How Are You Planning for Revenue Growth in the Post Pandemic World?
The global recession of 2008 created extremely difficult circumstances for businesses including law firms across the world. Fresh off the crisis, law firms across the world reacted sharply to the crisis and made ambitious statements of intent to transform their operations and meet the changing expectations of their clients’ head-on. While some progress was made over the last decade, the radical overhaul that was promised never came.
However, the past 10-week period in 2020 has been the biggest shock to businesses in decades. Corporate legal spend that is already under the spotlight will be looked at closely in the months to come. Law firms that got by with incremental improvements over the last decade may finally be meeting the disruptive moment the industry has been resisting for a while. The Alternative Legal Service Provider (ALSP) market segment that did not exist prior to 2008, has been growing in the last decade and is poised to seize the moment given their investments in technology and a more agile approach to client management.
Source: Thomson Reuters and Adam Smith, Esq estimates
This is not intended to be a doom and gloom post, rather a suggestion that while the need to innovate is urgent, the current ‘new normal’ that law firms find themselves in is actually a perfect catalyst and opportunity for transformation. Entire firms from the most senior partner to the most junior assistant are working from home, staff have been furloughed, and across the board significant partner compensation reductions have been implemented – all topics that were previously considered “sacred cow” have been dealt with in a matter of weeks! This is a clear demonstration that in fact change can happen and quickly at that.
So what is the best place for law firms to focus their innovation efforts in the coming months? Previous conversations around law firm innovations have been disproportionately focused on practice processes and pricing and have completely failed to consider one of the most crucial aspects of a firm’s bottom line. It is time that law firms put client acquisition and retention processes in the spotlight and adopt an innovation-focused, digital-first approach across the organization in order to ensure predictable revenue growth.
Based on our experience of working with professional services firms across the world, we’ve observed that law firm Business Development and Marketing functions significantly trail their counterparts in other professional services firms and the corporate world.
Some key challenges we have observed in the Business Development and Marketing processes are:
The Role of Lawyer
Business Development and Marketing processes in a law firm are overly dependent on fee earners. Lawyers expect to or are expected to lead the img src=complete process from strategy to execution on all client facing activities including marketing. This is highly problematic as lawyers have significant billable hour pressures and are easily distracted from marketing and business development activities dueimg src= to the demands of billable work.
Source: Where Are We Now Bloomberg survey – 2018
The perception is that lawyers lag their counterparts in other sectors when it comes to their client development and revenue generation activities because they are uninterested in sales and marketing. However, in our discussions with lawyers, particularly in the recent weeks, we have mostly heard a high degree of anxiety about the lack of skills and knowledge required to execute these activities effectively. They recognize that client development and revenue generation won’t be the same after the pandemic is over, but don’t know where to start. For many lawyers whose tried and true client relationship strategies involve happy hour meetings, golf games, or conference attendance, figuring out how to keep these client relationships strong in their new ‘virtual normal’ is going to be crucial.
Lack of a Structured Approach
The traditional model of law firms has been to hold partners accountable for client development and revenue generation. It was assumed that partners, with their network developed over the years, would be the right people to originate business. That expectation still holds in many firms. However, partners were never trained in sales and are often uncomfortable with this activity, which is a second reason they’re easily distracted from these activities.
Even when there is an effort around sales or marketing activities, the majority of the times there is a complete lack of strategy or systematic approach that can be replicated. This ends up looking like ‘random acts of client outreach’, with lawyers reaching out only when they feel like it or think of it.
Many of the lawyers we speak to are not even able to describe how their current book of business was built and how they would repeat it. It is clear there is a strong need for a more formalized approach to revenue growth and retention that would ensure lawyers are reaching out at the right time, with the right message
Broken Support Operations
So what does Business Development mean, anyways and how is it different from Marketing?
Most law firms have some form of Business Development and Marketing function in place, precisely to address the lack of process and the lawyer’s constant dilemma to balance billable work with new client acquisition and revenue generation. However, the way these functions in law firms are structured leads to fundamental issues.
