I have been waiting all year for the 2019 Legal Trends Report to come out, and today it did! My law firm uses this report to make business decisions for the year. The report is so important that our entire management team gets together in person to review it (we only do so a few times a year since we live in Canada and the United Kingdom.)
The Client-Centered Law Firm
This year, in addition to the Legal Trend Report, the CEO of Clio, Jack Newton, just released his new book “The Client-Centered Law Firm,” which I received an advanced copy of. After the Clio Conference in San Diego, which is Monday until Wednesday, I’m planning to read the book from cover to cover.
I’m particularly interested to read what Mr. Newton says as he just raised $250 million USD to expand Clio. I am currently trying to raise $1M for my law firm, and I believe if I can adopt Mr. Newton’s client-centered mindset, the capital raise will be no problem. People know that law is changing, and many people are starting to see investing in law as a real opportunity.
The book offered a timely look at how taking care of the client, running an efficient practice, and being a profitable law firm are all part of the same. You need all these things to run a successful law firm over a long period of time. You need to be clear on the what, how and why of running a law firm. What is your purpose? How are you different than other law firms?
If your plan is to increase your hourly rate over time and make more money that way, the report will share with you some information you won’t like.
Law firms that can create a client centered law firm will join Clio in the legal revolution and push out “old school law. The legal industry is changing, and if you read the report, you will see what I mean.
2019 Legal Trends Report
I also read the Legal Trend Report over the weekend as I received an advance copy, and I have pulled out some shocking findings that I have highlighted below.
The report showed that collection rates, and something that Clio calls “realization rates” are two of the most important metrics for being successful as a law firm. It’s the major difference between growing and shrinking firms that they measured.
Realization rates measure the amount that a firm invoice compared to the amount of billable work performed. And collection measures the amount that a firm collects compared to the amount invoiced.
Factors that were not associated with growth in the report were hourly rates. The researchers wanted to see if firms that grow their revenues increased their hourly rates at a higher rate than others, but this wasn’t the case. When comparing hourly rates across each group, all three followed a very similar trend.
What does this mean for lawyers?
There wasn’t only one factor that defined the type of massive increase in sales in growing firms. And, in fact, simply increasing hourly rates is not effective in growing a law firm. Instead, real growth is a result of two factors:
Generating more business. Compared to the number of attorneys they have, great companies increase the amount of work they bring in.
Strong business metrics. Growing firms improve their realization and collection rates.
In other words, growing firms know how to bring in more business while also increasing the capacity of their lawyers to do more work and collect more revenue for every case and client they bring in.
How clients find a lawyer
When the researched looked at how clients found a law firm, they saw that 59% looked for a referral. Friends were the most common source for a referral (32%), followed by referrals from a lawyer they used in the past (16%) or another non-legal professional, which was often an accountant or a Realtor (9%).