Marketing and BD focus is key to law firm success
Highly successful law firms have greater business development, marketing and technology focus, according to new research.
A number of law firms have been able to notably outperform their peers even though the overall large law firm market is experiencing flat to little growth - by their use of marketing, business development and technology. The report from the Thomson Reuters Legal Executive Institute suggests that investments in areas such as business development, marketing and technology may be a key factor defining the higher-performing firms. The 2017 State of the Legal Market Mid-Year Report identified a population of firms with market-leading growth in overall profits, revenue per lawyer and profit margin, using data from 165 US-based large law firms. The population of higher-performing firms also had above-average growth in demand and fees worked. The findings form part of the discussion at this year's Law Firm Marketing Summit on 7 November 2017 in London.
The highest-performing quartile of firms increased their marketing and business development expenses by an average of 4.6 per cent last year, compared with only 1.8 percent for the lowest-performing quartile. Similarly, higher-performing firms grew their per-lawyer investment in technology by 3.2 per cent, while the lowest-performing firms grew technology spending by only 1.2 per cent.
A recent Legal Executive Institute survey found that 80 percent of large law firm leaders anticipate marketing and business development being a major priority for their firms this year, suggesting that more firms are looking to adopt a mindset similar to that of the highest-performing firms.
Demand only slightly positive
The report noted that overall market demand growth was only slightly positive for the first six months of 2017, with billable hours rising merely 0.1 per cent. Law firms have traditionally driven much of their growth through rate increases. That may be an increasingly risky strategy, however. Despite some recent strengthening in rates, realisations continue to be at near-record low levels. Firms last year collected an average of only 82.5 cents on every dollar billed versus standard rates. According to Peer Monitor data, average write-downs of worked rates increased from 7.8 per cent in Q2 2016 to 8.4 pe rcent in Q2 2017 as clients continue to push for discounts and write-downs.
'The current law firm market is largely a zero-sum game,' noted Mike Abbott, vice president, client management & global thought leadership at Thomson Reuters. 'Rate increases are no longer the reliable lever they once were for growing profitability. Our analysis bolsters the case that the firms favouring a ‘build not buy’ strategy of investing in their strengths may be better poised for growth than those pursuing market share through acquisitions and lateral hires. Emphasis on business development, marketing and technologies that enhance workflow productivity are increasingly defining the firms that are leading the pack.' The 2017 State of the Legal Market Mid-Year Report can be downloaded here.For urther information on the Law Firm Marketing Summit 2017, contact email@example.com.