7 strategies that will help mushy middle law firms make a mint
A little while back I wrote an article cautioning law firms about the perils of playing in the ‘mushy middle’. I pointed out that this was the most competitive - and most vulnerable - part of the legal services market where fees are under the greatest threat. It’s also the part where it’s becoming hardest to make a decent living.
But, still, that doesn’t mean your firm can’t thrive, even if it’s sitting smack bang in the middle of the bell curve. As my esteemed colleague Joel Barolsky pointed out: “There are still lots of mushy middle firms making a mint”. So if you find yourself playing in the mushy middle, how can you join these champions of the centre, the heroes of the halfway line?
Well, here are 7 strategies that have led other mid-tier firms to success.
1. Segment, segment, segment – then specialise.
One of the easiest ways to protect your fees is to own your segment. You’ve probably heard this one before and I’ve written about it many times. But are you really doing it?
A segment doesn’t have to be a niche. Your segment could be as big as an industry, a geographical area or a type of business. Or it can be one large client. What’s important though is that you know it inside out. That means you know the players who matter (or at least enough of them). It also means you understand how they think, what matters to them, what keeps them awake at night and how you can make their lives easier.
For me, one of the highlights of the Thomson Reuters 2016 State of the Australian Legal Market was that it showed the growth of hyper-specialist firms who really understood their clients so that they became the ‘go to’ lawyers for a particular market. It singled out Thoroughbred Legal and Salvos Legal as examples of this.
These law firms may be smaller than yours, but there’s no reason you can’t take a leaf out of their books and live and breathe a particular segment. So shake off the shackles of trying to be ‘just like a top tier only cheaper’ and start thinking about how you can own a space.
2. Become pricing ninjas
Getting the balance right between charging enough and charging too much is always a challenge. That’s why the best middle of the market firms have their pricing structures and strategies down pat.
If you want to join them as a pricing ninja, data is everything. You need to be able to put a figure on your cost of producing work before you can properly analyse whether a particular project is worth it or whether it’s worth pursuing certain types of work.
You also need to know your clients’ expectations are around pricing. In other words, what are they prepared to wear? (Good client feedback should tell you this.)
Once you’ve worked this out, you can apply a matrix such as the Clifford Chance modelto more accurately determine where you should set your fees.
And, when you’re doing this, don’t just assume you need to rush into value billing. As another of my esteemed colleagues, Sam Coupland puts it: “Be careful about drinking the Kool-Aid on value billing. It’s not the panacea. Every fee earner should know their cost of production.”
3. Show your human face
It should go without saying that any law firm is only as good as its lawyers. After all, they’re the ones whose advice people are paying to receive. So, while your firm’s ‘brand’ is important it shouldn’t come entirely at the exclusion of selling your people’s skill.
What I mean by this, is that it’s important that you encourage your lawyers to get out there and show off their expertise. They should be speaking and publishing so that they’re positioned as thought leaders in their space. Let them show off their knowledge and give prospective clients a real feel for what they do and how they can help. (Just make sure they do this in proper language, not robotic jargon-filled legalese.)
While we’re on that subject, let your website and marketing material reflect who you really are, don’t just copy your competitors. Look on any firm’s marketing material and they’ll all tell you they have “extensive experience in all aspects” of their field…. Yawn.
If you speak this way you’re not differentiating yourself - you’re the same as everyone else and, let’s face it, you’re just another lawyer.
Oh, and stop it with the stock shots on your website and start showing your people - all of them. You’d be surprised what a difference it makes when clients get to know the people they’re likely to be dealing with.
4. See yourself through your clients’ eyes
One way out of the mushy middle is by building the kind of client relationships that simply can’t be broken. And the only (legal) way I can think of to do that is to be exactly what your clients are looking for in a law firm.
So, have you ever stopped to think about how your clients’ perceive you? I hope so. In fact, I hope you’re constantly engaged in client listening - that you ask them how they found each project: what they liked and what they didn’t like and why.
