It is apropos in a way that our first digital issue is our annual Finance issue. The financial side of the legal business often requires tough decisions. But sometimes increasing profitability simply requires making changes to technology, systems or priorities in order to improve the bottom line. We appreciate the insight of the contributors to this issue, especially the members of the Law Practice Division’s Law Firm Finance Committee.
It's hard to get anywhere without a map, including navigating law firm finance––and a financial map is key, according to Terrell Turner in “How to Master Finance for Law Firms.” He explains the ins and outs of using a firm’s financial statements to get an overview of the business and plan for growth. Indicators like cost to acquire a new client can help focus resources where they will be most effective.
Profit dashboards are another approach, explored by Steven Campbell and David Bilinsky in “Profit Dashboards: Opportunities to Improve Partner Profit and Client Value.” The authors encourage sharing of data amongst partners or shareholders in the firm through a dashboard that provides insights into firm profit––including mechanisms to observe the impact of potential alternate scenarios.
In “The Evolution of Equity Partner Compensation,” John C. Scott addresses the important role of a compensation system that aligns the goals of partners with the goals of the firm. He reviews the more traditional methods of compensation––“eat what you kill,” “equal partnership” and the Hale & Dorr incentive system. He rejects these systems, in favor of a goal-based system that allows partners to set individual goals that align with the firm, and they are rewarded according to their performance measured against those goals.
Kimberly Bennett encourages law firms to commit to eliminating hourly billing in “Closing the Justice Gap: The Power of Subscription Legal Services.” She suggests a sea change for firms, transforming the practice with subscription legal services, allowing law firm teams to redirect time and energy to their strengths and improved problem solving. She also addresses the important issues of how to price subscription models, and ethical considerations.
Dan Lear explores ways for law firms to grow revenue simply by changing how they are paid in “Change How You Get Paid: Grow Your Firm.” No business benefits by making it difficult for customers to pay, and a law firm is no different. It’s critical to make it easy for clients to pay by whatever method they like, including credit cards, wire transfer or even cryptocurrency. Other tactics that might be more commonly used in the retail world are shifting payment processing costs to clients and making it easier for clients to pay using technology.
Finally, Shannon Kirk delves into alternative fee arrangements in “Alternative Fee Arrangements Put the Focus on Value, Not Time.” There are many types of alternative fee arrangements––such as flat fees, blended fees, incentives and unbundled legal services. Payment plans and subscriptions are other forms of alternative fees that don’t necessarily come first to mind but are also creative ways of getting to the ultimate goal: a profitable law practice.
The articles in this issue are designed to address all kinds of law firms, and various ways to improve a firm’s bottom line. We hope you will find some ideas to fuel your growth and success!
Many thanks to our issue editors Carol Schiro Greenwald and Jason Long for putting together a wonderful set of features highlighting law firm finance.