Smart Growth Part 7: Organic Growth of Revenue
In our prior post, Smart Growth Part 6: Organic Growth of Talent, we discussed the need for growing your talent organically as well as through lateral hiring of associates and partners. Today, when leaders and consultants talk about organic growth, they often are referring to the revenue side of organic growth. In a highly competitive environment in which demand for traditional law firm services is flat or declining, law firms cannot grow quickly enough and compete aggressively enough by using organic growth alone, i.e., expanding revenue from existing clients. This is why lateral hiring, group acquisitions and mergers have become the predominant strategy of choice for growth. By merging or hiring partners with significant books of business, firms in effect are “buying revenue.” But as we pointed out in Smart Growth Part 4: Lateral Partner Hiring, there is much at stake in this strategy since a large number of lateral hires fail at great cost to firms and to partners.
Growing Organically as a Revenue Strategy
Even firms that use lateral hiring and mergers to buy shorter term revenue bursts, those that are strategic also recognize that the most effective way to build long term revenue growth and stability is through deepening and expanding existing client relationships. Traditional one-firm firms that use a lock-step compensation model, a strict adherence to hiring top quality lawyers and where only a select few make it to the partnership, have long recognized the value of institutional clients. When partners don’t have to fight over credit for new business origination, the focus tends to be where it should be – on what services and approaches are best for the client, not for individual partner gain.
As firms got larger, and clients became less loyal and less able to discern the differences between one firm and another, early adopters of key client teams began to see measurable improvements to their revenue growth. Bill Flannery was among the first sales trainers to help convert law firms to the strategic account management approach long adopted by sales teams in major corporations like IBM. Many firms now have robust and strategic key client team programs that create stronger partnerships with clients and develop much deeper knowledge of the clients they serve and inevitably, result in multiple partners and practice groups serving these clients.
According to a study by Redwood Analytics, when five or more partners are involved with a client, fewer than 10% of the clients leave the firm. Heidi Gardner, Distinguished Fellow at Harvard Law School and Assistant Professor at Harvard Business School, has authored numerous studies and articles about the impact on revenue growth of collaboration and better teaming within law firms. In her book, Smart Collaboration and her HBR article Collaboration in Law Firms, she notes that: 72% of single partner clients would seek another provider if their relationship partner left firm but 90% of multiple partner clients would remain loyal to the existing firm even if the relationship partner left. Also, Gardner’s studies substantiate the claim that serving clients in multiple practices has a direct impact on revenue growth. She concludes that “the financial benefits of multi-practice collaboration are clear: The more practices serving a client, the more revenue the client generates for the firm each year. Single-specialty is often viewed as a commodity that’s entirely price driven, but cross-practice work is a value differentiator.” [It should be noted that Gardner distinguishes between cross-practice collaboration and cross-selling.]
While the convergence and RFP trends by clients have reduced the chances of expanding representation of clients beyond the expertise selected for in the RFP, those opportunities still exist as do organic growth strategies imbedded in key client teams, industry teams and cross-selling approaches to build more profitable revenue.
10 Ways to Improve Your Organic Revenue Growth Strategies
- Be strategic about growth. As detailed in Smart Growth Part 2: Your Growth Strategy Must be Much More than a Plan, an informed growth strategy requires you to differentiate and find your “blue oceans” of opportunity. Deliberate, comprehensive client and market research should drive your priorities for where your best opportunities are to grow more business from existing clients and new business from new clients by existing partners.
- Analyze your data. Firms that actively pursue revenue growth from existing clients rigorously look at many types of data they have about their clients including three to five year fee history and trends, fees by practice area, percentage of legal spend their firms receive from each client, fees by industry, profitability of clients and matters. This client lifecycle information is used to identify areas of shrinking revenue, growth in revenue and areas of potential cross-selling opportunity.
- Use market research diligently. Both Porter’s 5 Forces and the Blue Ocean strategy described in Smart Growth Part 2 require a foundation in good research and intelligence that when converted into analysis and extrapolation help drive smarter, market-driven decisions about growth and priorities. Our post, Smart Growth Part 3: Using PESTEL and SWOT to Inform Strategy outlined the types of external information you need to devise sound strategy. Data and research aggregators as well as other industry sources, deal and litigation data bases are all available to help drive smarter growth decisions.
- Install and enforce use of CRM (by partners.) Customer Relationship Management is a technology platform for managing a firm’s relationships and interactions with clients and prospects. Too many firms still use this primarily as a mailing list and not as the relationship intelligence, management and growth tool that it is. To be an effective tool, the data must be kept accurate and updated, lawyer interactions with contacts must be recorded in real time, and the data must be converted to relationship intelligence to assess why and how business has been won, what marketing and outreach activities your clients are responding to and how the web of networks throughout the firm can be used to grow new organic revenue. [One of the best, most robust suite of tools on the market is offered by InTapp.]
- Regularly assess feedback and client needs. To hold onto clients and to understand their future legal issues, develop a comprehensive approach to talking to clients and getting their feedback on how well you serve them, who else they use and what they will need going forward. This should include outreach throughout engagements, after action reviews, annual client feedback interviews, client audits and client visits.
- Build value for and with clients. There are two ways to build value for clients, through value-added approaches like on-site CLEs, access to data bases and resources, training for their other professional staff, collaborating on pro bono and diversity initiatives. Value-enabling activities include those associated with legal operations in concert with clients including legal project management, process improvement, technology enablement and resource sharing, pricing and project staffing, etc.
- Understand clients’ businesses and industries. Make sure firm lawyers, regardless of their practice specialty, are commercially focused for clients, i.e., understand how they make their money and profits, what their distribution channels are, how global trade, geopolitical and competitive forces impact their business and their industry. Establish industry teams that have formal plans and budgets.
- Key client teams. Strategic account management has long been the foundation of corporate sales strategies. Establish key client teams for the firm’s largest, most profitable and highest growth potential clients, carefully selecting members and leaders who build client input and market research into client team strategic plans, meet and communicate regularly about the status of matters and any interactions that occur beyond their current matter, industry and company trends. Each client team should have a dedicated section on the firm’s intranet where all key data and intelligence is housed and can be accessed at any time. Each client team also should have a designated budget to cover client entertainment, travel for client visits and interviews and sponsorship of client events.
- Build a culture of collaboration. As noted previously, collaborative teaming by partners on behalf of clients results in greater loyalty, retention, revenue growth and profitability. The firm’s performance process and compensation process should reward/penalize partners for collaboration, sharing, cross-selling and broadening the firm’s representation of clients.
- Provide client development training. Clients have too many choices for how to satisfy their legal needs and they will be more inclined to those that aren’t just smart and experienced but those that listen, are genuine in their desire to help the client, work in partnership with them to solve their problems and above all are not arrogant or self-serving. All attorneys and staff should be trained in the art of exceptional client service, customer experience (CX,) relationship strategies, emotional intelligence and effective communication.
RainMaking Oasis provides consulting, training and coaching services to law firms and lawyers in the areas of business development and growth strategy, innovation, client retention and expansion, succession planning and leadership and personal effectiveness skills. Please contact Susan Duncan at firstname.lastname@example.org.