First, the term “business development” is used in law firms as a catch-all for support activities related to creating and maintaining revenue generating client relationships. It is expected that all of this is done from behind the scenes, and as a result, Business Development and Marketing professionals at law firms play a variety of roles, depending on the day and the fee earner they are supporting. Sometimes it’s research to support target list generation or “know your client” content, other times it is acting as a copywriter or graphic designer to support client pitches or social media posts, and quite often it is acting as an event organizer (translated to organizing webinars in the current environment). This vague and messy role definition results in individuals hired for roles that don’t match their skills or experience.
Furthermore, there are ineffective silos – practice group BD professionals, regional BD professionals and central marketing teams that are made up of event organizers, digital marketers, CRM and communication specialists. Some firms have stand-alone business research teams, others have these skills located within their Library teams and reporting up to Knowledge Management. BD Directors are supposed to be coaches, but BD training is the responsibility of Professional Development functions. Each of these units is supported by disparate tools and software that don’t speak to each other, creating a fragmented, uncoordinated revenue generation engine.
In comparison, modern sales and marketing teams in corporate businesses are technology and insights-led and are supported by a cohesive unit (comprised of inside sales, marketing, customer support, and operations) that keeps the funnel active.
Lack of Metrics
Corporate sales organizations track many metrics to monitor the effectiveness of their salesforce and marketing campaigns. The most common of these metrics is CAC (Client Acquisition Costs).
In a recent survey, 94% of law firms report not knowing their costs of customer acquisition. Nor do they track any other metrics related to their business development and marketing function. Why?
CAC is a difficult metric for firms to monitor as the numerator (‘total sales and marketing spend’) is distributed across multiple silos and reporting lines. On top of that, the denominator (‘# of new customers acquired’) is also difficult to define. Is it a net new account or a new billable matter at a former client who hasn’t sent business the firm’s way for a couple years? Or perhaps a new practice matter from a key account?
Whatever the measure, the highest number in total spend is the least visible which is fee-earner time invested in the activities and related lost opportunity costs (i.e. if a partner attends a conference, the firm may at best track the event fees and travel costs, but not the cost of days of partner time invested in this activity and resulting ROI). As a consequence, law firms likely have extremely variable client acquisition costs (CAC) that are not tracked or measured.
We will delve into this topic of metrics and key performance indicators (KPIs) in more detail in an upcoming blog post.
So, what does innovatingspan the Business Development & Marketing function within a law firm look like?
Some progress has been made in the last decade and law firms across the world have managed to build modern websites and invested in CRM tools. Terms such as cross-selling and Key Account Management (KAM) are now part of the vocabulary. However, due to the lack of a structured and strategic approach to managing the sales funnel, very few leverage the entire gamut of tools (including social media) available to help with lead generation, and progressing these leads through the sales funnel all the way to conversion. The starting point of innovation must be an examination of the current state of the processes across each of the three buckets of spend to identify areas of improvement with two guiding principles:
- Maximize the effectiveness of time that a lawyer invests in revenue generation and building stronger relationships.
- Improve the support structures eliminate unnecessary silos, introducing tools and automation, and increasing the focus on accountability for the sales funnel.
It is well known that companies that put together the right combination of people, process, data, and technology significantly outperform others, registering a 2.3 times industry average growth and 3 to 5 percent additional return on sales.
The Future of Business Development is in the RevOps Framework
Business Development is a messy catch-all term and ‘sales’ is still a bad word for lawyers, so we’re introducing the term RevOps to the lexicon of law firms – a structured framework to amplify the revenue generation activities of fee earners, enabled by data, analytics, and automation while eliminating traditional marketing, business development, and professional development silos within firms.
The Revenue Operations framework has become the go-to model for high-velocity revenue generation in B2B Sales (particularly in technology and SaaS). It is time law firms considered a similar framework to accelerate growth and deal with the headwinds for the industry, particularly since their LegalTech and ALSP counterparts will be adopting these modern processes.
In our next blog post, we will define what a RevOps framework for a law firm would look like, the related KPIs, transition processes and how a RevOps framework may well help to reduce costs while addressing client complaints that they want their lawyers to be more proactive.
In conclusion, a typical response of law firms in recessionary times is to cut costs, and cost centers such as Business Development and Marketing functions are low hanging targets. We are suggesting that the current economic circumstances have created both a need and opportunity for firms to strengthen fee-earner support while innovating to address long-standing structural deficiencies in this function. Cost savings may well be a resulting benefit.