiency and profitability is being able to track, measure and evaluate the effectiveness of your efforts. Having a clear idea of what you want to achieve and the KPIs (key performance indicators) related to the process or area you’re looking to make more efficient will give you the insight and data on what works and where you can make other savings throughout the firm. Knowing where your firm is more profitable can also help when it comes to prioritising efforts and creating a unique position against competition. An integrated practice management system is essential when it comes to understanding performance. Real-time reporting and data can allow a firm to easily manage individual or team productivity, monitoring such things as workload, cost per case, utilization rate, realization rate and more.
Top tips for improving efficiency and profitability
- Review manual processes – Review the processes you and your staff are doing manually and see if there’s functionality available within existing or new software to support doing this more efficiently.
- Review how much cash you’re advancing clients and potentially amend your agreements to decrease the amount you’re financing to improve cash flow.
- Continue virtual meetings –
- Maintain paper-lite approach –
- Create an engaging online marketing strategy
- Implement and make use of CRM linked to case management system
- Implement a cloud-based practice and case management solution with features to support automating manual processes and improving client experience
- Have clear KPIs for what you’re looking to achieve and a practice management system that allows you to track those KPIs with real-time data
1 PwC Law Firms’ Survey 2020 - https://www.pwc.co.uk/industries/law-firms/law-firm-survey-report-2020.pdf
2 Law Live: Expert legal industry panel discussion and live Q&A [Access All Areas, 2021]
3 https://www.nivancontent.com/law-firm-marketing-statistics-2019/
4 https://www.lexology.com/library/detail.aspx?g=5a7d853f-5168-4112-91ff-fb384a7f6ec4
