You can generate income to grow your firm using different approaches without triggering a sudden rush of new clients. Profitability can be boiled down to increasing income and decreasing expenses. It’s about understanding your firm’s financial benchmarks for performance, finding new or better ways to get paid, and engaging your staff to meet the firm’s goals.
To keep things simple, let’s look at the three “P”s of profitability—Performance, Payments, and People.
Performance: Set Benchmarks to Track Financial Performance
Every firm manager should start the process of growth by choosing specific objectives for the firm (see this blog post on goal setting). After setting these goals, managers should understand how to translate them into financial benchmarks. For example, if your goal is to hire a new employee, you will need to ensure that you have enough income and cash flowing into the firm. If you want to buy new software, you will need to know if you have enough funds to purchase the software and pay for any set-up fees.
Meeting your goals requires periodically reviewing the firm’s financial performance and overall health. Start by evaluating your actual budget against both the projected and historical budgets. Don’t think of your budget as static, and recognize that you may need to repeatedly revise or update it. Depending on your practice, it might be beneficial to conduct a periodic budget review on a monthly, yearly, and seasonal basis. For more information on firm financial statements, check out this blog post.
Managers should be looking at key financial markers and analyzing their impact on firm goals. For the above examples, a new employee requires a sufficient client base to supply a workload and enough revenue to pay their salary. The cash flow and profit and loss statements can help identify the affordability of an employee’s compensation over monthly and yearly time frames. If buying new software, you may need to plan for recurring subscription payments and/or an initial start-up fee. It would be important to know if you will have enough money to pay any initial fees or additional future expenses.
Payment: Expand Client Payment Opportunities
A major factor in a firm’s profits is the collection rate on billed work. Many clients no longer pay with cash or checks, and some may find it difficult or unsafe to give their credit card number over the phone. The easier it is for a client to pay, the more likely they will do so and promptly. If your firm doesn’t accept credit cards or online payments, talk to a PMA about options or read this blog post.
Practice management software may include a payment processor with your subscription. Even some billing-specific software has expanded to offer this functionality. If you aren’t using that feature, it may be time to talk to ask your representative for a demo and options for training your staff.
There are methods other than software to encourage consistent payments, depending on your clientele and area of law. One way is to change the billing period for half of your clients from the end of the month to the middle of the month, providing a steadier stream of income over that period. For more ideas, review this blog post.
Ideally, your system will be set up for clients to pay easily, consistently, and timely.
People: Engage and Develop Your People
The final “P” to consider is how to engage and develop your people working in the firm. Your staff—including associates, legal assistants, and other office staff—can provide more just than the revenue they produce. They may have a set of skills that is being mis- or underutilized. To improve office morale and firm culture, learn about and encourage your team’s unique skill sets.
You may not know what each member is capable of, so ask each person to think about what they love to do in and outside of work. Emphasizing that you want to develop and support their strengths will be a huge morale boost for the office. You can also have each staff member identify their skill set using tools like CliftonStrengths or DISC. Both are simple quizzes employees can take to identify various strengths. For more ideas on how to improve office culture, read this blog post.
There are many ways to value the people on your payroll. Your focus should be to provide them with the support they need to develop their skills. None of the performance goals or firm’s payment processing can happen smoothly without workers who feel supported and engaged.
Your firm’s growth and profitability rely on what you can offer both your clients and your staff. Use the three “P”s as springboards for launching your firm into the realm of efficient and streamlined processes. And remember to consider Performance, Payment, and People when thinking of success.
Full List of Resources:
- Setting Achievable Goals for the New Year
- Basics of Your Financial Statements
- Cash Flow Worksheet
- Monthly Budget
- Design 2023 to Be a Success
- Billing Software: Explore Your Options
- Options for Getting Paid
- Electronic Payment Processing
- 5 Rules of Profitability to Uplevel Your Business
- 7 Rules of Productivity
- Building Good Workplace Culture
- Lawyers as Supervisors