At a recent CLT session on this subject, the delegates – mostly heads of family departments outside of London – found the following concepts most valuable for developing a privately funded family law practice:

Mind shift – from public service provider to profit generator

a)         Accept it’s not Legal Aid anymore – Those who have predominantly done Legal Aid work in the past have a different mentality. They take their duty to the Courts and the clients extremely seriously and work very hard to try to service an almost infinite demand with limited resources. There are always more files to open and always more work to do. The clients often make unreasonable demands and are a real drain on energy and morale. Of course, you must provide an excellent service to clients but they are now paying for that service. And therefore, you don’t accept clients where they won’t pay for the level of service they demand.

b)         Use a financial expert to understand the numbers – The working capital and the cash flow are different in the private market – especially if you adopt new approaches such as monthly billing or financing large work-in-progress for fees to be paid in instalments or at the end of a case. Some lawyers still don’t understand the profitability of different types of work or levels of fee-earners. Get an accountant who understands legal practices to help you build your understanding and the systems that you and your partners will need to manage the finance in your private business.

c)         If the local market can’t pay, find one that can – If those on your doorstep can’t afford the fees for the service you provide, then find a market that can. The key here is research to achieve a better segmentation. Creating a profitable niche is one of the most effective strategies for a smaller law firm yet many try to provide all things to all men/women and fail miserably. It’s back to the need to focus again.

Focus – Set goals to make the choice of strategy easier

a)      Clarity on the owner’s real goals – Too often, the only “goals” are the total amount of fees that are required. For the next year – far too short term. Profit is often missed from the equation and this is highly dangerous as fee-earners may end up super-busy but making a loss. The owners of a law practice need to be clear about their guiding objective – Do they want a lifestyle business with a modest but regular income? Are they prepared to invest to make greater profits later on? Do they want to build equity in the business, for, say an exit in five years’ time? Or do they want to wring out every last penny of profit in the short term? Are they looking to shape up to be attractive for a merger/takeover partner? Do they have regional growth ambitions etc?

b)      Break down the goals – Think what any financial goal really means. Is that 100 cases at £2,000 each or 10 cases at £20,000 each? Or is it a mix? What time frame will be required to achieve this? What is the time span between generating the enquiry and closing the case so it can be billed?

c)       Select one or two key strategies – Smaller firms simply do not have the resources to have all singing, all dancing marketing strategies that tap into every channel and use every promotional tool. Consider the best sources of the best work. Consider the strengths and preferences of the lawyers generating the work. Consider what might work best for the particular market you are targeting. Then select a couple of approaches, set up systems so that results can be measured and do them really well.

Pricing – Think differently about pricing

a)      Separate costs from price – There is, of course, an internal cost management element – this enables firms to determine how much it is costing to provide the service and therefore assess whether any investment in technology or training might help improve efficiency. But then we must think about the price from the client’s point of view – about what they value. The client does not care about the cost of production – only the value that they perceive. Therefore, if they perceive all legal providers as generating the same value then they will choose on the lowest price – it’s a commodity after all.

b)      Add value beyond legal advice – So we spent quite a bit of time thinking about how to add further value (even if this means breaking out from thinking about purely legal services) and/or packaging the service differently so that direct comparisons are no longer possible. The legal advice is the core produce – but the value comes from the lawyers around it in terms of service delivery, relationship, communication, billing practices, reassurance etc. There were some interesting ideas around a greater range of variables in different service options – at present, the market seems to concentrate on download forms only (DIY), lawyer assistance and fully represented. But with some creativity (i.e. thinking outside the box) we found over 50 possible service dimensions to give the client more choice and control whilst also demonstrating exactly what they get for their money.

c)       Differentiation – This is the key to fighting commoditisation. Whilst brands might be used by the larger providers in the market to good effect (e.g. the trust associated with a major financial or retail organisation), smaller firms can focus on differentiation generated by truly different service – whether that is embodied in the experience or style of a particular individual, a departure from the typical legal model (for example, we talked about the possible provision of child contact centres and other child related services with, perhaps, psychologists and counsellors) or some other aspect of delivery.

On a more practical (as opposed to strategic) level, the other key point of interest was the use of the Internet and social media. Free software such as Google Analytics is vital to monitor web traffic from different sources and to learn the key words that get people to your site. Search Engine Optimisation (SEO) can be complex but the basics need to be understood by anyone writing copy for the web site or blogs. It is also the main reason why firms should get to grips with social media – the value of the inbound links even if time prevents a proper listening and interacting approach.

Dates for future presentations of this CLT workshop are here: