Archive for the 'Business Development' Category
The pressure to discount rates has never been greater. Yet studies of complex sales like legal show that less than 10 percent of decisions are based on the value-to-price ratio:
So why has price become the cornerstone of so many conversations between lawyers and their clients? There is no question that legal budgets have become a greater focal point for companies in the post-recession economy, but it is more than that.
More people than ever before are leveraging their personal networks and publicly available information to make decisions about what and from whom to buy. These resources always have been part of the due diligence process for making purchasing decisions, but in the digital age, where people have instant access to social networks and an abundance of free online information, the influence of these factors has grown exponentially.
Just think about what happens when you get a new ache or pain. Do you call the doctor immediately? Chances are, no. First you might ask someone for their insight — maybe you post a question online, email some trusted friends, make a call or ask someone face-to-face. Once you get insight from those you trust, you will probably go online to research a potential ailment or get background on a doctor. Next thing you know, you are in the doctor’s office, sharing your self-diagnosis and inquiring about a specific remedy.
The impact of the internet on the “sales” process is fascinating. Research by the CEB Marketing Leadership Counsel across 22 B2B industries revealed that the average customer had completed more than half of the purchase process before having an initial conversation with their service provider. That means clients have already vetted their choices and face-to-face conversations often focus on specific requirements — price being the major one.
If that data holds true for the legal industry, what does it mean for lawyers?:
1) Your marketing program is no longer a “nice to have,” it is a “need to have.” Face time with potential clients is no longer a commodity, so you need to find ways to engage with potential clients long before they need your services. You don’t need to friend your clients on Facebook or have a Twitter account if that is not who you are, but you do need a robust online presence that leverages the same online channels that your clients use. And, instead of developing content that begins with you, identify topics that are focused around the needs of your clients.
2) Your brand must define you as more than a good lawyer. Your marketing must express what makes you different. This is not a new marketing concept, but it is something lawyers continually fail to do. If your website or bio is dominated by words like “Innovative,” “Client-focused,” “Responsive,” or “excellent lawyers,” it is not working. That’s not to say these things aren’t important, but it isn’t going to make your stand out.
3) If you don’t want to compete on price, bring something new to the conversation. If your prospective client has learned all about you online and wants to talk to you, be as prepared as they are. Bring something to the conversation that will give them insight into their business that they don’t already know. Make the time they spend with you valuable. If there is nothing new to talk about, all you will be left with is price.
If your marketing and business development efforts lead to conversations that show clients why you are the only person who can solve their need, price won’t matter.
Debra Baker, esq., is chair of the law firm services group of Legal Vertical Strategies. She works at the intersection of practice management, marketing and business development to help lawyers drive revenue and expand client relationships. LVS has developed a proprietary process called Insight Mapping to help law firms define what makes them different and develop strategic content marketing programs and business development toolkits that create business opportunities.
Referrals are the primary source of business, but a strong network and the ability to build great relationships will not be enough to build your book in the coming years. The buying behavior of those who purchase legal services has changed and the way lawyers pursue new business must change too.
For any lawyer that has had formal training in business development, the concept of “solution selling” should be familiar. Lawyers are solution sellers. They don’t sell products; they solve real problems. The key to successful solution selling is the ability to develop a rapport, ask the right questions, and listen; so you can then go back and find a unique “solution” that fits the specific needs they have identified.
For decades, this approach has been the hallmark of law firm business development, but that has changed if the findings of the Corporate Executive Board’s research on the sales process holds true. The book based on the CEB research, “The Challenger Sale,” debunks the myth that the most successful sales approach is based on relationship building. In the book they compare five types of sales representatives (yes, lawyers do act in the capacity of a sales rep.): Relationship Builders, Lone Wolves, Challengers, Hard Workers, Reactive Problem Solvers. The findings? When it comes to high performers in complex sales, only 7 percent of them are relationships sellers.
Hard data to swallow for a profession where likability, trust and knowledge are fundamental to providing the highest level of representation. But when you consider the changes taking place in the market — particularly since the financial collapse in 2008 — the data makes sense when it comes to the purchase of complex legal services. Here are three reasons why:
- Time: Who has it? It takes time for relationship builders to find out all the information they need to know in order to provide a solution to fit their clients’ needs. This time is precious to the buyer and they don’t want to spend it educating their lawyers. If in-house counsel or the c-level suite are going to invest their time, they should be the ones getting the value. Tell them something about their business that they do not know.
