The true growth of any business is through an increase in profit.
By Richard Hugo-Hamman, Practice Advisor
It is a common misconception among owners of small law firms that growth is measured by the number of people in the business. Over the years, I have spoken with many partners in small law firms, and as soon as the word ‘growth’ is mentioned, they react, usually with alarm and a statement similar to: “No! I don’t want any more partners!” However, the meaning of growth is misunderstood. The true growth of any business is through an increase in profit.
Cut Costs or Improve Efficiency
From a revenue perspective, simply increasing charge rates to improve the bottom line is not as easy as it sounds. Rates, whether fixed-fee or time-based, are controlled by powerful market forces. For most small practices, the need to offer affordable services constrains pricing. Most people find it difficult to pay legal fees, so you may have to cut costs or improve efficiency to increase your profits.
Staff costs are the biggest expense and the only variable where changes can have impact. Your options are to either reduce staff or get existing staff to do more. An effective way to achieve either of these objectives is to improve your business’s efficiency by using the right technology. The rise of self check-ins/check-outs at airports and grocery stores provides clear signposts for the future.
Intense competition has made technology cheaper than ever; assuming you have the right staff, investing in the right technology is the best way to increase efficiency – and profits.
Some small law firms find it difficult to find suitable support staff – such as legal accountants, administrative assistants, and junior lawyers – particularly in non-metropolitan areas.
Possible solutions to this problem include:
1. Giving your staff the tools they need to do more work faster.
2. Delegating routine work to existing staff so that you can do the high-value work.
3. Reducing legal accounting costs by re-engineering the way you do your matter accounting so you can use part-time bookkeepers.
9-Point Plan to Increase Profits
1. Organize your data into a single database.
2. Organize your template documents and matter documents.
3. Organize your communication documents.
4. Organize your Safe Custody contents.
5. Be disciplined about time recording.
6. Produce bills regularly for smaller amounts.
7. Collect what people owe you.
8. Involve yourself in the change project.
9. Act today!
If you follow this plan, you will see your profits grow without having to employ extra staff.
There are many reasons to do nothing: partnership difficulties, thoughts of retirement, being busy, general inertia, etc. Complaining is easier than doing. However, to grow the profitability of your firm while providing a better service to your clients, you must change something. Organizing your practice by introducing software will allow you to fine-tune the balance between the work you have and the people you have working for you. But which software solution is the right one for your practice?
One relatively quick and easy way to do this is to contact the software provider’s support team directly. They should be able to help you make the right decisions for your firm, assist with the deployment and training, and provide the long-term support you need to enable you to concentrate on your clients – not on the technology.
Richard Hugo-Hamman is the Executive Chairman of LEAP Legal Software. He has thought about the challenges facing small law firms for more than 25 years and has visited thousands of law firms on three continents. www.leap.us
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