I recently read an article detailing the impact of the market downturn on U.S. law firms. Relying heavily on data presented by the Hildebrandt/Citi Private Bank 2012 Client Advisory, the article discussed the steady - if not drastic - decline in revenue, demand and "realization" since September 2008.
One of the most alarming statistics was the decline in the collected realization rate against the standard, i.e., the percentage of work performed at a particular firm's standard rates that is actually collected from clients. It reveals that U.S. law firms are collecting less than 85 cents on the dollar, essentially an industry-wide client discount of 15% on every transaction. The effects of this decline include downsizing, lack of hiring and significant pricing pressures.
So, what can we do to sustain our practices? I've put together a number of tips, many of which we employ in our practices, to reduce your overhead expenses and maximize efficiency. By doing so, both you and your clients can save green. It's a win-win situation. (Note: These tips are directed generally to small firms and solos, but most apply to larger firms as well.)
Outsource Only What Makes Sense
Many law firms outsource every "non-lawyer service," e.g., administrative work, bookkeeping, marketing, etc., instead of performing the tasks in-house. Not only is it more expensive (in many cases), in the long run it can be less efficient.
When you delegate tasks you must first explain what the task is and how you want it performed, and oversee its implementation. The time spent is often more than it would have taken you to do it yourself. Plus, when you do it yourself, you learn how things work "behind the scenes" in your law firm.
You may recognize growth opportunities and cost savings more readily if you spend time dealing with the less glamorous administrative tasks. You may also glean insight into how your marketing practices are actually paying off, and how you can improve them, by spending time focusing on these issues yourself. You may even run into issues that your clients are grappling with and by relating a personal experience you can better connect with your clients.
Still, there are some tasks better left to specialists, such as taxes. There is also a point at which these tasks will begin to cost more than they are worth if you must sacrifice "full price" paid work. However, for many lawyers, the money saved by doing it yourself is worth the time spent doing it.
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