- Complexity of Doing Business: The traditional solution selling model makes a significant presumption — that buyers know what they need. That is not always the case. The increasingly complex regulatory environment, the need for enhanced due diligence, and sheer volume of potential legal issues facing businesses today is daunting. In many cases, corporate buyers of legal services don’t need lawyers to fill an existing need; they need lawyers to tell them what they need.
- Risk Adversity: With the issues facing companies, buyers are increasingly risk adverse. Legal solutions are typically complex, time consuming and expensive. Decision-makers no longer are willing to make a unilateral decision about who to hire. The decisions are more consensus driven than ever before. The larger the organization, the more people involved in the decision-making process.
Do you have what it takes to provide clients what they need to be successful in the coming year?
Do you have what it takes to build a $1 million law practice?
As law firms become more business focused in response to economic, technological and other market forces impacting the practice of law, the ability to generate business is increasingly important.
Whether it’s $1 million, $10 million, or $250,000, most of us have a number that signifies success. Many lawyers don’t achieve this number because they lack the tools to do so or mistake financial return for purpose.
Numbers are important. They make goals tangible and provide metrics for measuring progress. But numbers alone are not good enough. There must be a business vision and a defined plan behind the number to achieve success.
Why do you do what you do?
A number is a great metric, but it is not your business purpose. Understanding why you do what you do provides the vision, values and motivation for reaching your goals.
Many people – including myself at one time – have underestimated the value of defining their purpose. They have mistaken their number for their why, making their quest for money passionless at best and unsustainable at worse.
The most successful lawyers have a defined reason for choosing the law as a profession and are able to use that motivation to achieve financial rewards.
What will you do to you achieve your business purpose?
To achieve your business purpose you need a means to do so. At a very tactical level, your “what” is the legal work you do in exchange for money. But there are strategic considerations as well.
From an internal standpoint, you need to determine what you need to do to reach your revenue goals:
- How many matters do you need?
- How many clients do you need?
- What resources and processes do you need to provide these services?
From an external standpoint, you need be able to identify and leverage business opportunities. This requires an understanding of a number of factors:
- How much demand exists for what you do?
- Who needs these services?
- How much are these services worth?
- Who else provides these services and how are you different?
The analysis will depend on the environment in which you work. There are different issues depending on whether you are a senior partner, a mid-level associate, or a solo practitioner. Yet armed with the right insight, you can realistically assess whether your number is attainable and, if not, adjust accordingly.
How will you do it?
This is the roadmap for achieving your purpose. The roadmap includes systems and processes that will allow you accomplish your “what” in an efficient and profitable way. Internally, you need an organizational plan that will allow you to provide your services efficiently and profitably. Externally, you need a marketing and business development plan that will drive business to you.
And then you have to take action. This is the hard part, but when you understand why and know exactly what you need to do, reaching your number not only becomes possible, it is achievable.
The legal industry is famous for lookie-loo marketing. They watch what their neighbor does and say we should do that too. The problem with this approach is multifold. First, there are only a handful of firms that see the return on marketing investment time and resources that they want. Second, it assumes all firms have the same needs.
Before trying to copy your neighbor in pursuing business development,consider where your firm sits in the market and use that as a starting point for pursuing a business development strategy.
Not sure where you fit in this progression? Considering which of the four marketing stages reflects your firm.
If the old adage about understanding you have a problem is the first step to fixing it holds true, the same can be said about addressing these common marketing and business development challenges. By understanding where you fit in the market, you will be taking the first step toward taking the guesswork out of your marketing program.
Despite the financial downturn and increased competition, it continues to surprise me how few lawyers effectively use competitive intelligence to evaluate market opportunities. Lawyers instead look for opportunities where they have found them in the past, wait for opportunities to find them, or engage in random acts of marketing without clearly identifying who they are trying to reach.
The greater the understanding of the market, the greater the ability to identify new opportunities and to articulate your unique value to existing and prospective clients.
