Jon Whittle Consulting Ltd
64 Contributions by Jon Whittle Consulting Ltd Experts
PRACTICE NOTES
This Practice Note sets out a range of approaches for gauging a law firm’s financial performance. It further offers guidance on analysing and benchmarking financial data so that results can be compared with prior years and with competitors. It explains how to interpret trends and set benchmarks for meaningful comparison.
What key aspects of performance need to be measured?
Firms must look at income, expenditure and cash flow together to avoid running out of funds.
Income
Expenditure
Cash flow
This information should be reviewed routinely, at least once a month, and budget holders should monitor the figures for which they are accountable. Regular, at least monthly, reviews are essential.
Fee income
Fee income fluctuates and directly impacts profit. For that reason, fee generation warrants close oversight, ideally month by month. A downward trend in fees can indicate looming difficulties, especially where overheads are static or rising
Practice Management
PRACTICE NOTES
This Practice Note is aimed at law firms. It looks at how you can raise your people’s financial awareness so they are both more willing and better able to help you meet your financial targets.
Financial awareness—why it should matter to fee earners?
It is unsustainable to have capable fee earners who deliver excellent client service yet generate no profit from their work. To produce healthy margins, your fee earners must know the law and be attentive to every client’s needs, but these abilities on their own do not secure profit. Lawyers who grasp how a firm’s finances operate can satisfy clients’ expectations while simultaneously producing strong profits for the practice. In turn, the firm can reinvest in its people and its clients, fuelling even greater profitability. Fee earners with a commercial mindset are also more likely to give clients sound commercial guidance, not just advice that is
Practice Management
PRACTICE NOTES
Most law firms have rainmakers who stand out for their ability to win work, yet many lawyers view selling as distasteful—a frequent remark is that they did not become a lawyer to engage in sales. This is hardly unexpected, as common stereotypes portray lawyers and salespeople as drawing on very different capabilities. Typically:
lawyers are regarded as highly analytical, understated, risk-averse, considered, reserved, and accustomed to operating in a regulated environment
sales personnel are, by contrast, seen as more opportunistic, extrovert, and readier to take risks
It does not have to remain so—a few modest wins can turn a wary lawyer into a self-assured business developer. For many, it simply takes clarity on how the sales process works, a readiness to give it a try, and a handful of good experiences. This Practice Note offers guidance on selling to new
Practice Management
PRACTICE NOTES
This Practice Note sets out what is meant by a pipeline of new clients and new business, and how to develop one
The need for a pipeline
Securing fresh clients and instructions is the culmination of your BD and marketing activity. Prospective clients decide to instruct you for a mix of reasons, for example:
your lawyers’ grasp of their organisation and legal needs
the firm’s reputation
the fee proposal and how they judge price versus value
the rapport with the team they met
Identifying prospects with the greatest likelihood of converting can be difficult. Building a pipeline of potential clients and new business—known in other sectors as the sales pipeline—is vital. A strong pipeline helps you maximise the chances of winning new work. It must be an ongoing effort so that when fee-earning work slows, other
Practice Management
PRACTICE NOTES
Practice Note
This Practice Note sets out what business development encompasses in a law firm setting, sketches the principal approaches available and offers a straightforward, six-step route to building an effective business development plan. Every law firm, whatever its size or specialism, must actively secure new business to endure and grow. The UK legal market is becoming ever more competitive; clients are better informed, more cost-conscious, and increasingly ready to switch between firms. Reputation on its own is no longer sufficient to ensure a reliable flow of work. A successful firm needs a defined business development strategy, underpinned by realistic plans, appropriate systems and consistent management. Business development is no longer optional for law firms. Nor is it a dependable or sustainable approach to rely on individual solicitors who naturally attract work through their personal standing and contacts. Many law firms produce
Practice Management
PRACTICE NOTES
This Practice Note is aimed at law firms. It explains why management information (MI) is necessary and how it ought to be presented and circulated to secure:
a shift in managers’ behaviour
better financial outcomes
Why do you need management information?
Every business needs MI to:
monitor performance against budget
spot variances from budget as early as possible
By its nature, MI concerns matters the recipient can influence. Do not circulate data merely because it is interesting; share it because it can drive improved performance.
Many law firms have issued MI for years, yet there is often little proof that this has lifted efficiency or results. It may therefore be prudent to reassess what is being shared and pinpoint enhancements.
Before computers, most practices produced minimal MI and partners were simply expected to maximise their billings each year. As most costs were fixed, a
Practice Management
PRACTICE NOTES
This Practice Note sets out why boosting the efficiency of legal work is vital for law firms and how this can be done without sacrificing quality.
Why is work efficiency becoming so important for lawyers?
