Maintaining a healthy level of profit in a small or sole-practise law firm can be tough, and there’s no magic bullet for success. In fact, sometimes your first instincts can lead you astray. “Quite often, if someone thinks they should do something to improve their bottom line, they should do the exact opposite,” says Wayne Cosgrove, a profitability consultant with Cosgrove & Associates in Toronto who specializes in working with small law firms.
For instance, the first reaction to a shrinking profit margin might be cutting expenses — but Cosgrove often advises his clients to actually increase office expenses. “What are you going to do, cut your staff, which you need? Cut staff salaries? You can cut till the cows come home, and even if you’re successful in saving some money, it won’t make much difference on the bottom line,” he says.
Instead, he recommends investing in a modern office, in trained and competent staff, and in good computer software and hardware. “Without that, there’s not much use in trying,” he advises. “You have to make sure your office is refurbished every so often, your staff is trained in the latest information, and your technology is up to date.”
Here are eight of Cosgrove’s tips for improving profits:
- Focus on files. Stop reacting to crisis after crisis, and move your current files to their conclusion.
- Docket your time meticulously. Send a bill as soon as the job is done – don’t wait for the end of the month.
- Collect retainers, and replenish those retainers whenever needed.
- Draw up a monthly “profit plan” showing what’s coming in, what’s been written off, and what bills must be paid. With foresight, you can spot and plan for trouble.
- Raise you billing rates annually.
- Train staff to multitask, so that assistants double as bookkeepers, or even paralegals – and compensate them accordingly.
- Form partnerships with younger lawyers who can eventually take over the bulk of the firm – and avoid partnerships with those who will wind down and retire when you do.
- Market yourself. Instead of lunch or drinks, visit your client’s firms and get to know their business better. You’ll be amazed at how pleased they’ll be.
Amy Jo Ehman
Reprinted with permission from the Jan/Feb 2005 issue of National, the magazine of the Canadian Bar Association. Copyright 2005.