Law firms are increasingly looking for ways to identify their most profitable clients. The firms that get this right will find the most effective avenues for lucrative collaborative work, as well as the lawyers best suited to providing high-quality services.
The modern law firm can use various techniques to guide the its relationships towards higher profitability. Data models in modern business intelligence platforms enable you to instantly analyse relationship factors, rank clients by growth and profitability, identify clients by characteristics such as industry sectors, and more.
Targeting high-value cross-sell
Identifying where existing cross-selling transactions stem from – introductions, referrals or collaborations – encourages lawyers to repeat profitable activities. Fees billed is just one helpful base metric to determine the value of cross-sales.
Analysing cross-sell introductions and referrals can be a key part of identifying more profitable relationships. Many firms measure origination percentages to pinpoint how much credit each lawyer gets on a matter. Your data can also reveal: how much work a lawyer originates for themselves; how much work they bring in for others in the firm; and with whom a lawyer collaborates.
Identifying each fee earner’s touchpoints across the firm can also help with analysing collaboration. Higher earners often have more touchpoints, revealing a more in-depth picture of successful cross-functional work.
This type of analysis uncovers routes for client relationship holders to feed new work to others and show which services may attract new clients.
Client retention and growth
Studies by Bain & Company, along with Earl Sasser of the Harvard Business School, have shown that even a 5 percent increase in customer retention can lead to an increase in profits of between 25 and 95 percent. Firms that focus on measuring client growth rates incentivise client retention, allowing them to rebalance client relationship responsibilities.
Start by calculating client growth rates. Examine a lawyer’s book of business, comparing year-over-year fee calculations to determine an average fee growth percentage. Adding an open client count can provide clarity when a portfolio’s growth drops while the number of clients increases. Or, you may discover a lawyer brings in many clients, but further assessment shows they deliver less profit. Next comes identifying client growth and shrinkage. Running a client list which includes two years of fees billed identifies your top clients and the percentage of revenue they represent – alternatively, you may prefer to determine Tier 1, Tier 2 and Tier 3 clients – either way, you will see which clients are growing or shrinking. Including metrics such as discounts and average billings deepens your insight into each relationship’s value.
The best reasoning I have seen for undertaking white space analysis has been put forward by HubSpot: “Sometimes, clients don’t know what they need, until well, they need it, so it’s up to companies to be pro-active”. Undertaking white space analysis reveals growth opportunities. For instance, ‘identifying Acme Corporation’s recent commercial work and which other departments are involved.’ Now, ask: “What types of work are we not yet performing for Acme?” This encourages the person who holds the relationship to pitch other types of work to the client or create new introductions.
We believe strongly that technology offers firms the opportunity to take advantage of the unique characteristics that define their firm while building strong, sustainable client relationships. This starts with the premise that no two firms are alike. When implementing a business intelligence solution, it’s vital to take into account the ‘things that make you who you are as a firm’. Our clients understand that a pure ‘out-of-the-box’ approach to data analysis will not meet their needs and that, with a fully-customised BI solution, they will be able to actively manage their firm, lawyers and clients to improve profitability and quality of service delivered.
We encourage our clients to explore how to best identify the most effective strategies for increasing profitability by analysing each contributing factor. This helps to refine and align the firm’s internal reporting and results in highly tuned dashboards for partners across the firm that support the firm’s culture and strategy.
If your firm is looking for a partner who understands the meaning of collaboration and how it applies to your firm’s data, you should get in touch with Iridium Technology, now part of BigHand today.