Three Hot Trends in Law Firm Business Development
This article was first published by Trends@BusDevInc.com and is used with permission.
1. Size Alone Does Not Yield Profits - Is There Enough Good Work?
As the latest American Lawyer 100 survey analysis explains, the mega-firms with the largest platforms are not necessarily the most profitable. The growth imperative that exists in the legal marketplace has driven many firms to respond primarily by acquiring top-down head-count. So, lateral movement remains high; however the hope that 'significant business will follow this lateral/acquisition' is difficult to project with accuracy in the vetting process and has not been achieved to the level or degree hoped for by many acquiring firms. Growing new business from 15,000 feet is simply not as effective as growing it selectively from the ground up. So, without a corresponding and focused growth plan at the 'grass roots'/individual partner level (other than simply requiring increased numbers of hours), adequate future work and/or profitability will not necessarily follow.
2. Transitioning Retiring Partners from the 'Baby Boom' Generation
Within almost every law firm, increasing numbers of senior partners will be retiring in the next several years. Depending upon the total percentage of partners this generational transition affects in any single firm, the future viability of the firm as a whole may be at stake. In addition, with the increasing commoditization of legal work, it is no longer enough to rely on a few lawyer-client relationships alone to assume and hope that the legal work led/originated by any single partner will remain within the firm. Due to client-driven pressures to contain the overall costs of legal services, "institutional" or "firm" clients are just not as loyal or prolific as they once were. "Hoarding" until retirement is no longer an effective succession strategy. Firms are responding to this demographic transition in various ways with a goal of assisting and supporting succession/transition planning and efforts over time. Some firms have responded to the pending departure of senior partners by assembling and/or requiring more formal 'client teams' that are built around certain key client relationships. The objective is to solidify the firm's relationships at several levels and to increase overall client satisfaction in order to retain and/or expand the relationship originally built by senior Partners.
3. Sales Pipelines in Law Firms
Increasingly, law firms around the country are successfully using sales pipelines to identify, track and close new business from the volumes of their client development opportunities and efforts. To understand sales pipelines and their utility for law firms it is helpful to note that the definition of "sales" in law firms is different than in many other consumer-type businesses. Law firms sell legal services which are intangible and this almost always requires personal contact with the buyer before getting new work. So, sales in law firms is best defined as "client development," i.e. the process of identifying, developing a relationship with, getting legal work from and expanding that work from a client, contact or prospect.So, what exactly is a "sales" or client development "pipeline?" A law firm sales pipeline is a separate and distinct precursor to the billable hour pipeline which most often measures legal work only once it is already in the door by tracking hours and dollars through initial intake, WIP, hours billed, hours collected, receivables and actual realization. The objective of the sales pipeline is to provide a tangible way to measure upcoming, new billable hours/revenue streams that may be coming in the door in the next few months and/or years. As a result, using sales pipelines help firms to solidify their estimates and probability of new work realistically anticipated in the near term and future. So, a sales "pipeline" can be visualized as a conduit that inputs prospective new clients/work on one end and, at the other end outputs new legal matters/upcoming WIP. Several major law firms have recently and successfully implemented sales pipelines either at the individual Partner level, for practice groups, offices, within client teams, for RFPs, and/or for industry groups. Other firms have successfully implemented sales pipelines for geographic areas, key clients and/or boutique practices.New business that has been facilitated by the use of sales pipelines in the aggregate (of which the author is aware) easily exceeds hundreds of millions of dollars.