Stephen Fairley 2016-05-25 09:07:12
4 Keys to Breaking the 7-Figure Barrier It’s no surprise when laid-off lawyers or law school grads who can’t find a job hang out their own shingles, but there are even more attorneys heeding the siren call to start up their own firm in order to achieve a better work-life balance (if that even exists). You may feel at times that starting a law firm is counterintuitive when it comes to finding balance in your life. However, if you build it right, running your own firm can be a highly satisfying way to employ yourself and serve clients the way you’ve always wanted. I have personally trained over 18,000 lawyers on how to manage and market their firms more efficiently and effectively. I have probably helped more attorneys break the seven-figure barrier in revenues than anyone else. I’m not telling you this to brag, but to share with you the keys to breaking the seven-figure barrier based on my experiences. 1. Run your law firm like a business. You studied the law as a noble profession, but to break the seven-figure barrier, you must run your law firm like a business. As a solo practitioner or the owner of a small law firm, your primary focus – after gaining competency as an attorney – is to understand and apply the key principles of business development, operations, management and law firm marketing every single day. There are 10 major parts every successful law firm owner must focus on – in this order: Marketing: The purpose of marketing is to generate leads. There are a wide variety of ways to do this. All of them work, but they are not always suited for all situations, practice areas or attorneys. Find three-five different ways that work for you and use them frequently. Not every attorney will be a top Rainmaker, but everyone can do something to grow and market his or her practice. Sales: The purpose of sales is to close the deal or sign up the client. Once you start generating leads, you must become better at getting prospects to become paying clients. Services: Once you have become proficient at generating leads and closing the deal, you must perform the services for the client. When you fix your marketing, then you have a sales problem. When you fix your sales problem, then you have a services problem. See how this works? Staff: When you become successful at marketing and sales, eventually you will also need more staff to do the work. You cannot hire just any staff; they must be the right staff for you. What kind of culture do you want your firm to have? Who will best fit that culture? Develop a list of qualities and characteristics you need your team members to have. Systems: Policies, procedures and systems allow you to scale to the next level. Without written systems you cannot scale your business. You will hit a breaking point. It may be at half a million or more, but eventually you will experience a lot of unnecessary pain and suffering because you didn’t invest in creating written policies, procedures and systems for your law firm. You need written systems for every major part of your business. From marketing and intake to money and metrics, it all must be logically written down so even a brand new team member who knows nothing about your business can follow it. Space: After you start hiring the right staff because you have more clients to serve, eventually you will need more office space to house them. Far too many attorneys get caught up in renting a much bigger or nicer space than they can afford in an attempt to “keep up with the Joneses” or give off the appearance of being more successful than they are. The pleasure you may gain from a fancy office is nothing compared with the worry of making those big payments every month. Don’t strap yourself with too many financial obligations and be careful about signing longterm agreements, especially when you’re just starting off. Money: Very few attorneys went to school to become a bookkeeper or an accountant, but to manage a growing business you must know how to manage your money. You need to know the basics of finances for small business, from reading a profit and loss statement to analyzing your cash flow. Being an owner means other people are depending on you to manage the money wisely. Metrics: To consistently break a million dollars per year in revenues, there are over a dozen numbers you must be monitoring and measuring consistently. Here are a few of them – unique website visitors each month, leads per month, average cost per lead by marketing channel (PPC, SEO, TV, radio, print, etc), appointments your team sets per month, show up rate to your appointments, conversion rate for initial consultation by attorney, average cost per client acquisition by marketing channel, cost of goods sold (COGS) per practice area and profit margin per practice area. This is not a comprehensive list, but if you know, measure and track each of those metrics every month, you’re on your way to comprehensively monitoring your business. Strategy: While having a great strategy is necessary, most attorneys spend too much time developing a strategy and too little time implementing the strategy! Get some leads in the door. Make the sale. Collect the money. Do great work. Obtain some referrals. Wash, rinse and repeat! Then work on your next level strategy. Self: Upgrading yourself is the last, but most important step. You need to read business growth books or take classes or seminars if that fits your style of learning better. Hang around other successful business owners. Join a mastermind group of successful attorneys. Push yourself outside of your comfort zone. You will never build a multimillion-dollar law firm by staying inside your comfort zone. 2. Focus on a niche. When you’re in the startup phase (from $0 to about $250,000), you face a neverending challenge of taking whatever business comes in through the door in order to pay the bills or concentrating on one area to build a niche practice. It becomes a question of short-term focus versus longterm survival – and I realize that most solos need to balance both in order to make it. However, the faster you can start focusing on one to two practice area niches, the faster you will go from having a job ($0 to $500,000) to creating a practice ($500,000 to $1M). When people see you as a jack of all trades (the generalist approach), they also perceive you as the master of none. People will pay more for a specialist because they see you as an expert. People will refer more to a specialist because they aren’t afraid of you stealing their clients or competing with them. Contrary to popular belief, this approach does not limit you. It helps to focus your marketing and business development efforts. There are many ways to select a niche, but