7 Tips to Eliminate Stagnant Revenue Growth
I grew up with my grandmother living in our home with my parents, brother and me. It was a great experience. I learned a lot from her, not the least of which was from seeing the lasting impact The Great Depression had on her. She saved everything, wasted nothing, and looked long and hard at ways to keep our household running efficiently.
Fast forward to 2013 and it has been a tumultuous few years for the profession. Three major forces have combined to put a lot of pressure on the private practice of law: the Great Recession; increasing numbers of folks taking the bar exam; and the continued rise of document preparation services like Legal Zoom and Rocket Lawyer.
The result has been the widespread stifling of top-line revenue growth in law firms. From one end of the state to the other, partner meetings in many firms are involving conversations about flat or declining partner pay and what to do about it.
Most of the big brains in law practice management say these changes are here to stay (“structural changes in the profession”, they call them). I don’t know whether they are right or not. Only time will tell. What I do know is that for now, a lot of firms are dealing with stagnant revenue growth now and some trends are starting to emerge about how they are choosing to deal with it.
Through a combination of expense reduction and turning to technology to solve problems more efficiently, lawyers are starting to chart a course forward. Here are the top seven trends of how they are doing it:
1. Reducing real estate costs - after the real estate boom and subsequent recession, a lot of law firms found themselves in 2009 with a lot of expensive, extra real estate that they did not need or want. Long term commercial leases and owning real estate have been the two most common arrangements for firms, so this overcommitment of real estate was a long term problem not easily solved.
Five years on those leases are starting to terminate and the real estate marketing starting to percolate again. Many firms are taking this opportunity to reduce their real estate footprint and reduce a key piece of overhead. Space sharing extra and “office suites” permitting short one-year leases and virtual offices have given North Carolina lawyers a lot more options now.
2. Moving to associate staffing - hiring associate attorneys hardly seems like a cost cutting maneuver - until, that is, you spend a moment thinking about how many lawyers there are in North Carolina looking for legal jobs. Like it or not, the oversupply of lawyers has dramatically reduced the cost of hiring and retaining associates. A lot of firms that have been support staff-centric are finding that they can hire associate attorneys more cost effectively that they anticipated. Those associates can be versatile staff members, performing tasks that support staff can not, such as handling court appearances.
3. Pursuing alternative fees - whatever you think of document preparation services, and most lawyers take a pretty dim view of them, one thing is certain: they are adding fuel to the fire of setting fixed-fees for legal services. Simple, repetitive services have been billed as fixed fees for a long time, but the evolution continues into more sophisticated parts of the practice. Moreover, in addition to the pressure from document preparations services, lawyers who represent business clients are finding their in-house counterparts increasingly interested in fee certainty and other alternative fee structures.
4. Investing in technology - every year I go to ABA TECHSHOW to learn from and about the latest and greatest in legal tech. For years, the conference has been dominated by geeks (like myself) who find technology inherently fascinating. This year, though, I noticed a distinct difference. There were a lot more non-geeks there and they were zeroing in on the high ROI technologies available for their practices. They cared less about the latest shiny gizmo and a lot more about which technologies are available to help them do more with less. Document assembly, practice management and other core infrastructure technologies were the most popular sessions and booths of the show.
This change mirrors a trend I’ve noticed in North Carolina as well. Lawyers are starting to get deeply interested in the efficiency gains possible through the well-planned implementation of technology.
5. Ramping up online marketing - we all know that print media is dying and it is taking a zillion lawyer yellow page ads with it. Unsurprisingly, lawyers are turning to online marketing in the wake of this change. Firms are building more robust websites filled with content designed to educate their potential clients as well as experimenting with paid online advertising to help direct more traffic to the sites they are working so hard to build.
6. Narrowing marketing focus - if there is one lesson law firms learn very quickly when turning to online marketing is that in the internet era, focus pays off. It is exceptionally hard, maybe impossible, to build a general interest law firm website for a general practice law firm. Instead, firms are choosing which of their practice areas to emphasize in their web marketing - a choice often dictated by which attorneys in the firm are willing to take on the Herculean task of developing content for the site. It’s not exactly turning general practice firms into niche practices, but it is continuing the trend of highly specialized, narrowly focused law practices.
7. Embracing variable pay - by far and away, the biggest line item on every law firm budget is salaries. Few things cause a firm and its shareholders more stress than going through a down quarter where revenues drop precipitously but staff salaries remain stubbornly, maddeningly static. Increasingly, firms are starting to adopt variable pay structures for associates and outsourcing as much staff work to project based employees and services as possible. For its part, the market has made this exponentially easier as companies like Ruby Receptionists offer excellent solutions not widely available even a few years ago.
Are all the firms in North Carolina following all seven of these trends? No. Are some firms following none? Absolutely. But from my vantage point at the NC Bar Association, I am seeing more and more firms adopting one, two, three or more of these trends in an effort to adapt to the changing legal marketplace.
It seems pretty smart to me. Nobody who has heard stories from a parent or grandparent who lived through the Great Depression would quibble with the notion that living within your means, as a person and a law firm, is a pretty timeless and wise thing to do.
About the Author
919.447.3352 | Erik@lawyersmutualnc.com
Erik Mazzone is the practice management advisor in residence at Lawyers Mutual. He is available to LML insureds to book a free practice management or legal tech consultation. You can book directly with him at www.calendly.com/erikmazzone
Read More by Erik >