In 5 Years or Less Your Law Firm Will Be Dead
A Tale of Two Firms, One Thriving, One Clinging to Life
This report is not about how to make your office more productive. It’s not about how to streamline your document processes. It’s not about how to market your firm better and pull in more clients with slick advertising. You could probably do a Google search and find some free info product on any of those topics.
No, this report is about life and death.
At least the life and death of your firm.
Because if you don’t heed the advice and follow the direction in this report, in 5 years (maybe less), you’re out of business.
Existential threats to the legal industry, especially to smaller firms, is more dangerous than in any time in history.
But, don’t believe me.
In their 2015 annual report on the legal industry, Georgetown University researchers had this to say…
The current challenge in the legal market is not that firms are unaware of the threat posed to their current business model by the dramatic shift in the demands and expectations of their clients. Instead… the challenge is that firms are choosing not to act in response to the threat, even though they are fully aware of its ramifications.
The 2016 and 2017 reports continued to show the exact same trends
In other words, it’s not the market’s fault. It’s not the internet’s fault. It’s not Trumps’s fault.
It’s your fault. You know the industry is changing. You know that there are “dramatic shifts in the demands and expectations of your clients.” But you’re not doing anything about it. You’re choosing not to act.
I apologize if those words are harsh. But remember, they’re not my words.
Want more proof? Here’s some more choice bits from the same publication…
Productivity is plummeting
The number of lawyers in U.S. firms grew by some 1.3 percent…although this rate of growth is modest, given the flat growth in demand, it resulted in a decline in productivity across the market.
Rates are not keeping up
Although the pace of rate increases has clearly slowed since the pre-recession period before 2008…client pushback to such increases has continued to mount. This has resulted in plummeting realization rates over the same period
And clients are getting more demanding…and walking out the door
At least since the onset of the recession in 2008, law firm clients have increasingly demanded more efficiency, predictability, and cost effectiveness in the delivery of the legal services they purchase. In the main, however, law firms have been slow to respond to these demands, often addressing specific problems when raised by their clients but failing to become proactive in implementing the changes needed to genuinely meet their clients’ overall concerns. As a result,, increasingly clients have chosen to “vote with their feet” … by finding other more efficient and cost effective ways of meeting their legal needs. This trend continued to be evident during 2015.
In other words, your clients are demanding more efficiency and you are giving them less. Again, not my words.
Will it Get Better Soon?
Well, if you believe recent events in the political world are going make things any better in 2017, 2018 and 2019, I admire your optimism.
We have entered an age of financial uncertainty that none of us have experienced before.
Not since the 1930s has the future of the world economy been more uncertain. Financial experts are baffled. Prophets and prognosticators are stymied. No one knows what to predict.
So, like never before in legal history, you have zero margin for error.
You must know exactly where you firm stands. You must know exactly what to focus on now to get to the next level. What got you to your current level will rarely be what gets you to the next. Business as usual means death.
Because unlike 10 or 20 years ago, wasting time on the wrong aspects for your business can be lethal to your firm.
The Difference Between the Survivors and the Walking Dead
I’m guessing you’re very good at what you do. I’m guessing your 3 years in law school and your years of practice have taught you to be highly competent.
But you were taught to practice law.
You were not taught to run a business.
There was a time when you didn’t need to know how to run a business. You just did what lawyers do. Clients were referred. There were enough of them to go around. If you did an excellent job for your clients, you became well-known, you got more clients and your firm grew and grew.
Those days are over.
I’ve worked with hundreds of law firms and I’ve notice one key difference between the survivors and the walking dead: The survivors implemented BUSINESS systems aggressively. They decided to run their firm like a business. The walking dead are the ones who decided not to implement business systems. Will the walking dead survive?
Well, all I can say is, it doesn’t look good. For example…
I spoke with an attorney several years ago. Business was good. A great time to invest in systems. I proposed an automation system for him. The numbers were there. The ROI was months. It made sense on every business level. But he decided to pass. Business was good. He was rolling in it. He couldn’t imagine it would ever not be good.
Back then he was doing 100 title transactions per month.
Now he’s doing 8.
And now he can’t afford to implement the systems that would have given him the time to brainstorm ways to transform his business, to pivot, to provide a more efficient, more enjoyable customer experience for his clients.
Had he implemented a system like that back before the crash, he’d probably be back at 50-75 contracts per month.
Instead? Instead he’s desperately grasping at straws. He’s ventured into family law, estate planning. He’s playing whack-a-mole with a disappearing, commodity marketplace. He’s stuck.
He’s the walking dead.
How to Survive the Night of the Walking Dead
As the Georgetown report suggests, your clients are looking for 3 things…
- A more enjoyable client experience
Rather than go into a tedious 15-point plan for how you achieve these goals, I’ll share with you another client story…
Jeff Katz has a small practice but very successful practice in the Washington DC area.
I recently sat down with him and asked, “Jeff, what’s working for you and why is it working for you? How have you been able to thrive while other firms are struggling to tread water or even drowning?”
“Kim, if I didn’t put systems in place years ago, my people (and even me!) would
be stuck doing tedious and expensive tasks like completing standard documents.
