What factors will have the greatest influence on small law firm profits in 2014?
Macquarie Bank who is a major lender to small and medium sized law firms publishes an annual survey of small law firms that reveals some very interesting information that you can use to the benefit of your practice.
One of the results of the survey that I found of great interest was the factors that were likely to have the greatest impact on small law firm firm profits in 2014.
The survey results graphed the results in 2013 and also in 2011, so you could see any trends.
Click on the graph to open as a bigger one.
By far the most important factors in order were these:
– Maintaining and developing client relationships (79% of firms)
– Retaining quality staff (75% of firms)
– Excellent customer service (57% of firms)
The importance of all of these factors had increased form 2011.
In this article I would like to concentrate on the first factor.
Maintaining and developing client relationships is critical to having a successful practice.
79% of firms clearly believed that if they could do a great job in this area, that it would be a Win/Win for both client and firm.
This survey was only focused on what would lead to increased profit, but another benefit of a focus on client relationships is that one day you will want to sell and realise the rewards for your lifetime of efforts.
When you sell a practice, the buyer is generally not interested in buying some furniture and filing cabinets off you, they could get that on Ebay.
What they can’t get on Ebay, are the client relationships. This is the only thing that gives your practice it’s value.
The only thing
It stands to reason that if you nurture your client relationships, you will have a much higher quality practice to sell.
If you were a buyer, what would you want?
1) A bunch of old filing cabinets, full of files on people that no one knows and indeed no one knows if most of them are still even clients of the firm anymore
2) A practice full of fantastic client relationships, with clients that everyone loves dealing with, who pay fair fees, never quibble over them and actively refer many new clients, just like themselves to the practice.
It is not a hard choice is it?
Will a buyer pay more for that practice?
Well here’s a thought…. if you have a practice that good, you just may never want to sell it… and yes, buyers will pay you more.
Buyers are not idiots.
Buyers can tell the difference between rubbish and quality
Remember I said that building quality client relationships was a Win/Win for both you and your clients?
In fact it is a Win/Win/Win
It is still a win for the clients and your firm, but it is a Win for you personally when you finally look to sell your interest and get appropriately rewarded for your life time of efforts in building the practice.
So what is it going to be for you?
– Great clients, who you love dealing with; and
– Great profits; and
– Great sale price reflecting your awesome client relationships.
It really isn’t a hard choice, is it?
If you would like to get a copy of the Macquarie Bank survey, you can use this link to navigate to the relevant section of the Macquarie Bank website.
Colin Ritchie passionately believes in the future of the legal profession and knows that helping firms to dramatically improve profits and practice valuation is his way of ensuring that the legal profession has a bright future.
1) Building the relationship with existing clients
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