Is it a bad time to be running a law firm, or can you survive – in fact thrive? It’s a tough market out there generally, but are law firms subject to even more problems? It seems more law firms are “going bust” and it appears the contingency fund may be under pressure.
In the last few months, we’ve seen the high profile closures of firms like Cobbetts, Atteys and Blakemores. What’s going on in the market and what should you do to ensure your firm is safe?
Are Law firms struggling like never before?
Is there a growing trend in the legal market, is running a law firm getting harder? After intervening in 30 firms last year, the regulator is in talks with 56 firms where intervention is possible. (Law Society Gazette)
The SRA is concerned about the financial stability many firms. We also see headline like “Prepare for the worst, SRA tells struggling firms” (Law Society Gazette). Is there a range of “one offs” or is it time to think differently and change the way you’re running your law firm?
What’s making running a Law firm so hard?
(Law Society president Lucy Scott-Moncrieff, talking about the reduction in the number of Law Firms in the UK.)
The main things I see are:
Cost control: Historically the strength of balance sheets in most law firms has meant that cost control hasn’t been the same issue it is today. Today some firms, allegedly, are not retaining enough cash for tax payments. Add this to the tightening of banking controls and cash becomes a major issue. Click here for some more ideas, but one thought is to create a regularly updated cash flow projection. It’s a lot easier than it sounds and can get everybody focussing on the real problem areas.
- Competitive market: Many firms are concentrating on “getting work”, rather than looking at the number of leads (sorry sales speak slipping in there). The result is not enough of the right sort of work. Do you have a clear target in mind for every piece of marketing you undertake and do you set aside regular resource (your time as well as money) towards getting the right leads every week?
If you don't really enjoy selling, or you want to be better at converting prospects into clients - why not download "6 steps to sales success". It's a great free guide that we will send you Click here (email address required) for this report.
- Pricing: Increasing competition means that one can easily slip into a mindset of chasing work, without pricing it realistically. Thus taking on jobs which increase the pressure, rather than decrease it. How do you monitor pricing?
- The Ostrich Syndrome: It’s really easy to see the multitude of changes in the marketplace, consider that “we’re still doing OK” and take no real action. “We don’t do PI or rely on Legal aid”, or “we’re a small firm and not as large as the ones having problems”. I’ve heard that many times, followed a couple of months later by “Jon, what do you suggest we do….”
The next article is called “Running a law firm: 9 things all small law firms should do in order to survive and prosper”, return on Thursday to read it.
One last one that I’d add is about creating the right focus on the problem. That’s about having an effective key performance indicator process in place. If you’d like to download our free report “What are KPIs, why and how should I use them”, it's free and waiting for you to download right now. Click here for instant access (email address required).
What’s the biggest thing you’re focusing on right now?