Missed Opportunities in Client Relationships
In our firm’s experience and research, approximately one-third of law firms cite the maintenance of financially sustainable relationships with their existing clients as one of the major issues in their marketing and business development efforts.
The proportion appears to be relatively consistent — approximately one-third — across practice areas, firm sizes, and locations. Their concern is very well-placed, especially in today’s highly competitive — and in some instances, predatory — markets for legal services.
At the root of this issue is a failure to perceive and understand two fundamental principles in business growth and development in law firms. Each of these represents an overlooked opportunity that can produce a very large, sustainable return on a relatively small investment.
Mistake 1: Wasting time, effort, and money marketing to the wrong prospects
Many law firms overlook a"80-20" phenomenon observed in many professional services businesses, law firms included. Approximately 80% of the fee revenues in most law firms are generated by about 20% of the clients. The segment at the top of the "client pyramid" is critically important for both client-retention efforts and the development of new legal work.
As one law firm partner once told me, “The best rainmaker in our firm gets almost all her rain from the same clouds.”
This is why, for many law firms, poorly-conceived marketing plans are little more that an overly-optimistic hash of assumptions, guesswork, and overly-optimistic hopes. Most of the money spent on such efforts produces little, if any, return on investment. By contrast, time spent by a partner suggesting new or extended services to an existing or recent client can produce returns on investment, as measured by the value of the partner’s time and the fee revenue produced, typically ranges from 8:1 to 12:1, and in some instances even higher.
Law firms, practice groups, and even individual lawyers, should evaluate realistically the client sectors and service lines that they already have. What is the current relative profitability of each one? Which ones have the greatest growth potential? This does not necessarily mean that the firm should jettison relatively unprofitable clients or services. Instead, it can help the firm identify the areas for focused investment of time, attention, and resources.
Law firms should invest in – and use! – robust client-centric analytics to help answer these questions. By doing so, they can not only pinpoint the clients that generate the most revenue, but also anticipate their legal needs, thereby offering more relevant and personalized services. Don’t be afraid of the word analysis. Almost every law firm in the world, regardless of size or location, already has the data it needs to develop a reliable, comprehensive understanding of its client base. The key is to focus on the client relationships with the greatest long-term growth potential and to maintaining an ongoing, relevant, and personalized relationship with them. To the extent possible, every communication should be tailored to their specific needs and context, rather than being generic or an obvious sales pitch.
It also does not mean that a law firm should not continue to seek new clients. However, the best opportunities for financial growth of a law firm usually will be among the clients at the top of the client pyramid. That’s where most of the attention should be directed.
Even if one of the biggest fee-producing clients does not have a steady stream of opportunities for new work, it can also be a powerful — but in many law firms, unknown — marketing force, by referring other potential clients to the law firm.
Mistake 2: Overlooking the value of clients as sources of market intelligence
Resilience requires more than courageous improvisation when the unexpected occurs.
Law firms can benefit from frequent, ongoing communications with their clients to anticipate “over-the-horizon” trends and their potential impacts, often before the law firm is aware of them. This is where the real competitive advantage lies: in demonstrating a deep understanding of the client's business, their industry, and the challenges they face. Building these relationships should be a continuous part of business operations, not a one-time effort.
Lawyers, not their marketing staff, need to take the lead and be personally involved. For many law firms, a productive first step is a comprehensive, in-depth Walker Clark Strategic Business Development Survey, a low-cost project that produces insights about overlooked opportunities and actions to capitalize on them.
To achieve sustainable growth and profitability, law firms must shift their focus from merely searching for new clients to analyzing, understanding, and leveraging relationships with existing ones. The path to sustainable growth much more than a frantic search for new clients; it's about fully leveraging the opportunities with the ones you already have.
How we can help
For more than thirty years, Walker Clark members have been working with law firms of all sizes, worldwide, to develop client relationship and business development plans customized to the unique characteristics, client base, and competitive environment of each firm and practice group. Click on the secure e-mail link at the bottom of this page to schedule a complimentary, confidential discussion with a senior member of our team.