Small law firms face challenges when trying to attract new clients. With limited resources and…
The ongoing pandemic and economic uncertainty have shown how valuable saving for a rainy day can be. In order to weather such turbulent times, it is critical to have funds in reserve. To do this, you need to make sure your law firm is profitable. A law firm with a healthy profit margin has the resources to serve its clients well, compensate its attorneys and staff, and attract higher-level talent.
Revenue & Profitability
Boosting revenue is great for your law firm, but what really matters is increasing profitability. You may increase your revenue by serving more clients, for example, but if you are spending more money and time to serve those clients, you are not increasing your profits. To be more profitable, you need to boost your profit margin.
Your profit margin is the difference between your revenue and your operating costs. Even though you may have to increase your operating costs as your revenue increases, you will probably always be able to find ways to keep your costs in check. For example, if you offer free one-hour consultations, consider offering half-hour consultations instead.
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To make sure your law firm is continually profitable, assess whether or not you are earning a healthy return on investment (ROI) from all of your efforts. Track the time and money spent on all the things the members of your firm do and the value they provide the firm. Look at which efforts are bringing in money and which are saving money. Make adjustments as necessary to bring in more money while increasing your savings as much as possible.
Running a law firm involves spending time on tasks that are not billable. There are plenty of ways to reduce the amount of unbillable time you spend each week. One way to reduce non-billable time is to automate as much as you can. Some areas you can automate are client intake, time and expense tracking, and billing.
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Managing a small law firm often means wearing lots of hats. While this is especially true when you are starting out, as time goes on, you will need to delegate some tasks in order to be more profitable. Unless you really enjoy doing a certain task or you are the only one who can do it, you should delegate it to another person in your firm, preferably a staff member whose hours are not billable. As an attorney in your firm, you should be spending as much time as possible on billable work.
There are many aspects of running a business that can be outsourced to other companies or freelancers. Accounting is an obvious task that can be handled by an outside source. Marketing and communications are other areas that can be outsourced. For most law firms, marketing is often the area that gets the least amount of attention, yet it can be one of the most profitable investments in terms of ROI.
Help with Marketing and Communications
If marketing and communications are areas you need help with, you can hire a marketing agency, such as Law As a Business (LAB), that specializes in all aspects of marketing and communications for law firms. Contact LAB today to find out how we can help you market your law firm successfully.
Increase the value of your law firm!
There is a right way and a wrong way to build and then exit a law practice. Specific decisions and actions build value while others do not. Watch this video and learn the steps you should take to create value within your firm and increase desirability to a potential buyer.