A simple framework for identifying market opportunities are to look at four trends in the context of your current practice:
Economic climate. A strong economy contributes to legal needs driven by opportunity – deal flow, investment, joint ventures and strategic alliances. Businesses can use litigation as a strategy to protect, not just defend. In weaker economies, opportunistic legal activities still exist, but fewer businesses are positioned to take advantage of them. Often the legal issues that do arise are necessity deals and litigation, viewed as expenses and subject to significant price sensitivity.
Regulatory environment. Regulations add to the complexity to running a business. Heavily regulated industries and regions increase demand for legal services. On the counseling side, legal services are tied to risk aversion and will be considered in most cases as important and necessary expenses. Litigation can be high-risk, bet-the-company type matters, such as a multi-district, class action lawsuit alleging violation of a statute, or a single claim that could result in having a key brand pulled from the market. At the same time, increased regulations can also lead to more nuisance litigation.
Industry Trends. Industry trends can create or deter demand for legal services within specific sectors. Niche issues that impact a particular industry provide lawyers an opportunity for legal specialization. Industry trends that lead to demand also provide law firms an opportunity to be more targeted in their marketing and business development efforts.
Geographic Trends. With increased globalization, geographic trends are important to understand even when evaluating the legal services market of a single region. Businesses inside that market do not limit their business to a given region, so their legal needs bleed into other geographies. Additionally, the competitive landscape is not limited to the attorneys within the region.
Understanding the impact of these factors on the markets they serve in order to assess what type of work in their areas of expertise will be in demand. It will assist firms in identifying common characteristics among businesses with specific needs that can be used to more effectively target and market the practice.
As a follow up to my Moneyball and the Law series addressing whether statistical data is a better measure of law firm performance than subjective insight, I’m introducing a new framework that tests this hypothesis.
The Law Firm Performance Index™
To achieve the highest level of performance, law firms need to understand the outward-facing factors that impact the business of law. The LVS Law Firm Performance Index™ provides insight into these external drivers:
- The trends that generate or limit demand for specific types of legal services.
- The needs and decision-making process of potential buyers in a given market.
- The landscape of lawyers competing for the same clients.
Armed with this knowledge, law firms can develop and execute strategies based on objective rather than subjective evidence, reducing risks and increasing returns.
The Performance Indicators
Are you in demand?
Because of the dynamic nature of legal services, predicting demand in a given market is challenging. Legal matters typically fall into one of four categories: Commodity, Routine, Complex, Bet-the-Company. The largest volume of work falls into the first two categories while the most profitable work lies in the latter two.
A variety of trends impact the volume (amount) and nature (value) of legal services. The LVS Performance Index™ evaluates global, national and local trends to predict demand for different practices:
Who needs your services?
Corporate buyers of legal services vary based on business type, size and market reach. The buyer profile provides insight into the value (cost) of different types of legal needs. Size also impacts the way clients make decisions about whom to hire.
LVS segments the business market into five categories:
- Public Companies
- Large Private Companies (greater than $75 million in revenues)
- Mid-Sized Private Companies ($10-$75 million in revenues)
- Small business enterprises (less than $10 million revenues.
Pricing of legal services is generally associated with the level of risk and complexity of a matter. The larger the company, the more complexities in running the business and the greater the value of legal services that facilitate this process.
The business segment can also dictate how decisions about who to hire are made. Small companies make decisions quickly and rely heavily on referrals from trusted advisors when deciding who to hire. Large companies have more formal hiring processes, so firm brand and the ability to demonstrate and validate expertise is more important.
Can you get the business?
Law firms do not compete on an even playing field. The richest firms are getting richer. They are able to attract the best lawyers and win the highest volume of premium legal work.
At the same time, the firms that make up “Big Law” are increasingly segmented. A new tier of super-rich firms now controls the largest share of the premium legal services market. Large firms in the tier below are under increased pressure to compete for the premium work that remains. Trends impacting these firms have a trickle-down effect on other regional, local and solo firms.
Although these sub-groups will continue to evolve, Legal Vertical Strategies segments the law firm competitive landscape into five tiers:
|Tier 1||An emerging Global 25 law firms that LVS believes will ultimately control the legal market.|
|Tier 2||The remainder of the AmLaw 200 firms based on revenue.|
|Tier 3||Regional and other firms outside the AmLaw 200 with multi-city offices.|
|Tier 4||Single office/city law firms with more than four people.|
|Tier 5||Solo attorneys and firms with up to four people.|
What is your baseline competitive position?
