This 26-point checklist by Simon McCrum is a handy summary of the points made in his book ‘The Perfect Legal Business’. You may also want to watch the Law Firm of Tomorrow webinar recording How to build the perfect legal business of the future, in which Simon was interviewed. (11 February 2022)
- The managing partner needs real authority. But they must be effective. Management abilities are reduced if the managing partner has a caseload.
- Risk management is key. Or PII is unobtainable and the firm shuts down. So be fussy about the clients and cases you take on.
- A firm is its people. So you need a culture – a set of non-negotiable rules that apply equally to everyone. Enforce zero tolerance of contrary behaviours – whoever the person is!
- Only recruit people with the right attitude. Train, develop and support them. Offer a clear and fair career path. Reward the priorities of the firm.
- A firm needs growth, or it risks decline (talent leaves, etc).
- The key metric for every team is the gross margin percentage, based on the cash generated. The team leader’s priority is to drive growth in the gross margin, ie more (paid-up) revenue with the same salaries.
- What is your firm’s USP (Unique Selling Point)? For example, ‘We deliver a great service: every lawyer, every time.’ If you really can say ‘I am the best’ or ‘My team is the best’ or ‘My firm is the best’ it is extremely powerful. It makes everyone else an also-ran.
- Service is all about push (the case) and tell (the client). So design a ‘service pledge’ that the whole firm keeps to. It has to be more than just words on a website.
- Management must be committed to enforce the service pledge (eg sorting out people who don’t return client calls).
- Avoid parked files. Lawyers should be empowered to tell (and indeed, must tell) their team leader if they cannot handle their current workload.
- Use inactivity reports (less than one hour a month) to identify and deal with stoppages on cases.
- Efficient teamwork and delegation pays off through more speed, better service, and greater profit.
- Spend more time on fewer cases. Otherwise great service is impossible, as is high utilisation (ie billable hours per day).
- Real-time client feedback and quality control is far better than sending occasional questionnaires out at the end of a case.
- A client matrix together with gap analysis immediately identifies any silo behaviour by teams, eg a client who has only ever used the commercial property team.
- Avoid taking on clients and cases that you cannot deliver on, or that you may not get paid for. Learn to say no.
- Don’t compete on price. Have ‘Pride in pricing’, but you need valuable differentiators to do this successfully.
- Use value pricing. Do not be limited by the 3x salary formula.
- Define what you are doing (and not doing) for the client. Extra work means extra fees.
- Prompt payment terms must be stipulated at the outset, not just referred to somewhere in a long retainer letter.
- A fee-earners’ job is to do good work, bill it all, and get the cash in.
- Welcome clients into your firm, not just into one part of it (eg the conveyancing team).
- Be proactive with your client care. Companies need a shareholders’ agreement, account-opening procedures, T&Cs, credit control, and employment contracts and policies; just as any adult individual needs a will and LPAs.
- Focus on inputs (pricing, number of chargeable hours, and realisation rates) not outputs (bills raised, which may be uncollectable). Aim for 100% realisation, with no write-offs.
- Pick great team leaders. Use an agenda for their team meetings, and the meeting of the team leader group, designed to spot the problems and opportunities and to deal with them all (eg an Inactivity Report and an Aged WIP report).
- Focus on completing files with big blocks of WIP that can then be billed.
Growth that often backfires
‘Who dares, wins’ may be a superb motto for the SAS, but succeeding in the legal services market requires careful thought and excellent implementation.
Some strategies backfire. Take the simple example of a firm that recruits an expensive fee-earner from another firm. The person's salary hits the P&L immediately. But instructions may take time to build up. So the temptation is to offer generous terms of business, with low pricing and retainers that favour the client. Lock-up is inflated, meanwhile you are still paying 20% VAT on any bills that you send out even if the bills remain unpaid for whatever reason. All in all, cashflow can be strongly negative.
The same dangers apply to other growth strategies:
- You embark on a new practice area, which also adds to the firm’s management burden.
- You merge with another firm, which also has the risk of two cultures clashing.
- You pour money into general marketing and BD. But new client acquisition is expensive compared to upselling existing clients. ROI may be poor unless you have a clear USP in the first place.
- You increase prices, but your differentiation and quality of service does not warrant them so instructions decline.
- You open a second office (or multiple offices), which immediately makes the team less cohesive and harder to manage.
This checklist is based on Simon's book 'The Perfect Legal Business', which is full of tips. For example, how to achieve real-time client feedback, or what agendas to use for team meetings.