But, even more than that, I hope you’re treating them the way they want to be treated - so long as it’s reasonable, of course. That’s what Tony Alessandra and Dr Michael O’Connor call the ‘Platinum Rule’ of client service. Some firms have tried to live this through symbolic statements such as the Red Chair in the boardroom or by writing literal statements such as ‘always put clients first’ on all file notepads. I don’t think you need to go that far. But I do think you need to think seriously about how you’re going to live out the Platinum Rule for two reasons.
First, it’s easier work from existing clients than it is to find new ones. So, if you’re listening to what your clients tell you and you’re actively doing what you can to keep them happy, your chances of getting more work out of them is good.
Second, there is no better referrer than a satisfied client. Simple as that.
5. Start Design Thinking
One way out of the mushy middle is to innovate. I know. It’s become another cliche. But it’s true. If you want to change the status quo you need to increase the number of new ideas you’re exploring.
And here’s one way to do it: Design Thinking.
Design Thinking recognises that innovation doesn’t have to take the form of an Uber or an AirBNB. And in fact, for law firms, it probably shouldn’t. Instead, it asks you to work collaboratively to step back and analyse the problem you’re trying to solve from the users’ point of view. Then it progresses to coming up with ideas to solve it before developing, testing and then refining the better ones. In other words, fail fast and move on until you perfect what you’re doing.
In this way, Design Thinking encourages an iterative, low risk approach to innovation that involves using your existing resources and relationships, such as your fee earners and your clients. It also recognises that the best ideas are based on ‘user experience’ not theory, and encourages you to trial things in the real world. In other words, done is better than perfect.
If you’ve been quick to dismiss Design Thinking as just another fly-by-night theory without any rigour, think again. Stanford Law School now integrates ‘Design Thinking’ into its curriculum.
6. Bring it down a notch
Law firms tend to be hierarchical places and it can be tempting to let the people at the top of the tree with the loudest voices always set the agenda. But deferring to leadership - or the HiPPOs - can reduce the pool of ideas and lead to a lack of new ideas.
So here’s a thought. What if you could get away with having more junior people make at least some of the decisions about what you do? Not only are they more often on the coalface, seeing how clients react to what you’re doing first-hand, they’re also the ones who’ll be affected by any long-term direction you take.
For instance, I read recently about a firm that was moving office. They took a vote on what to do and where to go but they excluded anyone who was expected to retire in the next five years. Why? Because they wouldn’t have to live with the decision over the long term.
7. Play to your strengths
Last week I read Tony O’Malley, PwC’s leader of Australian and Asia Pacific Legal Services, pronounce that the big firms and boutiques mid-tier firms were getting their lunch eaten by their rivals - big firms, new Law and boutiques.
But I don’t think that has to happen. You can build a wall around your lunch that means they won’t be able to get near.
After all, you still have a lot to offer none of these guys can give.
For instance, when I interview the corporate clients of mid tier firms they usually tell me how much they like their lawyers - often much more than their big firm rivals. They also like that you mid-tiers usually have enough bench strength to work on bigger or multiple projects (unlike many of the boutiques). They like that you guys tend not to get too caught up on vigorous cross-selling.
It’s also worth noting that lot of today’s buyers of professional services - ie in-house teams - left big firms so they know their deficiencies as well as their strengths. Oh, and just between you and me, they often don’t trust the big end of town when it comes to bait and switch pricing either.
So play on this. The good guys don’t have to finish last - work on your relationships and be the people whose company they enjoy. That way they’ll keep looking to do what they can to get you onto a project.
Keep yourself top of mind when it comes to your best clients and referrals sources. I find a good way to do this is to try and connect at least four people every month - for their benefit alone, not for yours. Connecting your clients with others in your networks helps network ‘stickiness’ and builds loyalty in your relationships and will lead to others reciprocating.
Besides, the 2016 State of the Legal Market study showed that lawyers in Australia’s Big 8 firms worked around 39 hours more every quarter than their counterparts in mid-tier firms. And that gap is widening. So use those extra non-billable hours you have to enjoy relationships, build networks and listen to the market.
Go on... take someone out to lunch today!
In their 2015 Law Firms in Transition report, Altman Weil noted that the mid-tier firms doing best were also the ones who’ve done the most when it comes to pricing, staffing and efficiency.
There’s no reason you can’t join them and these 7 tips should have given you some idea on just how.
Get in touch if you’d like to know more.