Top 5 things to increase law firm profitability

Colin Cameron has in his Profits for Partners Blog written a post on the five most important issues that should be addressed for law firms to increase profitability - The Top 5 Things Law Firms Need To Do Now To Increase Profitability.

The bottom line for law firms to increase their profitability is to "determine your cost per billable hour and create strategies to reduce costs and increase your profit margins." The top five issues that Colin recommends law firms to focus on to achieve this are

  • Management
  • People
  • Clients
  • Vision
  • Systems

As regards the management issue Colin points out the drawback of the democratic system of law firms where partners have full say on which clients they work for and the type of work they do, thus effectively acting as solo practitioners. Without a centralized management with a clear authority to make strategic decisions that all partners adopt and comply with the firm cannot direct its efforts in the most effective way to increase profitability. Furthermore, the centralized management needs to have, as Colin puts it "the "right" vision and a process for initiating strategic planning on an ongoing basis".

It is also about reallocating the internal resources in the best way and to attract the right kind of people, or as Colin address the people issue: "You need the right people. Many firms have ill-defined partnership entry criteria and even less understanding of what it takes to remain a partner.  You need to have high-performing people to move the firm forward and achieve your firm goals and profitability targets.  Ensure your top performers are paid what they're worth. Define partnership entry and retention criteria and enforce these criteria regularly."

As regards the client issue Colin points to studies showing that 80% of law firm profits come from 20% of the clients, which means that "you need to figure out who these high profit clients are and how to get more work from these clients."

An important aspect to be added is that the management of law firms needs to have a good understanding for the importance of streamlining processes by new innovative ways of performing the work and by using technology as much as possible, to reduce cost and ensure high performance. Is it not time for the legal practice to fully embrace technology and the possibility that it provides to find new innovative ways of delivering legal services and to gain competitive advantages?

 

Leave a comment to VQ



(Mandatory, but will not be shown in the comment list)



VQ in social media

You are also most welcome to follow us on

Twitter Twitter vqab

LinkedIn LinkedIn Virtual Intelligence VQ

LinkedIn LinkedIn Legal Innovation Group

Facebook Facebook VQ

Blog archive

All VQ blog posts »