Why You Should Niche
I was listening to a National Public Radio podcast on what was the most valuable language in the world. People might think it is Chinese or Spanish, and at some level this makes sense, as they are two of the most-spoken languages. But in fact, people who were bilingual with these languages did not command the highest prices for translation services. If you think about it, it makes sense: How easily can I find someone to translate in either of these languages for me?
I can’t remember which language was named the most valuable (it was an African language), but the premise is that there are not many people who speak the language, so when someone needs an interpreter, the price is much higher than that for a Spanish or Chinese interpreter.
Now think about attorneys who charge $1,000 per hour. How can they command such a rate? Because there are probably very few people in the world who can do what they do in the same amount of time. This is an extreme example, but it illustrates the point about why you should niche.
Scalability. The conventional thinking about business is that the more people you can serve, the more money you can make. While this mantra might be true for the Walmarts of the world, in a service-based business, particularly when you are the only service provider in your company, it’s hard to get good at one or two different areas if you do a different one each week.
Doing the same thing over and over is great for business. Why? Because you can increase profitability and reduce time spent doing the work.
One of my favorite television shows is The Profit, in which Marcus Lemonis, owner of Camping World, searches for deserving businesses to fund and fix. More importantly to me, he shows viewers how he runs multi-million-dollar businesses. And the fundamental lessons he illustrates on the show can be applied to any business, including law firms.
In one episode, he had just invested in a manufacturer of tiny homes. Before he got involved, that business was really making custom homes. Each client would come in and make their custom home; then the next client would come in and make their custom home, usually totally different from any previous client. The cost of these customized homes quickly skyrocketed, and the margins shrank on each. Lemonis standardized the process: The company now only offers three different floor plans. This lets the company build homes faster and with greater margins. And clients are still satisfied.
Imagine if you got four no-contest divorces with the same (or similar) fact pattern per month? Or a series of unlawful detainers with the same fact pattern every time? How fast could you get clients the resolution they want?
Be the industry services provider. Another way to niche is to serve a particular industry. There are law firms that specialize in craft beer and yacht owners, for instance. In fact, I was servicing a client that needed a specialist in alcohol; there were only two firms in the state that specialized in it, and the other firm was conflicted out of the matter. The Only Choice in Town is not a bad place to be when you are a business owner.
Being the expert service provider in a particular industry will still allow you to practice multiple areas of law because of all the various issues that might come up in that industry. For instance, if you service the restaurant industry, there are employment, wage and hour, and real estate issues that come up frequently.
One additional benefit is that all the owners or executives of these companies tend to keep company together, so it’s a good way to get your name passed around.
Reduce your client acquisition cost. If you’ve been to a McDonald’s, you know what they ask you after you place your order: “Would you like fries with that?” Or “Would you like to Supersize that?”
The reason they do this is that the cost of acquiring a new client is one of the most expensive parts of doing business. One of the cheapest ways to get new business is to help existing customers. Thus, the margins on the fries or Supersize are much greater than those on the initial order.
Do you have any practices areas that easily relate to another? I was chatting with a family law attorney, and she said she was expanding into estate planning. Why? Because after the parties get a divorce, her clients always need an estate plan. Adding this practice is easily worth hundreds of thousands of dollars over the lifetime of her law firm, and the cost to obtain the client for estate planning from a divorce is much cheaper than if the client had come straight in for an estate plan.
The cross-sale. Servicing your existing clients in another area of law is a form of cross-selling. Sales is often considered a dirty word in the legal industry, but noted marketer Jay Abraham says: “If you truly believe that what you have is useful and valuable to your clients, then you have a moral obligation to try to serve them in every way possible.” If you don’t, your client will just go to your competition, and do you think they will do a better job taking care of your client?
It’s good for the client. Consider your family doctor—the same one you’ve been seeing your entire adult life. She knows your medical history and family history. When you face a new health challenge, wouldn’t you want this doctor to treat you if she has the capability to do so? Or would you rather go to someone with whom you have absolutely no relationship?