The LVS Competitive Matrix pinpoints the relative competitive position of each tier of firm based on the type of client and value of work needed to achieve those goals.
Using the baseline competitive matrix, firms and individual attorneys can evaluate and adjust strategic goals and objectives based on market realities.
External dynamics impact how law firms will achieve these goals in many ways:
- The ability to generate business is dependent upon global, national and local trends that impact demand for legal services.
- Developing strong client relationships requires a deep understanding of the unique characteristics and demographics of businesses in the market.
- In order to demonstrate and differentiate to a client requires an in-depth knowledge of the competitive landscape.
- Operations, profitability and professional development are all dependent upon decisions that arise out of business creation, client relationships and competitive differentiation.
The Law Firm Performance Index provides the data firms and attorneys need to align external-facing strategies with the overall vision and culture of the firm. As with any index, the indicators will continue to evolve over time.
I’d like to hear from you. What external measure would you look at to predict law firm performance? In the meantime, I look forward to sharing in future posts the results of the work I do with clients who utilize this framework.
By Debra Baker
“I do not start with the numbers any more than a mechanic starts with a monkey wrench. I start with the game, with the things that I see there and the things that people say there. And I ask:Is it true? Can you validate it? Can you measure it? How does it fit with the rest of the machinery? “
- Bill James, 1985 Baseball Abstract, as quoted in Moneyball by Michael Lewis
Understanding the client base of a given market is akin to fielding a team based on the totality of circumstances — the opponent, the stadium, the talent pool.
Legal Vertical Strategies analyzes the legal landscape from three perspectives: Demand, Client Base, Competition. Each has its own set of measures that provide insight into the overall market. The second perspective, Client Base, provides insight into the mix of legal needs that exist and how decisions about who to hire are made.
Buyers of legal services vary based on size, market reach and relative sophistication. Legal needs range from day-to-day matters – perceived as part of the cost of doing business – to high-risk, premium matters where price plays little, if any, role in who gets hired. The larger an organization, the more complex the legal needs are likely to be. The buyer profile of a given market, therefore, provides insight into the value (cost) of different types of legal needs and the decision-making process for selecting who to hire.
In general, businesses can be categorized into four clusters: Multi-nationals, Large Companies, Medium-sized Companies, and Small Companies. Combined with an analysis of market demand, insight into the client base of a given market provides informs decisions about:
- What clients to target;
- How to reach decision-makers and key influencers;
- How to focus marketing and business development resources around the highest value opportunities;
- Projecting revenue and developing creative pricing strategies.
Lawyers and law firms should evaluate how much of their client mix is dependent on clients in this region and ensure that growth strategies take into consideration the nature of work this client base has and how these clients make decisions.
By Debra Baker
“Baseball was theater. But it could not be artful unless its performances could be properly understood. The meaning of these performances depended on the clarity of the statistics that measure them.”
- Michael Lewis, Moneyball
Like baseball, the legal profession is as much art as it is discipline. But if objective measures will provide clarity as to how legal services are defined, what are those measures?
Legal Vertical Strategies analyzes the legal landscape from three perspectives: Demand, Client Base, Competition. Each has its own set of measures that provide insight into the overall market.
Demand identifies what opportunities exist, with whom, and the relative value of those opportunities, informing decisions about:
- Target practices and industry groups;
- Talent development;
- Maximizing marketing and business development investment;
- Aligning resources.
Economic, industry, regulatory and geographic trends all impact demand.
Economic climate. A strong economy contributes to legal needs driven by opportunity – deal flow, investment, joint ventures and strategic alliances. Weak economic confidence stifles deal flow, lowering overall demand for transactional services.
Regulatory environment. The more regulations, the more complexity to running a business. Heavily regulated industries and states created environments increase demand for legal services.
Industry Trends. Industry trends can create or deter demand for legal services within specific sectors.
Geographic Trends. With increased globalization, geographic trends are important to understand even when evaluating the legal services market of a single region. Businesses inside that market do not limit their business to a given reason, so their legal needs bleed into other geographies.
