Profitability in Law Firms
Insight and Analysis
Toby Brown, Steven Campbell, Tim Corcoran, Mark Santiago, Shaun Jardine, Richard Brzakala, Stuart Dodds, Phil Nixon, Wayne Hassay, Madhav Srinivasan, Richard Martin, John McCarthy, Jack Kingston, Michelle Peters, Mitch Spradlin
Profit. What a simple term. To determine it, all one needs to do is take revenue and subtract costs and there you go: profit. From there it’s easy to determine a percentage and margin. So what’s so hard about law firm profitability?
How can they increase their profitability and efficiency without compromising their quality and reputation? How can they leverage the power of technology, data, and innovation to create value for their clients and themselves? Law firms are facing unprecedented challenges in the current financial climate and therefore need profitability strategies to survive and thrive in a competitive and changing market.
Table of Contents
|About the authors
|Chapter 1: The law firm profit primer
|Let’s get started
|Moving right along
|Putting it all together
|Chapter 2: KPIs for aligning strategy to enhanced client value and partner profitability
|Avoiding unintended consequences
|Don’t confuse margin (net income) and profits per equity partner (PPEP)
|Dashboards should focus on areas of greatest impact
|Vision drives strategy – strategy drives effective KPIs
|Example law firm mission, values, and vision
|New tools to help measure and prioritize strategic action
|Effective KPIs should inspire action
|Chapter 3: Applying battlefield lessons during peace time – learnings from the COVID-19 pandemic
|The standard playbook
|The long view
|Chapter 4: Linking partner and associate compensation to the achievement of a firm’s strategy
|Vision and strategy development
|How did we get here?
|Compensating the rain dancers
|Individual partner goal setting
|Assessment and evaluation
|Communicating pay decisions
|The partnership compensation system
|Closing the loop
|Chapter 5: Pricing approaches and firm profitability
|Business development, clients, and positioning strategy
|Create a pricing strategy and vision
|Lead the change
|Chapter 6: The roadmap to £1,000,000 extra profit in three years
|The P.R.O.F.I.T. system
|The nine-step roadmap
|Implementing the P.R.O.F.I.T. system
|The business blueprint
|Not following the business blueprint
|Following the business blueprint
|How poor cash flow almost sank a law firm
|The five cash flow levers
|The five cash flow levers being implemented
|Profitability and efficiency first, marketing second
|Implementing the profit maximizer
|Don’t do what many other law firms do
|Focusing on effectiveness
|Putting this into practice
|Chapter 7: How a sound matter pricing strategy can elevate law firm profitability
|Bringing in the best matters for your firm
|Differing approaches for payment of legal services
|Chapter 8: Questioning the value of law firm rack rates
|Why RRB discounts are so attractive to CLDs
|The credibility of cost savings based on RRB data
|The utilization of supplementary fees
|Zero negotiation strategy
|What are CLDs looking for?
|Law firm reliance on pricing specialists and business intelligence tools
|What CLDs want to see from firms utilizing a RRB strategy
|The importance and value of transparency
|Chapter 9: The next frontier in pricing strategy – capturing value from legal technology
|Making sense of the legal technology landscape
|The partner’s perspective
|The client’s perspective
|The pricing professional’s perspective
|Pricing approaches adopted to date
|What we can learn from the early adopters
|Chapter 10: Harvey Specter – the ghost of a law firm reality yet to come
|What is available and how will this impact legal services?
|Will you take the blue pill, or the red pill?
|Building the foundations for technological success
|Can technology actually help us become more profitable?
|Improving profitability and WIP to cash with technology available today
|Improving profitability and WIP to cash with one eye on the future
|A technology roadmap – getting your house in order
|Chapter 11: AI and what it means for law firm profitability
|The ethics objection
|The fear of change
|The risks and emerging power of AI
|Making a smarter, more profitable, law firm
|Chapter 12: Sustaining success along the profitability journey
|Mitch Spradlin, pricing director, Hunton Andrews Kurth Overview
|Chapter 13: The seven profit zones formula for higher profits – without working more hours
|A different approach – the seven profit zones formula for profitable growth
|Getting practical – how to increase each profit zone
|Beyond ten percent increases – doubling your profits without doubling your clients
|How long does it take to double your profits?
|The implementation paradox – information vs action
|Chapter 14: The human cost of boosting profitability
|Mental health in the legal profession
|A couple of caveats before we start
|Why lawyers become lawyers
|Where’s the balance?