it must be small enough to be realistic, yet big enough to have enough potential clients in it. For example, being No. 1 divorce attorney in all of the Phoenix metro area is not realistic. There are far too many entrenched and successful competitors to ever achieve this. However, you could be the No. 1 divorce attorney for entrepreneurs and small business owners in the East Valley. Here are a few other ways to select a niche: • Service Niche: DUI attorney for licensed health care professionals; estate planning and asset protection for doctors and dentists; tax attorney for the self-employed; business transactional lawyer for real estate investors; business immigration law for the hi-tech industry; business law for health care providers; and IP and trademark lawyer for small business owners. • Industry Niche: Technology, agriculture, doctors, transportation, restaurant owners, manufacturing, construction, energy, or real estate development. • Geographic Niche: Phoenix, Gilbert, Tempe, Chandler, Scottsdale, or the East Valley. • Specialty Market Niche: Privately held companies, Fortune 500, physicians, white collar executives, blue collar construction workers, franchise owners, bicycle accidents, fitness centers, Spanish-speaking clients, developers, or commercial lenders. Review your top 10 client list (either by amount of revenue/fees generated or in terms of how much you enjoy working with them). Then, look for any similarities. It may not be apparent at first, but keep asking questions and you will find it. Building a niche around a solid client base is one of the fastest ways to differentiate yourself. Another way to help determine your niche is to track the inquiries from prospective clients to determine what’s drawing them to you and your law firm. See if they don’t begin to naturally fall into one or more groups. Becoming aware of these commonalities is a way to let your niche find you, helping you develop your law firm marketing. Once you niche your practice, you will find that referrals come more readily to you, since it will become clear in referral source’s mind just exactly what it is you do. 3. Identify your ideal target market. Your ideal target market (ITM) is the person or company who is most likely to retain you initially, repeatedly and at the highest profit margin. No matter what area of practice you are in, you can use these eight questions to help you determine your ideal client. I recommend you answer these questions with as much specificity as you can: 1. What does your perfect client look like? (Think in terms of age, profession, gender, education, interests, work, marital status, family size, hobbies and lifestyle.) 2. Who can afford your fees? How much can they afford? What’s your value to them? 3. Who could be a good long-term, repeat client for your firm? 4. What qualities, characteristics and values do they have? 5. What are you helping them accomplish? 6. What are their issues, challenges or pain? 7. Who could be a good source of referrals for these ideal clients? 8. Who is NOT your ideal client? Identifying and targeting the right market is absolutely critical to the success of your law firm marketing plan. If you don’t target the right market, nothing else you do will matter. To be successful in your marketing, you must start with a clear picture of your perfect client. 4. Pay attention to your firm’s finances. A 2014 LexisNexis survey of 309 U.S.- based law firms – 75 percent of which were firms with less than 10 attorneys – reports that 39 percent of a typical practice’s client accounts are past due. And of these past due accounts, only half are likely to be paid. That’s a lot of cash flow down the toilet. Seventy-three percent of small firms in that survey said they have past due accounts and 53 percent of firms have client accounts that are past due. So why aren’t lawyers getting paid? The number one reason cited by lawyers in the survey (82.5 percent) was “client financial hardship.” Here are the other reasons in order of prevalence: • Client challenged value of charges. • Miscommunication. • Bill was for services performed too far in the past. • Client disputed services. • Bill format unclear to client. In the “Other” category were these reasons for past due bills: invoices sent irregularly; poor tracking of fees and services; bills sent too infrequently and bill larger than client expected; inconsistent billing; corporate client with slow internal bureaucracy; and not a priority for client to pay. It’s really hard to believe that four out of 10 clients are financial hardship cases. However, if these survey results are accurate, then law firms have a huge disconnect in one or more of these critical functions: • Marketing: You are clearly marketing to and attracting the wrong type of client. • Sales: You are not managing client expectations or educating them on the value of your services or your retainer fee is not high enough to weed these types of clients out on the front end. • Business Processes: You have a broken billing model (i.e., hourly billing) or you do not have the proper systems in place to handle your billing and collections. In the survey, attorneys admitted to something we all know is true (and is a lot more believable than client financial hardship), lawyers hate asking clients for money. They find it embarrassing, distasteful, even greedy, but I don’t know any lawyers who finds money itself embarrassing, distasteful or greedy! The problem is if you don’t expect to be paid; your receivables will probably reflect that. If you pursue your work on your client’s behalf with passion, you should pursue payment for that work with the same passion. So you likely need to (1) change your attitude; (2) put better systems in place; and/or (3) task this out to someone who is not afraid to bulldog clients about their bills. Your survival depends on it! Two-time international bestselling author, Stephen Fairley is CEO of The Rainmaker Institute, LLC, the nation’s largest law firm marketing company specializing in marketing and lead conversion for small to medium law firms. Over 18,000 attorneys nationwide have benefited from learning and implementing the proven Rainmaker Marketing System. Over the last 16 years, he has become a nationally recognized legal marketing expert and been named, “America’s Top Marketing Coach.” He has spoken numerous times for over 35 of the nation’s largest state and local bar associations and has a large virtual footprint with his highly successful Rainmaker legal marketing blog and has over 200,000 followers on Facebook, Twitter and LinkedIn. For more information, please visit www.TheRainmakerInstitute.com or call (888) 588-5891.
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