Law firms need to understand the impact of these factors on the markets they serve in order to assess what type of work in their areas of expertise will be in demand. It will assist firms in identifying common characteristics among businesses with specific needs that can be used to more effectively target and market the practice.
The first of a five-part series.
By Debra Baker
Competition for a share of the legal services market has never been greater. Most firms struggle to identify how best to use limited marketing and business development time and dollars. Too often firms use subjective criteria when making decisions. They do what they’ve always done without measuring return on investment. They do what everyone else does because everyone else is doing it. Or, they do nothing, hoping their existing client base will be enough to get them through the future.
The reality is it won’t. The market has changed. Competition is increasing. Buyer expectations are greater. In the book and academy award-nominated film Moneyball, Oakland A’s General Manager Billy Beane applied objective measures to the business of baseball, focusing on statistics rather than “look and feel” to field his team. Author Michael Lewis observed:
If gross miscalculations of a person’s value could occur on a baseball field, before a live audience of 30,000, and a television audiences of millions more, what did that say about the measure of performance in other lines of work?
Legal Vertical Strategies is taking a page from Moneyball to help law firms use objective data to develop strategic growth plans, focusing on three aspects of the market that impact how law firms win new business:
- Overall demand for legal services
- How purchasers of legal services make decisions on who to hire
- The law firm competitive landscape
These external insights – demand, decision-making, and competitive landscape – combined with an analysis of internal insights related to attorney expertise, existing client base, industry knowledge and current market position provide an objective framework around which law firms can plan for future growth.
I’ll be discussing each of these three areas and presenting a framework firms can use to analyze the data in the contact of their own strategic growth in future posts.
In legal knowledge management and IT circles, the concept of Legal Project Management as a discipline has been a hot topic for the last two years. In marketing circles, … not so much. Amidst client development programs, service offering launches and the support and evaluation of new business opportunities, few law firm marketers seem to be thinking about how firm processes and technologies can reshape the fundamental value proposition of a firm.
But lawyers and marketing professionals who are thinking about how to reposition their firms to thrive in the future should consider the role Legal Project Management can play in that effort. Differentiating a law firm is harder now than ever before. The market is converging. The gap between the top firms and the rest of the playing field is widening. The firms at the top are getting the choice matters and are cherry picking the talent. There are few areas in which the rest of the field can still compete…. with one exception.
Firms of any size have the opportunity to demonstrate their unique value to clients by working more efficiently. Legal Project Management (LPM) principles provide the framework around which to do this.
LPM applies traditional project management concepts to the control and management of legal cases or matters. As explained by Jim Hassett in the July/August issue of Managing Partner (subscription required), there are eight elements of LPM:
- Setting the objective and defining the scope
- Identifying and scheduling activities
- Assigning tasks and managing the team
- Planning and managing the budget
- Assessing risks to the budget and schedule
- Managing quality
- Managing client communication and expectations
- Negotiating changes with clients
These elements are inherently part of any case or matter. The difference with LPM is that these steps are managed in an ongoing and consistent way. From a marketing standpoint, that translates into the following opportunities:
- Enhanced Client Communication. Survey after survey reveal that client communication (or lack of it) is a primary driver of corporate decision making when it comes to hiring a law firm. With LPM, law firms have the tools they need to stay responsive and address issues in a proactive way with clients. LPM provides the tools for planning and managing a budget. It allows you to better manage quality. It also allows you to address unanticipated changes that invariably occur during the course of most matters.
- Demonstrate ROI. The consistency that LPM brings to the table means there is an opportunity to demonstrate a quantifiable return on investment to clients — something very few firms have mastered successfully. Consider having the ability to conduct a post-matter client debrief in which you can evaluate the actual costs incurred against the original estimated budget, and then using that hard data to discuss ways in which you and the client might be able to improve management of a particular type of matter in the future.
- Alternative Fee Arrangements. As we all know, everyone wants AFAs, but few people know how to put them together confidently. Fewer still know how to do so profitably. LPM provides the tools to effectively looking at the true cost of a matter, and the tools for better managing the matter during the project.
LPM as a discipline has the opportunity to make a lasting impact on how lawyers do business. But we all know change is slow to come, particularly if left up to the lawyers alone. Marketing professionals should get involved with their knowledge managers, IT and pricing colleagues to help drive this change.
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