Now, that may seem like small thing. But it’s actually huge. It impacts every aspect of our firm…from profitability to employee satisfaction to client experience.
Expected and Surprising Benefits of Automation Systems
Here are some examples. First, our people love working here. Everybody says that, but it’s true here. And the main reason is trust.
Because I don’t have to check and double-check and triple-check their work, I can trust them more. I can give them more interesting tasks to work on. I heard two of my associates talking about how their friends in other firms complain about how boring the work is, how they hate their jobs and can’t wait to find another job. Meanwhile, my associates love their work. That’s a very overlooked but incredibly powerful benefit of relying on systems instead of humans for rote tasks.
I saw a survey and 94% of the US based workers actually want to do a good job. Instead, they don’t have systems to allow them to do a good job. Or they’ve got a boss who comes down on them. so they’re in this state of panic all the time and they’re in trouble.
(By the way, the legal industry loses $9.1 billion to turnover costs every year, so don’t sneeze at the value of happy employees! – km)
Second, humans do make mistakes. When a legal document goes out to a client with a mistake, that costs me big time in reputation and client satisfaction. When those kinds of mistakes can be easily eliminated with systems, why would I not invest in that? Why would I risk it?
Third, if my people and I had to spend time on “non-creative” work stuff, that would severely limit our ability to provide excellent customer service. If I had to spend all my time just getting the basic job done, I’d have no time to go above and beyond for the client. If we spend all our time on the 80% of things that are identical to what every other firm can offer, when would we have time to spend on the 20% that makes us unique?
Clients want a more enjoyable, customized experience. You can’t do that if you’re spending all your time on the cookie-cutter stuff.
Fourth, I need time to run my firm like a business. I need to time to think strategically, to think about marketing, to think about growth. If I’m busy micromanaging my staff to prevent simple errors, when would I have time to deal with those more important 30,000-foot questions? None. I’d be just like every other firm.
Fifth, having systems has enabled us to cultivate an environment peopled by calm problem solvers. At a lot of firms, if a mistake is made, the partner goes ballistic and tries to “manage by screaming loud enough that the mistake never happens again.”
I’ve found that ineffective.
Because we have systems in place, and problems happen so rarely, when a problem does happen, we have the luxury of being able to ask, “What other system can we implement that will insure this never happens again?”
Sixth, systems help future-proof our firm. Commoditization is rampant in our industry. LegalZoom is eliminating the need for entire segments of our business. If we tried to compete with them on cost, predictability, and efficiency alone, we’d get buried. The only advantage we can offer is a superior customer experience. And commoditization is not going anywhere. It’s going to increase. We cannot afford to fall behind the technology curve.
Seventh, it hardly seems worth mentioning since it’s so obvious, but we save lots of money through automation. Paying a software program to routine tasks, is far less expensive than paying a human. It’s just a fact. Plus, the reduction in errors and re-work is almost incalculable. How can you put a price on NOT looking incompetent in front of your clients?
A Hard Lesson from the Retail World
What’s the difference between Costco and Wal-Mart?
They provide the same service, same prices. But Costco seems to be doing much better. People like going there. It’s always packed.
Wal-Mart, on the other hand is dreaded.
And the only reason I can see for that is that Costco has implemented systems that have allowed them to create a superior customer experience. It allows them to pay their employees more, spend more time creating unique solutions, and it generates a welcoming, energizing environment.
People love going to Costco but many would pay money to NOT go to Wal-Mart.
That wasn’t always the case.
Back in the 90s, Wal-Mart was known for their awesome customer experience. I know because I worked there in the early 90s. We took pride in giving customers a friendly, pleasant shopping experience.
That’s hard to believe these days. Today, their customer experience is dreadful.
I’ll leave you with these thoughts from Keith Lee on AbovetheLaw.com…
I recently explained why lawyers doubt technology – it’s because they don’t want to risk losing their ability to be thorough in exchange for being efficient. But thoroughness and efficiency are not mutually exclusive. And rampant inefficiency can actually hamper the ability to be thorough.
If you’re spending hours a day on $10 an hour clerical tasks that could be accomplished in half the time by adopting efficient policies and procedures – then you’re limiting the amount of time you have to be thorough for your clients. At some point, being disinterested in optimization and efficiency is self-destructive.
Good enough is dying.
The 21st century is an era of hypercompetition. Any business that wants to compete must not only be doing well by their own standards, they have to be doing better than everyone else as well.
What Type Of Lawyer Are You?
We’re increasingly transitioning towards a winner-takes-all economy. There will be fewer players, but the competition more frenzied and intense.
- That means above average lawyers, smart lawyers, need to stay abreast of changes in technology and the industry (not being cheerleaders for it).
- Smart lawyers will look for new means of delivering legal services — client portals, secure apps, assisted self-service.
- Smart lawyers will look for new means of communicating with clients — blogs, social media, video conferencing.
- Smart lawyers will look for efficiencies and best practices for their offices — case management software, computer-assisted document assembly, ediscovery software platforms.
So, what type of lawyer are you?
What’s Your Next Step?
To help move your firm survive and thrive in this dangerous age, we have a practice assessment. It will take you 5 minutes to complete. Once you have completed we will send you an email with the next step that is customized based on your answers.