Being able to serve your clients in a couple of different areas of law allows them to keep their business “in-house” with you, and they don’t need to build a new relationship with another lawyer. You are really transferring the trust you built in one area of law to another.
Predictability and buffer against downturns. I was talking to a certified public accountant and asked how he liked doing taxes. He said he likes it because of the predictability; he is busy during tax season but knows he can take a vacation on April 16 and October 16 every year.
One of the hallmarks of solo/small firm practice, particularly in the first couple of years, is the unpredictability of revenue. If done right, having multiple practice areas can shield you from any downturns. For instance, estate planning attorneys tend to slow down during the holidays. What areas of law pick up during that time? DUI perhaps?
What no one else might tell you. Having multiple niches isn’t all sunshine and rainbows; while the revenue potential is there, you must consider the cost (and time) of keeping up with several practice areas to competently represent your clients. Also, having too few niches could close your practice if the industry you are serving suffers an economic downturn.
Marketing Your Niche When You Have Multiple Practice Areas
As part of your sales and marketing plan, identify your niches as narrowly as you can. You can do it in two simple steps: (1) identify the practice area, (2) identify the ideal (and profitable) client in that practice area.
Here are some examples:
- Estate planning: husband and wife, age 25 to 35, working professionals, with at least one child, own a home.
- Criminal: blue-collar worker with a license (e.g., commercial truck driver, forklift operator).
- Litigation: multinational corporation involved in a manufacturing business dispute with damages over $500,000.
The key then is how to market your niches. If you’re like most new practices, you don’t have a big budget to spend on print advertising or Google AdWords. That means hitting the pavement and spending your time doing good old-fashioned networking.
Doing your homework. If you have multiple practice areas, before you go to any networking event, you want to do your research: Who is putting on this event? Can I get a guest list of who is coming? Whom do I want to meet? And most importantly, what hat do I want to wear when I show up?
Get there early because this is not like your friend’s party, where you can be fashionably late. If you’re an introvert like me, you might have trouble or feel weird trying to squeeze into a group of three having an intense conversation. However, if you are the first one there, then the only other persons are the organizers or the second guest coming in, so it’s much easier to talk to them. If you don’t know who is coming, you can ask the organizers to help introduce you to people you want to meet. Here’s a little secret: Stand by the door because everyone will say “Hi” to you when they walk in.
And once you start exchanging handshakes, rather than saying “I’m John and I practice business law,” craft your introduction in such a way that the people you meet want to ask you “How do you do that?” or “What do you mean by that?” Why do you want to craft it this way? Because of how our brains work. With so much information entering our minds each second, we need to be able to stand out.
For example, if you are an estate planner, you could say, “I help families avoid the cost and time of probate with advanced planning, even if they think they don’t have a lot of assets.” Or if you are a criminal defense attorney, it could be, “I help people with licenses avoid letting one dumb mistake ruin their entire future by ensuring they get the fairest trial.”
The myth of losing business by niching. One thing I have heard about niching down too much is that attorneys don’t want to lose the tangential business. For instance, from the estate planning example above, you don’t want to lose the single person with no children and no home. In actuality, you are less likely to lose this type of business because if you are working by referral, the person referring you will remember you by your niche and introduction, and not as one of the other ten estate planning attorneys they met last week at the bar section meeting.
Multiple front doors. One increasing popular method of marketing is to have separate websites for each of your niches. The goal of each website should be for your visitors to set up an appointment to meet with you to discuss their matter.
In the End
There is a business argument to be made for have multiple practice areas. At the same time, you can’t just throw any areas together and call it a practice.
This subject brings to mind a comment I heard at the yearly attorney-only Mastermind group I run. At a session focused on referrals, an attendee mentioned meeting a lawyer at another networking event. When she asked him what areas he practiced, he spouted off such a long list that she responded, “You do so many things, I don’t even know what business to refer you.”
Her comment offers a great insight into how others are perceiving not your practice, but how you communicate your practice.
If you decide on multiple niches or practice areas, you must prepare and plan how to market your niches so that you can reap the benefits of a multi-area practice to serve your clients the best.