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7 Reasons your law firm isn’t making as much money as it should

Let’s address some of the most common reasons that small law firms fail to make as much money as they can and should.

Running your own law firm is incredibly difficult. You have the immense pressure to bill as many hours as you can, but on top of that, you’re also responsible for everything from picking computer systems to creating marketing collateral.

None of that is easy.

However, it’s all doable. With some tweaks to your operational strategy — and perhaps with a few new tools — you can find balance and maximize your income.

Implementing changes will, in some cases, be relatively easy. Others will require attitude adjustments for your entire operation. All of these suggestions, however, will help you make and keep as much money as possible.

#1: You still use outdated or overlapping processes

Oftentimes, when people start a new firm, they sign up for individual services as they need them.

One day, they might need an immediate filing in a courtroom halfway across the country. The following week, they might need a process server in yet another state. The next month, perhaps they need six parties in four different states to e-sign one document…and so on, and so on.

It’s easy to Google each of those processes as they come up.

Once you’re established, however, it is much easier (and typically cheaper) to have things like court filings, process service, electronic signatures, docket searches, and court record searches all handled in one place by the same vendor.

#2: You’re paying for unused tech tools

On the other side of the tech spectrum, there are people who start their own firm and purchase every legal tech toy in the marketplace before determining what they’ll actually need.

Over time, they use some and they let some fall by the wayside, often without canceling anything.

The classic example is purchasing cell-service-connected tablets for all employees. Chances are, those tablets are only being used in places with WiFi. In other words, the monthly phone bill isn’t necessary.

Other firms buy laptops and desktop computers for employees, and the desktop is never used.

All of these excesses can be resolved with a simple tech audit. You may be surprised just how much money you can save each year by only paying for what you use.

#3: You’re missing referral opportunities

Referrals from clients are one of the best known sources for new revenue.

It makes sense.

When you consider hiring a professional as important as a lawyer, doctor, or accountant, of course your ultimate decision is swayed by positive reviews from people you know and trust.

Many lawyers know this but they don’t take the time to actively strategize the best way to ask clients for referrals.

It’s not as easy as sending a mass email to everyone you know asking them to send you business. Instead, you need to think hard about who you’re going to ask, how you’re going to approach them, and what specifically you’re asking them to do.

Once you have a solid referral strategy in place, you should see an increase in new client retainer agreements (and new revenue) in no time.

#4: Your client service is below average

On the flip side of that last point, your clients can also be your worst nightmare when it comes to referrals.

Nine times out of ten, that’s not their fault. If you give poor client service, you are going to struggle to keep the doors open.

Look, we all know what bad client service looks like.

You don’t return phone calls.

You don’t communicate important case information to your client.

Your bills are exorbitant and lack sufficient detail.

Senior attorneys bill time to matters, but never meet with clients.

There are a million unsurprising ways to destroy client relationships. It’s up to you to ask yourself if you’re doing any of them. If you’re not sure, get feedback from others at your firm or consider a satisfaction survey for former clients.

#5: You picked the wrong outside vendors

The best way to illustrate this point is for me to share a personal experience.

Recently, I was hired to create the written content for a small law firm’s website. I charged the firm $3,500. What I learned after they had reviewed and approved my content, however, was that I was the second writer they’d hired for the task.

Before me, they had hired a “legal marketing agency” to do the same work. That firm charged them $30,000 ($15,000 of which had to be paid up front) and never delivered a single, usable word after “working on” the website for over a year.

My point is this:

There are a lot of flashy vendors out there that will offer you the world at very high prices because they think lawyers have bottomless bank accounts, and they know you don’t pay attention to business decisions. Those might be marketing firms, IT firms, accountants, or recruiting services.

You need to do a better job hiring these vendors.

Interview them.

Determine whether they have a background in working with lawyers.

Interview multiple vendors and have that awkward conversation about pricing and delivery.

It’s worth a little bit of extra work to find a reputable agency or vendor that specializes in working with legal clients. Especially if you practice a more obscure area of law, you should work with third parties that are familiar and trustworthy.

#6: You have high staff turnover

We all know that hiring new employees costs more than retaining existing ones.

It’s not just your bottom line that takes a hit; there are emotional costs as well. Every time an employee leaves, morale suffers, trust declines, and the viability of your firm may be called into question.

There’s one good way to avoid this:

Build a law firm people want to work for.

If you create a positive law firm culture, you’ll keep yourself from losing tons of money (and time) in constantly dealing with turnover. Plus, you’re likely to see other profitable boosts in productivity, reputation, and client satisfaction.

#7: Your payment arrangements are too inflexible

Far too many law firms stick to the old billable hour model for generating attorney fees.

Today’s clients are fed up with sky-high legal bills. They also know that lots of modern law firms offer alternative billing arrangements. If you only use the billable hour model, you’re probably losing clients (and money) to those firms.

At the very least, research the different types of billing arrangements firms are offering these days.

Talk with firms that are using them. Get recommendations and make a decision about what you’re going to offer.

Then, start communicating your flexibility to potential clients immediately. You may be surprised how much more annual revenue you can generate this way.

Boosting your bottom line

When you consider how your firm can make more money, there’s a good chance that things like marketing come to mind first, right?

Improving your law firm marketing is a great strategy, and you should definitely invest in that. However, if you have any of the operational issues we discussed in this article, much of the time and money you spend on marketing will go to waste.

Before you launch any efforts to improve profitability, start with this list. You’ll be much more successful if you stop those revenue leaks first.


  • Jennifer Anderson

    Jennifer Anderson is the founder of Attorney To Author, where she helps legal professionals bring their book projects to life. She was a California attorney for nearly two decades before becoming a freelance writer, marketing/branding consultant, ghostwriter, and writing coach. Her upcoming book, Breaking Out of Writer's Block, Exercises and inspirations for getting the words out of your head and onto the page, is due out in September 2023.

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