Clients want to be clients of financially successful law firms
Often when I talk with principals of small law firms, they tell me that being a financially successful law firm is not really a priority or a focus for them. Of course they have every right not to make that a focus and as a result those firms tend to under perform in that area.
While I understand that many professionals feel uncomfortable talking about ‘law firm profitability’, as if making a great profit is somehow unprofessional, this attitude can come back to bite them in a big way.
I suspect though that those principals don’t think through the implications of financial under performance.
For a start, those firms have employees. While the principal may not be focused on profitability, the employees may have a different view, when they realise that as a result, the firm is not able to pay them a competitive salary.
A natural result will be that this firm is unlikely to attract and retain quality people.
In addition, due to low law firm profitability, these firms tend not to invest in developing their people. In terms of CLE, both the principals and the employed lawyers, will often only do the minimum and probably cheapest training, to meet their CLE obligations.
As for training for staff who don’t need to meet CLE obligations, well you can forget about that.
This is hardly a conducive environment for retaining up and coming people and it is also hardly conducive for giving consistent high quality advice to clients.
When it comes to staying up to date with technology and other key areas of practice, the low profitability firms often let that slide as well. They can’t afford it.
If clients of that firm knew that due to the lack of focus of the principals in running a financially successful practice, that :
– They were dealing with principals who themselves are probably not as up to date as they should be, due to lack of cash flow to attend quality training;
– That staff working on their matter are of poor quality, as they have chosen to stay because they can’t get a better paid job at a better firm;
– That those same staff are receiving little or no quality training;
– That the firm wasn’t staying up to date with technology or anything else for that matter;
– As a result they aren’t necessarily getting consistent quality advice
Do you think those clients would want to stay at that firm?
Great profitability is a necessary requirement to have a great law firm. I find it hard to say that a firm is a really good firm if their profitability is poor, because I know the inevitable consequences of poor profitability. You see it everywhere, not just in law firms.
Great profitability is not just about the principals.
Great profitability leads to:
– Great training;
– Great advice to clients;
– Great clients; and
– Ultimately a great practice.
If you want to be a principal of a great law firm, one that you can be proud of, it is a vital ingredient that you make great profits.
Unfortunately, if you can’t reconcile in your head that you can still be professional and also have great profitability, you will quite likely destroy the professionalism that you wanted so dearly in the first place.
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