By Richard Hugo-Hamman, Executive Chairman of Legal Futures’ Associates LEAP UK 
Building a successful law firm requires thought and planning but above all it requires action. 89% of all law firms have between one and five partners and, like many small businesses, they are often under-resourced with many lacking training in business or even rudimentary bookkeeping skills. What is not sufficiently recognised is the entrepreneurial nature of almost every law firm. Many founders of law firms begin as sole practitioners or junior partners. They rely entirely on their own skills and determination, not just for success but for survival, and are dedicated to the calling of their profession.
Introducing change can be hard but adding some of these practical measures could transform a business.
1. Become efficient
Successful small law firms with extremely price sensitive private clients understand that their very survival depends upon efficiency.
Contrary to arguments that time is better spent lawyering for clients than worrying about efficiencies, it is impossible to ‘lawyer’ confidently and well in a disorganised and inefficient environment. Technology provides tremendous but often unharnessed opportunities to create the most efficient and successful law firm in your area. Most lawyers seem to think that putting effort into compliance and bookkeeping is a good place to start, but bookkeeping is typically done by one, usually non-billable, person within a small firm. Revenue is generated by lawyers. It makes sense to make them as productive as possible and to give them the tools to provide wonderful client service.
Brief your lawyers on your plans and goals, and select areas where technology can instantly provide the biggest productivity boost
2. Enjoy practising law
The lawyers working in the most successful small law firms enjoy what they do. They have organised their firms and have made conscious choices about the work they want to do and the clients they enjoy working with. Stress is bad for business and can be eliminated by choosing areas of law that interest you and setting realistic expectations of success.
Time needs to be set aside to lead the firm, to manage firm affairs, to meet regularly with staff, and to work on practice development.
3. Employ smart people and look after them
Your staff will be your biggest single expense aside from yourself. It does not make sense to treat staff badly, and yet in so many firms, staff are undervalued and not treated well by under pressure lawyers. Successful firms treat their staff better in a more holistic sense. Their staff have good chairs, up-to-date equipment and clean work areas. Happy and motivated staff will do better work, attract new clients and referrals.
Perhaps the biggest difference between the successful and unsuccessful is the attitude to staff training. Recruiting the best people you can afford and organising regular training will ensure they are happy and effective employees and will stay with the firm. Provide staff with the best tools to do their job, which applies to both hardware and software technologies, and with technology now so inexpensive any firm can afford the best systems. Mentor young lawyers (and paralegals), thereby constantly improving their skills.
4. Select areas of law you like
For smaller law firms, particularly when starting out, there is the temptation to take on any work that becomes available.
The successful firm will develop expertise in defined areas of law – thereby supporting higher professional fees. Select areas of law that sit together comfortably, e.g. residential property, estate planning and probate and family law.
It is possible to take a specialisation too far. One of the great advantages that the legal profession has, is that it is possible to build a very recession-proof business. Successful firms have multiple revenue streams to cushion them when the economy changes.
Once chosen, focus all your marketing and training on your selected areas of law.
5. Dedicate time to building the firm as a business
The leaders of successful firms understand that building a firm takes time. It is the leader who must do this. In many smaller firms, the principal is often the largest fee earner. But these leaders can get more done by delegating work effectively and setting aside 20% of their time to work on building the business.
If you want more clients and matters, you need to promote your firm. Successful firms ensure that there is constant alignment between the legal services offered and what their marketing material and their staff say. It is this alignment and consistency of messaging that builds a firm’s reputation. Because they are empowered and happy, clients take notice and will become repeat customers.
A good leader will share their vision with staff and clients and ‘know their numbers’. A good practice management system will track how many new clients they get per month and what the average client is worth. Understanding cash flow and working capital requirements is important as is adopting encouraging employment policies and practices.
6. Adopt new technology
The evolution of software has led to the development of solutions that help the owners of SME law firms become better leaders and build more successful firms. Just the act of using the software properly will transform a business, if a firm does not keep up with technology, it will quickly become uncompetitive. Technology can provide better quality of service more efficiently and at a lower cost. Ways to do this are:
- Focusing on having a single database of information for a firm,
- Having productivity systems (practice and case management) and legal accounting and client accounting in one application
- Having libraries of highly automated legal forms, letters and agreements to maintain consistency and produce accurate documents quickly without needing special typing skills;
- Recording every activity on the go so that the firm can bill accurately while complying with legislated record-keeping obligations;
- Using a compliant client accounting system which all staff can use.
