In the first of a two-part webinar series, LexiconLIVE! covered the fundamentals for a new fiscal year and how law firms can set themselves up for success.
The webinar featured a panel of executives covering several areas of operating a law firm profitably. In part 1, the panel reviews client relationships, financial performance, and talent management. They provide tips for evaluating your firm’s current practices and identifying areas of change to help strengthen the foundational building blocks needed to ensure success as you move into a new year – regardless of what circumstances the future brings.
Client Relationships in the Legal Industry
Without an adequate or accurate client base, a law firm’s prospects are dim. We recommend taking the following steps as you head into the new year:
- Perform an annual Client Portfolio review
- Who is your current client base?
- Does it align with your strategy?
- What patterns are visible?
- Perform an annual strategy review
- Is your portfolio reflecting a change in your target market?
- Is there an opportunity to bring in new business by adjusting your target market?
Your overarching goal should be to understand your current portfolio, understand your broader market/client potential, and address the game.
Financial Performance in the Legal Industry
There are two assessments of financial performance you will want to consider as your firm begins the new year.
- Perform an annual firm assessment considering strengths, weaknesses, trends, and strategies for improvement.
- Take a look at pandemic year specific assessments analyzing productivity trends, market reliance, margins, expenses, investment leaks, and financial risk.
To get started, here are a few best practices when it comes to your law firm’s finances:
- Document a long-term financial strategy and profitability model.
- Ensure access to sufficient capital and cash-flows.
- Follow written budgets and regularly monitor consistent financial reports and KPIs.
- Ensure streamlined invoicing, payments, and collections systems.
When it comes to addressing financial performance, there are four essential reports you need to ensure you track:
- Income statement
- Balance sheet
- Cash flow
- Retained earnings
Additionally, according to the AAEPA, there are four essential areas of focus:
- Revenue per attorney
- Salaries: 65% of gross revenue
- Marketing: 8-10% of gross revenue
- Rent: 6-7% of gross revenue
Talent in the Legal Industry
Finally, you will want to assess your firm’s talent management as you begin 2021.
You will first want to perform an annual talent review in which you:
- Review each person.
- Review each practice segment.
- Review your firm’s back office.
Then you will need to consider possible improvements and whether a boost in talent can be realized in-house (through training, focus, or otherwise) or by acquisition or outsourcing.
Law Practice Today recommends 7 focus areas to improve firm talent:
- Learning and Development
- Career Development
- Engagement and Retention
- Feedback and Evaluations
- Compensation, Rewards, Promotion
- People Data
Register for Part 2
We will continue our LexiconLIVE! webinar series in the coming weeks. Be sure to register for Part 2 for more tips on how to position your law firm for success in the new fiscal year.