|How profit is increased and the impact of that
|Doing more work
|Charging more or differently for work done and improved financial management
|A different approach
|About Globe Law and Business
Toby Brown is the CEO of DV8 Legal Strategies, which provides high-level strategic consulting to law firms, legal providers, and corporate legal departments. He is also CEO of NextGenLPM, which provides executive LPM coaching for LPM professionals and lawyers. Prior to this, Toby served as chief practice management officer for Perkins Coie. In this role, Toby worked with firm partners and clients in developing pricing arrangements and service delivery models that drive successful relationships. The role included practice management, pricing, legal project management, lateral partner acquisition, practice innovation, and client relationship management. Before Perkins, Toby served as the chief practice officer for Akin Gump and served in pricing roles for both Vinson & Elkins and Fulbright & Jaworski. Before joining Fulbright, Toby served as a director for the Utah State Bar. Toby presents nationally on legal pricing, practice innovation, lateral partner acquisition, marketing, technology, and law firm management for associations, law firms, legal departments, and law schools. He is the founder of the P3 Conference and is a founder of the Legal Value Network, which is building a community of pricing, LPM, and innovation people. Toby is also the founding president of the board for SALI, the standards body for the legal industry. Toby has served on a number of legal services boards, bar association task forces, and legal market organizations. He was named to The National Law Journal’s 2013 list of Legal Business Trailblazers and Pioneers and received the Peer Excellence Award, the President’s Award, and the Anne Charles Award from the National Association of Bar Executives. Toby received his BS and MS in Economics from the University of Utah.
Richard Brzakala is a published author, speaker, panelist, podcaster, and a recognized legal marketplace expert in legal operations, sourcing, and cost efficiency strategies. He has been a trusted advisor to many executives and general counsels, having consulted for numerous FIs, law firms, and companies. Richard is a contributing author for Thomson Reuters Legal Executive Institute, chairs a variety of legal ops groups, and acts in an executive advisory capacity for various global legal services companies. A leading US global publication once recognized Richard as a global trailblazer for developing a standardized cyber security evaluation process to monitor law firm compliance with cyber security standards. Richard currently works as the senior global director of external legal services at a large FI in Canada.
Steven Campbell is a consultant with Acumen Consulting, LLC. He helps law firms develop strategies to improve performance, leveraging innovative analytics and his extensive law firm experience to provide insight and encourage action. With over 25 years of experience in AmLaw COO and law firm consulting roles (including Thomson Reuters Elite’s Business Intelligence team), Steven has pioneered data-driven profitability analysis and performance management in law firms. Steven’s deep understanding of law firm operations and challenges has enabled him to partner with firms to successfully design and implement data-informed strategies, achieving significant transformational results in profitability and client value.
Tim Corcoran is a former CEO who now guides law firm and law department leaders through the profitable disruption of outdated business models. Tim is a fellow and former trustee of the College of Law Practice Management; he served as president of the Legal Marketing Association and is a member of its Hall of Fame; he’s an American Lawyer research fellow, a teaching fellow in the Masters in Legal Business program at the Australian College of Law, and a frequent presenter at lawyer retreats and legal conferences. Tim is a writer whose articles and book chapters are published regularly in leading legal publications. Legal journalists and podcasters regularly seek his perspectives because of his ability to get right to the heart of complex issues and for his wit and candor. Tim’s practice focus has been dominated lately by partner compensation redesign, governance reviews, and succession planning.
Stuart Dodds is co-founder and principal of Positive Pricing. Previously, he was one of the first and longest serving pricing and LPM directors in the legal industry, working firstly with Linklaters and then Baker McKenzie. Since co-founding Positive Pricing, he has subsequently worked with over 80 leading professional services firms. Stuart is a fellow of the College of Law Practice Management, a founder and board member of the Legal Value Network (a professional organization with 1,600+ members), and holds a number of professional accreditations (including as a Certified Pricing Professional (CPP)). He is a frequent speaker at conferences, and is extensively quoted in pricing and project management publications and journals.
Wayne Hassay began private practice in 1991 as a civil litigator and is now the managing partner of Maguire Schneider Hassay, LLP, in Columbus, Ohio. He is past president and serves on the board of directors of the American Bar Association affiliated Group Legal Services Association. His law firm serves as a provider firm for the legal service plan, LegalShield. As managing partner of MSH, his mission is to bring innovation and technology to the practice of law for the benefit of clients and lawyers. The philosophy is to broaden access to justice by using technology in a way that helps clients afford the legal services they need. Wayne believes this will achieve the best possible result for clients and lawyers.