By running operations on a low-cost, cloud-based system, tech-savvy law firms can use smartphones and tablets for mobility and save thousands of pounds otherwise wasted on traditional IT infrastructures and expensive IT support.
7. Confront the challenges of getting paid and solve them
The leaders of highly successful firms confront money challenges head on. With good time recording and billing systems, it becomes easier to explain and de-personalise the fee process.
Ways to do this are:
- Ensure there is an appropriate Retainer or Engagement/Costs Agreement in place for every matter and that it is signed. Good systems make this easy;
- Whenever possible, get a deposit from the client, ideally sufficient to cover the next 30 days of work;
- Where appropriate, set monthly payment arrangements from the start of a matter so that bills never get out of hand;
- Make sure that the firm does precisely what the Retainer Agreement says it will do regarding billing and payment which may mean ceasing work beyond the scope of the Agreement;
- Immediately provide a revised Retainer/Cost/Engagement Agreement when scope of work changes;
- Make sure that every activity of every lawyer is contemporaneously recorded into a system so they can manage their matters properly, bill accurately and comply with their professional obligations.
- Bill regularly for small amounts, never letting the debt get out of hand;
- Don’t operate under the illusion that WIP is income – it needs to be billed
- Most importantly, stop work if the client stops paying without making alternative arrangements
8. Implement standard processes and procedures
Many SME law firms are badly organised with files littering the office which does not impress clients.
A successful firm has systems and procedures needed for the efficient administration of the office and every matter throughout the firm, which all staff can pick up and understand. The certainty that organisation brings allows the lawyers to spend all their time doing law, not clerical work.
Ways to do this are:
- Having only one database of client and matter information. This requires a good software solution that combines time recording, document production and management, legal and client accounting and billing in one integrated application.
- Have one way of opening a new client file and apply that method for every member of staff and every client file.
- All standard documents electronically organised and easily available.
- All information about a matter can be accessed instantly and the matter can be shared with clients online
- Have standard billing procedures that are adhered to religiously.
9. Make compliance a natural consequence of running a firm well.
The leaders of successful SME law firms implement systems with standard procedures, processes and checks and balances to ensure that compliance is a natural consequence of running a firm well.
Every law firm is required to appoint a Compliance Officer Legal Practice (COLP) and a Compliance Officer Financial Affairs.
Successful firms use modern systems and manage their firms diligently, so they do not face stressful disciplinary proceedings for failing to comply with ethical or regulatory compliance.
10. Become experts in customer service
The bedrock of customer service is communication. Lawyers running successful firms effectively embed customer service throughout the culture of the firm. Happy clients mean repeat business and referrals.
With modern technology, lawyers can use new ways of communicating with clients, including self-service portals where clients can book appointments, pay bills and make deposits, view their matters and comment on documents.
Keeping in touch with clients thughout the year via a newsletter informing them of new legal issues and general news from the firm will further cement relationships.
11. Understand finances
A successful SME law firm will understand the economics of the firm and the matters.
To successfully grow a firm, understanding the sources of capital and effectively managing them is critical.
Ways to do this are:
- Ensure that you have a deposit in place to cover initial fees and disbursements whenever possible
- Ensure that every activity (in and out of the office) is accurately and contemporaneously recorded
- Ensure that bills are generated as soon as it is appropriate
- Ensure that everyone in the firm generates bills using the same system and sends them
- Make it easy for clients to pay using modern online payment methods
- Follow up debt to ensure it is paid on time
Successful firms monitor performance daily through automatically generated performance reports identifying issues or problems as they arise. They are particularly careful about managing disbursements, which can easily be overlooked. This creates a well-run and financially efficient law firm.
With a good understanding of revenue, firms will understand which matters are profitable, and which work is worth pursuing. By keeping accurate time records for every matter, they can adjust their charge rates as needed to achieve the desired profitability level.