Why Your Law Firm Isn't Making MoneyMay 11, 2022
Congratulations, you've decided to launch your own law firm! But let's be real for a moment. Starting a successful law firm is actually the easy part. Getting hired by the right clients and keeping them happy so they refer more business is the challenging part.
If you're in private practice you will inevitably face the growing pains that occur when it's time to scale your firm to generate more income. Making the jump from being a true solo or a firm with a few support staff, to running a 7 or 8-figure firm, is something that very few attorneys will ever accomplish.
It requires a willingness to work ON your business and not just in it. It takes someone who can lead a team, manage their time and delegate work. You will be asked to take many risks and the courage and faith it will require can not be understated. It isn't for the faint of heart but it's so worth it.
The only way you can build a 7 or 8-figure law firm is by having systems and procedures in place that allow you to manage your existing clients and your team. Having strong customer service ensures that clients are happy with the work you do and will continue referring work your way. You also have to have marketing support behind you so prospects think of your firm at the point of need. And finally, you need money. Investing into growing your firm needs to be on your radar if it isn't already (investing in hiring a team or paying for marketing support, etc.)
You Have No Systems and Procedures at Your Law Firm
You need to have systems and procedures in place. The reason is simple: if you don't, you and your time will not be efficient. That's why so many law firms aren't profitable. The main culprit is lack of systems and procedures--and the only way out of that hole is by implementing some solid processes that work for everyone. Without systems and procedures you will:
- Take longer to close out cases which results in less happy clients and less revenue for your firm to operate with. If a case takes 36 months to get paid on versus 12 months, you had to cover overhead for an additional 24 months. Turning cases over slowly can ruin your reputation and bankrupt your firm. Systems and procedures ensure your firm runs like a well-oiled machine.
- Lose talented employees. When your team doesn't know what to expect, resentment grows. Systems and procedures give your team a framework to guide them through the numerous tasks they will face in litigation and they will feel supported and able to execute their jobs expertly.
- Be a sloppy disorganized mess. Without systems and procedures each of your team members is going to invent the way in which they should accomplish a task. With no one guiding the ship it will go down. You want the work that your firm produces to be consistently excellent.
You Didn't Attract the Right Team or Train Them Properly
If you're not getting the results you want, you might be wondering if it's because you didn't attract the right team or train them properly. If that's the case, here are some of the most common reasons:
You hired too quickly. Don't wait until you're desperate to start looking for help. This opens you up to hiring the first person who applies for the job and that's a disaster in the making. We like to hire a few months before we know we will need the person. This allows us to train them properly and integrate them into our workflow and team.
You don't have a good reputation. The legal industry is a small place and word will get out if your a bad boss to work for. The best way to attract top talent is to have a reputation for being a great place to work and have an established track record for success. If your firm is new, it will take time for potential employees to learn about these things. Your first hires should be people who are willing to do whatever it takes, even if they don't have specific skills yet or aren't fully aware of all opportunities available within your organization yet—because that means they're committed!
You hired the wrong people. When selecting candidates for employment at your law office, don’t just look at how qualified someone seems based on their resume alone; make sure they fit into what kind personality type works best in your office environment.
- You didn't give new employees the proper training. This is a huge mistake we see attorneys making and it's one we made ourselves back when we started our firm. Even experienced candidates need extensive training. Remember, you own a firm that runs on systems and procedures. These take time to learn and your must have high expectations that your team follows the guidelines you have laid out. This can only be done through proper training.
You Don't Have Someone Managing the Firm
Big businesses need managers, and so do law firms. A good manager makes sure that people are doing the right things, that they're motivated to produce results, and that clients are happy with how things are going. Every year, the American Bar Association publishes a report on the financial status of law firms across the country. While there are many interesting insights in this report, one statistic that sticks out is the list of the top 10 reasons why law firms closed down. The majority of these reasons were results of unprofessional business-managerial practices. If you don't have someone managing your firm, it's likely that:
You'll be too busy and scattered to focus on what really matters (which is keeping clients happy)
Your employees won't be motivated to keep clients happy because they're not being managed properly or don't know your expectations for them
Cases won't be moving forward as fast as possible, which means you are losing money
- You're a sitting duck just waiting to be sued by a paralegal or secretary because you aren't ensuring compliance with labor laws in your state
You Haven't Created a Structure for Strong Customer Service
If you've been running a law firm for a while, you probably know that the number one way to make money is to have happy clients. If a client is happy, they will refer other clients and refer you to friends. They'll tell their family and friends that they love working with you. And they will be more likely to hire you again when they need legal help down the road. Everyone wants that kind of client right? To ensure you have strong customer service, ask yourself the following questions:
- Have I trained my team on how to deliver stellar customer service?
- Does my team know what I expect from them when it comes to customer service?
- Have I given my team concrete examples of how I want them to "wow" our clients?
- Do I have someone overseeing customer service in my firm to ensure the training given is being followed and executed?
- Do I have a system to implement customer service throughout the legal process?
- Is everyone on my team on board to follow my plan for customer service? If not, am I willing to replace them?
You're Not Marketing Yourself Because You Don't Have Time
Prioritizing your time and setting aside time to focus on marketing will mean you’re doing something proactive, rather than reactive. The benefits of taking this approach are numerous:
You'll be working on your business, and not just in it. This is the only way to truly grow as an entrepreneur.
You’ll be ahead of the game when it comes to your competition, which will give you a head start in terms of attracting new clients.
You won’t miss out on important opportunities such as receiving referrals from colleagues.
- You'll experience exponential growth. The time you spend marketing yourself is directly correlated to the number in your bank account.
Interested in getting 30 days of social media content done for your for less than $2.00 per post? Check out the Law Prophet Social System here!
You're Not Willing to Invest Money Into Growing Your Firm
As a business owner, you're probably used to making investments in your firm on an ad hoc basis. You invest money in marketing when you need to bring in new clients. You invest money in growth by hiring additional associates or support staff when they outgrow their current roles. But what if the problem isn't that you don't have enough cash to make the necessary investments? What if it's that you're not willing to make them?
There are many different types of investments that can help your law firm grow: investing in technology, investing in a team (e.g., hiring an office manager or marketing assistant), and investing marketing dollars into expanding your reach with new services or products.
We created an entire bundle to help you outsource your marketing and we're even training your assistant for you. Check it out here!
There Are Common Reasons Why Firms Don't Make Enough Money
There are common reasons why firms don't make enough money. Whether you're not generating enough business, losing clients, or unable to collect on bills.
The good news is that you don't have to do it all by yourself. Outsourcing and delegating key areas of your business can help you boost profits and free up time. They can also reduce the stress felt by your employees, resulting in a happier and productive workforce. So what are you waiting for? Take action today and start making moves towards profitability.
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