Shaun Jardine is unashamedly and unapologetically a disruptor. As a solicitor (now non-practicing) and former CEO of a top 250 law firm, he has an insight into what makes law firms tick. Shaun founded Big Yellow Penguin in 2021 with the aim of encouraging and helping lawyers and law firms to move on from the 20th century and adopt practices, including value pricing, which will make their futures more secure, both financially and operationally, and enjoy practicing their craft again.
Jack Kingston has been working in the legal software industry for the better part of the past 25 years. He has a passion for working with firms within the AMLaw 250 and beyond to drive productivity and profitability and enable firms to serve their clients more effectively.
Richard Martin is the CEO of the Mindful Business Charter, an increasingly global member organization with strong roots in the legal sector whose purpose is to address the unnecessary stress in the ways we work so as to work more healthily and more effectively. He is also a principal consultant at leading workplace consultancy Byrne Dean. Richard chairs the steering committee of the Lord Mayor of London’s “This is Me” campaign, which uses the power of storytelling to challenge the stigma that still exists around mental illness. He is a mental health first aid instructor and qualified coach. Previously, Richard was a senior law firm partner in London before experiencing serious mental illness. Richard is a regular speaker on mental health and wellbeing at conferences around the world.
John McCarthy guides owners of law firms to grow their practices, increase profits, and create world class teams so they can reduce their working hours and live healthier and happier lives. With ten years’ experience as a multi-award-winning business coach, and 30 years as a sports, military, and corporate trainer, he has developed a disciplined mindset and unique style of coaching, mentoring, and training. He has guided over 100 clients to transform their businesses and their lives.
Phil Nixon has worked in the legal technology industry for over a decade, working for multiple providers of legal technology to all different sizes of law firm, both in the UK and across Europe. Currently working for Elite Technology as a senior sales executive, Phil is experienced in helping law firms transition their foundational software to new platforms and understand and realize the benefits of these tools for their firm. Phil often writes articles concerning the areas of both legal technology and law firm profitability. Prior to this, Phil was a lecturer in law at the University of Central Lancashire in the UK. Phil completed his thesis on intellectual property, with a specific focus on technology and the impact of virtual piracy on copyright law.
Michelle Peters, founder of The Business Instructor, is a former practicing solicitor who trained at a “Magic Circle” firm in London and specialized in intellectual property and advertising law for seven years. She then spent the following five years as the co-owner of a small franchisor business where she discovered her business skills and developed them through training and coaching her franchisees to grow their own businesses. Since setting up The Business Instructor in 2010, Michelle has focused on helping the owners of small law firms to develop and create a more profitable practice by attracting more of their ideal clients and increasing their fee income and profits without working more hours. Michelle provides a blend of strategic advice, coaching, and skills training through her “profitable practice” program for small law firms.
J. Mark Santiago
J. Mark Santiago is the managing partner of SB2 Consultants, headquartered in New York City. Mark holds an MBA from Fordham University, is a certified management consultant (CMC), and a member of the Accounting and Financial Planning Newsletter Board of Editors. He has consulted to the legal profession for more than 30 years in the areas of financial performance improvement, partner compensation systems, merger/acquisition due diligence, and integration and administrative support outsourcing. While a partner at Deloitte & Touche he led the two largest law firm administrative outsourcing projects in the United States and one of the three originators of the Legal Tech Conference series, and was a member of its board of advisors. Mark is a frequent public speaker and author and was the chairman of the Am Law CFO conferences for 11 years.
Mitch Spradlin is the pricing director at Hunton Andrews Kurth LLP, leading the global pricing function, and holds industry certifications in both pricing and legal project management. He is a regular speaker and panelist on a variety of topics related to pricing and profitability. He has served in leadership roles in legal pricing industry groups. Since joining Hunton in 1994, Mitch has held a variety of leadership roles within the finance function.
Madhav Srinivasan is the chief financial officer at Proskauer. He has extensive experience in legal financial management, and a deep background in corporate finance, financial consulting, capital markets, and international business. Madhav has taught at Columbia Law School in New York and the University of Texas Law School. He is a guest professor at the Wharton School of Business. He is an ALM intelligence fellow and on the advisory board at the Future of The Profession Initiative at UPenn Law School. He has published in leading journals and is a frequent speaker at major conferences.