Improving profitability often includes driving more revenue, which may encompass a range of factors including service pricing, production, staffing mix and marketing. Each of these components has a unique effect on profitability. Revenue increases tied to increased client value produce better results, especially in a very competitive legal market.
Firms often view profitability improvement as a function of cost control. Cost control is a certainly an element of profitability, but the best results are attained when firms are able to distinguish between wasteful spending and spending that has the potential to return profit.
Tactically, we find it useful to separate expenditures into two basic categories: pure overhead and investments.
Overhead costs are affected by different drivers including discipline, technology, systems, procedures and management. Disciplined firms tend to have an efficient workforce, fully implemented systems, quality support data and a high production culture.
Investments also require expenditures of money, but have the potential to return profit. Typical investments in this sense include marketing, innovative technologies, and revenue producing salaries. Investment spending should be viewed in terms of quantifiable returns and timing.
High performing firms have a process for evaluating and managing overhead expenses. More importantly, top performing firms have the systems, data and training to help them make better choices. The difference between highly profitable firms and firms that struggle is mostly related to the choices they make.
FREQUENTLY ASKED QUESTIONS
What is the first thing PerformLaw does when engaged to help improve a firm’s profitability?
Initially we categorize the firm’s historical costs into categories that include overhead costs and investments. Overhead costs are measured against our benchmarks after taking into account any of the firm's unique circumstances. Expenditures deemed related to the production of profit are evaluated in terms of returns and opportunity costs.
Does PerformLaw focus only on cost aspects of profitability improvement?
Essentially, all profits are tied to expenditure of sort, however, we fully appreciate that revenue improvements and growth are important components of profitability. Normally revenue improvements beyond increasing production or rates are more complex and take time. Firms that run efficiently afford themselves more time to effect longer term plans.
What deliverable should I expect from an engagement with PerformLaw?
We have a strong belief in showing our work and supporting our recommendations with data and analysis that is clearly explained to our client firms. The purpose of our reporting is to educate and train with the goal of raising a firm’s internal capability to perform. Client firms receive well written and concise reporting explaining our findings and recommendations.
Will PerformLaw actually help us implement their recommendations?
We are well known for our implementation support. We believe we are unique in this regard. Some of our engagements last 30 days and some last 18 months. Every client is different and most of our clients retain an existing relationship with us. We absolutely implement and are willing to take on a firm’s most difficult challenges.
PerformLaw helps clients to become market aware and fiercely competitive. We are focused on planning, development, analysis & improvement of your firm. We specialize in these areas and are committed to providing outstanding critical services that will protect and grow your firm for years to come. Our expert staff have provided successful solutions to address the unique needs of each client we engage.