From 1992 to 2008, the UK economy enjoyed 63 consecutive quarters of growth. In that era, many practices lifted profits year on year simply by raising fees, before needing to seek extra instructions. Most firms experienced increases in billable rates as well as in the amount of work, and profits rose markedly. The global financial crisis in 2009 radically altered the landscape for numerous firms, making conditions far more challenging for practices. As a consequence, efficiency in delivery has moved centre stage for lawyers across firms...
Practice Management
PRACTICE NOTES
For law firms, business development works best when it is guided by a clear, systematic and transparent approach. All too frequently, practices rush into tasks—like networking, authoring articles or rolling out campaigns—before properly grasping where they stand, settling on intended outcomes, or mapping the route to reach them. This document brings together three critical core phases of business development planning as follows:
grasping your present position via both internal and external analysis
establishing clear, meaningful firm goals and objectives
creating a targeted, coherent business development and marketing strategy
Taken together, these steps provide a practical, reliable foundation for sustainable growth. They ensure business development activity is purposeful, aligned with firm strategy, and capable of delivering measurable results.
See also Precedents:
Business development—internal analysis—law firms
Business development—external market analysis—law firms
Business development aims, goals and
Practice Management
PRACTICE NOTES
Why do law firms need budgets and how might they be structured?
Just as with any other enterprise, a law firm requires budgets each year to:
properly oversee its income and expenditure; and, as a result,
reduce the likelihood that the final profit is out of line with expectations.
Although a law firm is a professional practice, it remains a business and must be managed with commercial discipline and a business-like approach, day to day and across the financial year. Traditionally, firms generate revenue by selling professional time. While many now employ alternative pricing and service models, most are essentially buying the time of fee earners and reselling that time to clients with the aim of making a profit. A law firm will also carry overheads in addition to the costs of its fee earners...
Practice Management
PRACTICE NOTES
This Practice Note sets out the factors that can cause a law firm to fail and what a bank expects to see if it is to keep backing the firm with further finance.
The rationale for cash flow forecasting
The immediate danger for any legal practice is exhausting its cash, which can bring the firm down. Receipts from clients are often slow, while outgoings are settled swiftly, leaving firms exposed if cash flow is not tightly managed and capital is inadequate. Failure is most likely at launch, during rapid expansion, or when fee income falls sharply and without warning.
By preparing and refreshing cash flow forecasts on a regular basis, the firm can anticipate periods when:
it expects to hold excess cash, and
it may require additional external funding
When these points are planned in advance, securing extra finance is more achievable than approaching the bank only when the
Practice Management
PRACTICE NOTES
This Practice Note sets out guidance on why a law firm may require finance and the ways in which such funding might sensibly be obtained. It also looks at what level of debt is sound and when it becomes too high.
Why do law firms need finance?
All businesses need finance, and law firms are no exception. Funding enables the practice to secure the assets it relies on to conduct its trade. A review of law firm balance sheets shows the principal assets that must be financed are:
fixed assets
current assets
Fixed assets
The main fixed assets are:
property—many smaller practices purchase their premises, whereas this is less typical for larger firms, which are more likely to rent their office space
IT equipment—almost all law firms recognise the need to improve and refresh their IT systems; although such equipment is
Practice Management
PRACTICE NOTES
This Practice Note examines the most common sources of financial instability affecting law firms and explains what actions are needed to ensure issues do not grow into crises.
Why might law firms become unsustainable?
Ultimately, firms fail when the cash runs out, their banks lose confidence in the business and refuse additional facilities, and alternative finance cannot be secured at short notice. The crunch is usually caused by major outgoings, eg rent, VAT and income tax, or the professional indemnity insurance (PII) premium becoming due.
Although performance differs from firm to firm, many are weak at converting time spent on client matters into cash. In practice, around 120 days can pass between doing the work and receiving payment (this period is called lock-up). Meanwhile, rent and insurance are commonly payable in advance, and staff must be paid at the end of every month. It follows that cash can be
Practice Management
PRACTICE NOTES
What are strategic aims?
A strategic aims document, often referred to as a strategic plan, sets out the firm’s aims over a defined timeframe—typically between one and five years—and condenses the actions the business will take to realise the organisation’s overarching vision or goals. See Precedents: Draft strategic aims and Sample strategic aims. This Practice Note, together with the referenced Precedents, will help you create a single, succinct document articulating high‑level strategic aims, covering areas such as:
where you should direct investment, the scale of that investment, and the source of funding
which markets you will compete in and which you plan to leave
the types of services you ought to provide
the desired firm and management structure
the people and infrastructure you will require
Your strategic aims must remain adaptable—ie not set in stone—so you can respond to
Practice Management
PRACTICE NOTES
The interview is your chance to showcase your proposal to the potential client. Poor preparation is the biggest cause of defeat at this stage. Even with a strong line-up, delivering without adequate rehearsal invites failure. This Practice Note sets out the core actions and factors to consider when preparing for a tender presentation.
