Has your law firm’s profitability flatlined? If so, you’re not alone.
Although modest growth has been observed in the last couple of years, widespread overcapacity means that law firms’ tried and true profit-raising strategy of boosting market share simply won’t cut it anymore.
…But don’t despair. There are plenty of simple ways to resuscitate your law firm’s profitability.
#1 Back off the back office
Everybody knows that people are a company’s best asset. But they are also its top expense.
A deep understanding of your law firm’s work habits and back office requirements can help you maximize your workforce and reduce costs relatively quickly and painlessly.
Trouble is, many law offices are pretty fuzzy on these aspects of their business.
Enter the business manager. In a mid-sized firm, a talented business manager can do wonders for the bottom line.
To decide if creating this role makes financial sense for your firm, simply make this quick calculation: multiply an estimate of the time your firm’s attorneys spend managing business aspects of the firm (HR, finances, admin, communications, etc) by the billing rate.
If this number is equal or greater to the salary you would pay a manager, go for it.
It will free up your lawyers to do more of the work your clients are paying them to do, and therefore improve the firms overall profit margins.
#2 Embrace legal tech, big and small
Innovation has traditionally been regarded with suspicion in the legal world.
However, firms looking to increase profitability are increasingly turning to legal technology for help in cutting costs.
From basic case management software to sophisticated artificial intelligence (AI) analytics programs, law firms are slowly warming to the idea that legal technology is not only safe but is one of the key ways to stay competitive.
Perhaps most importantly, clients are demanding firms adopt new technologies in order to drive their costs down.
If your firm is new to legal tech, there are some simple ways you can ease your team into this world.
As previously mentioned, case management software will likely be a welcome innovation in most firms.
Another hot trend is AI legal analytics. Companies like Lex Machina can give firms a leading edge with data on judges, rival counsel, litigation risk and several other factors relating to cases.
Used mainly by larger firms, many industry insiders predict legal analytics will soon be a necessity for any firm hoping to stay in the game.
If you’re looking for something a little simpler with a quicker pay-off, new legal tech developments like electronic document delivery can save money on pricey process server services.
Electronic legal document delivery is now legal in many jurisdictions; it’s also trackable and safe, and can represent a substantial reduction in admin tasks.
#3 Pass the buck
One of the biggest success stories in improving efficiency and therefore profits in recent years is the growing habit of outsourcing billing and payroll to a third party company.
Long practiced in the business world, law firms have realized that shutting down their accountancy department can greatly simplify their lives.
The benefits are substantial: reduction in admin workload, better control over revenues, elimination of the need to purchase billing software and the inevitable headaches involving training and tech support.
All this becomes someone else’s problem, allowing your firm to focus on its bread and butter.
Want to learn more about how to increase your law firm’s profitability? Download the free guide to boosting your law firm’s profits in 30 days using an all-in-one document exchange solution.