4 Steps To Snowball Your Law Firm Profits

I think the problem is that most lawyers look too often for what they call in Texas "the big lick". It is a case or line of business that gushes money to the extent that it can cure all of the law firm's misjudgments. Oh, the big lick happens once in a while to a few, but increasing profits for a law firm is usually accomplished on the margins.

The overall strategy takes a constant eye for what needs to be accomplished as the increase in profits rests on the margins. As with a snowball, it starts small and builds on itself quickly. But, that does not mean that you do not need to create the right environment for this to happen.

Let us look at what it takes to create an environment that will allow a snowball to roll and grow quickly.

1.    Aggressively control overhead. It is easy to let overhead get out of hand. The more overhead the more you are working for others and not for yourself. It represents more money you have to bring in without paying yourself. Whether you bring in another dollar or decrease overhead by a dollar it will still result in you earning another dollar to take home. I think most lawyers forget this. Increase earnings by a dollar and decrease overhead by a dollar and you now have conditions to start the snowball rolling.

2.    Niche your practice. This is a matter of taking your strongest and most profitable practice area or cases types and concentrating on those. The purpose is to increase those cases that pay you more, and take less of your time, while decreasing those cases that pay you less and consume most of your time. Realistically, the more time you have to spend on cases the higher your overhead will become. Time intensive cases is often a lack of proficiency in the case type. Experience cures this problem. But, have you ever noticed that the less you get paid for a case the more time that case seems to waste? The time issue is important because the more time you spend on a case type the less you make. After you niche you will naturally start to increase the number of the profitable cases you want. This will represent an exponential increase in earnings over time.

3.    Increase your prices. Once you niche your practice, become more efficient and become better known as the go-to person for a specialized problem, then you can increase the fees you charge. This is so because your pool of potential clients becomes larger and you can afford to be more choosy.  Your more profitable cases become even more profitable with more money coming in and less money going out.

4.    Network. You need to build a referral base. This helps in a number of ways. It results in more paying clients, paying you on the more profitable cases, in which you are earning more money, but the lack of advertising allows you to keep overhead under control. It helps build your reputation as an expert. An added benefit is that referred clients usually represent more qualified prospects and take less time to service. This is because they come with a level of trust that skeptical advertised for clients often times lack. Networking can greatly increase the number of leads. The more leads, the more cases. The more cases, the more in earnings. This leaves you only to fight against overhead.

So with low overhead, concentrating on your most profitable case type, working to make your time more efficient and increasing the value of your cases, and getting those cases and client through the front door economically, the profits will quickly increase like a snow ball rolling down a hill.

Comments

[Miriam Robeson]

Your suggestions are not only helpful for increasing your bottom line, but also for more effective time management. If you are controlling costs and able to effectively filter the appropriate clients and projects from the inappropriate (that is, low- or slow-paying clients, high-maintenance clients, or time-wasting clients), you can maintain desired profitability and increase leisure time (or add more "quality" clients and projects, depending on where you would like to spend that extra time you realize from more effective management)

[Jonathan Griffith]

Great article Chuck. Been a while since I've checked in. I'm now 7 months into the solo practice of law. I've been bouncing around, but think I might finally be finding a niche in criminal law.

I know exactly what you mean when you say the lowest paying cases require the greatest commitments. I've been trying to put these types of cases in 'runoff' mode, and will hopefully focus on criminal cases going forward.

Now I know there are several other lucrative areas of law, but it seems like ALL of my more profitable clients have been for criminal issues.