Get organised
Hold a team meeting with the full pitch group at the earliest opportunity—see Precedent: Preparing for a tender presentation—meeting agenda. Aim to run this first session at least four to five working days before the interview. Check the administrative arrangements in the request for proposal (RFP) or invitation to tender (ITT). If the papers do not cover this, confirm directly with the client:
how much time is available
the preferred team size and make-up
the location
the room type
the facilities and technology at the presentation location
who will attend from the client side and what their roles in the
Practice Management
PRACTICE NOTES
This Practice Note explains approaches for handling relentless client demands for fee reductions. It outlines inventive fee structures and considers how solicitors can develop greater confidence when negotiating charges.
Providing creative fee arrangements instead of greater discounts
Crucially, a creative fee arrangement is not simply a steeper discount. A creative price should advantage the client and also benefit the solicitor. If it favours only one side, it is unlikely to endure in the longer term. Balance is critical; where one side bears all the compromise, the model will falter.
Much legal commentary suggests clients dislike time-based billing, as it can reward inefficiency. Nonetheless, some matters may still suit time-based fees as the fairest option for both parties, for example where the amount of work required is uncertain. When the likely workload is unclear, paying for time can appear the most even-handed solution for both client and
Practice Management
PRACTICE NOTES
Its importance has grown notably in practice. Many clients face tight budgets for instructing solicitors and seek steadily lower fees and even greater overall value. Consequently, firms must compete harder and be readier to give more to secure fresh clients and fresh work. The rise of procurement managers has allowed commercial, institutional and public sector buyers to run robust and demanding processes that deliver improved value for money. As more clients go to tender and rivalry increases, pitches must be sharper than ever. This Practice Note clearly outlines a framework for pitching for work and points to best practices needed to thrive in a competitive market.
Requests for proposal and invitations to tender
Chances to pitch for work appear mainly in two principal forms. Requests for proposal (RFPs) are typically broad in scope and not highly prescriptive. An RFP is commonly used,
Practice Management
PRACTICE NOTES
After a law firm has assessed its position, defined clear objectives and aligned on a strategy, the emphasis must move to delivery. That involves selecting suitable business development efforts, ensuring the firm has the time, people and systems to support them, and consolidating everything into a clear business development plan. This guidance covers three connected areas:
choosing and executing effective business development and marketing campaigns
managing the people, time, systems and budgets needed to underpin those activities
building a business development plan that enables co-ordination, accountability and progress
Collectively, these measures convert strategic intent into measurable action.
Choosing business development and marketing activities
Business development should not be selected in isolation; every initiative must clearly support the agreed goals and strategy. Before approving any campaign or initiative, the firm should be explicit about:
the intended outcome of the activity
the target
Practice Management
PRACTICE NOTES
One difficulty lawyers encounter when meeting a potential client is not knowing enough about the individual and the company they speak for. Getting ready for those early meetings is, therefore, crucial to maximise the chances of building the relationship from the outset as effectively as possible. This Practice Note offers pointers to support a lawyer in preparing for a meeting with a corporate prospect.
Ten steps to a successful meeting
The steps below will assist you in preparing for a business development (BD) meeting and should improve your prospects of securing a positive result.
Conduct initial research
Identify principal stakeholders and decision makers in your target organisation.
Collect as much detail as you can on the person you will meet and the organisation they represent, eg:
on the person—what their present role is, their place in the hierarchy, and what their previous role was
on the
Practice Management
PRACTICE NOTES
Producing a first-rate proposal demands efficient, streamlined processes, committed and capable people, meticulous attention to detail and strict alignment with the RFP/ITT. It must also be clearly written and well presented. Writing ability varies across legal and BD teams, and the strongest writers may not always be free. Therefore, a robust checking process is essential to keep the document’s quality as high as possible.
This Practice Note offers quality control questions addressing frequent faults and weaknesses in proposals, with ideas on how to fix them. For broader checking before submission, see Precedent: Tender document checks. For more on building proposals, see Practice Note: Creating a persuasive proposal document.
Proposal quality control checks
Have you answered all the questions properly?
The leading cause of an unsuccessful pitch is failing to respond to what the RFP/ITT asked. Nominate someone to verify that every question has been fully
Practice Management
PRACTICE NOTES
This Practice Note is intended for law firms. It explains why capturing time is so vital. It also explores best practice around time recording and considers the impact on write-offs if more time is captured.
Why do law firms need to record time?
Time should be recorded primarily to understand the true cost of work undertaken, to ensure accurate and reliable client billing, and to maintain compliance with SRA client costs information requirements (see further subtopic: Information on costs). It is therefore necessary to record all time spent on a client’s matter—whether this time can be billed is a separate issue and must only be considered at the point of billing.
Law firms often confuse time recording with billing. As a consequence, many lawyers discount their time twice:
at the point of entry and initial capture
again when preparing and issuing the client’s
Practice Management
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