Where has all our confidence gone – Is it time to invest again?
Most legal businesses have found making money difficult since the credit crunch and the subsequent economic slowdown which began in 2008. Many firms have faced falling fee income due to a drop in demand for their services, coupled with pricing pressure, the like of which has not been experienced previously. This had lead in turn to a reduction in profits which has resulted in most firms looking again at their expenses and looking to find ways of reducing these without impacting on the quality of service provided to clients. This cost cutting mentality has now lasted for over 5 years but may finally have run its course.
Economic recovery needs investment
When the economy picks up and growth returns, there is always a shift that has to be made from “spending less to make more money” to “spending more to make more money”. It is difficult to make this change of mind set when the recession has lasted so long but if you don’t want to get left behind then it is important to be brave and to start spending again. After previous recessions, many law firms were slow to invest and failed to capitalise on the profits that could have been earned in the growth years. So do you want to miss out this time or are you happy with the status quo?
Where should you be looking to invest?
There is no right way to invest but it might be worthwhile considering whether you should be investing in one or more of the following areas:-
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Business Development & Pricing
Having identified the areas of your firm which are likely to grow fastest as the economy picks up, you should be developing a plan to grow in these areas. The investment may be a cash investment in developing your website or in offering more training to clients but it might simply be about encouraging people to invest time in traditional business development activities and to spend some time raising their profile through social media.
Productivity & Efficiency
If your service levels are poor and you are inefficient then you are unlikely to see much growth. By investing in service delivery and efficiency you could become much more attractive to your market. This might require investment in IT to improve your ability to manage cases more efficiently and to update clients proactively. It might also require further training of fee earners to help them understand what needs to be done to manage and exceed the expectations of clients.
Fee earners are not stupid, but if you have not properly explained what you are expecting them to do and you have not provided them with the necessary knowledge and skills to deliver on these expectations then you might be disappointed at the outcomes achieved. Fee earners will benefit from commercial training as well as legal training. The commercial training might include a refresher on time recording and more advanced sessions on matter planning and alternative fee arrangements.
Real change is achieved by changing the behaviours of people within the firm and such change is often well supported by training.
It will be interesting to see who fares best as the economy returns to growth. The evidence of growth in the fees earned by firms is fairly consistent at the half year point so should we now be increasing our investments or do we want to be left behind?
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