Why Law Firm Growth is 90% Mental and 10% Mental
Why do law firms always have to be in growth mode? This is a question that I get from a fair number of our potential clients. I always listen patiently while these clients explain to me that all they really need is a steady stream of high-quality clients and they will be just fine. This always reminds me of a comment that was made by another attorney in one of my high-level mastermind groups, “If your practice isn’t growing, it’s dying.” While many of us initially scratched our heads at this comment, it turned out to be completely true.
Tipping Points, Lost Associates, and Dwindling Morale
If you really want to develop a top-notch digital marketing plan – and by this, I am primarily talking about paid search, SEO, and social media – there is a natural tipping point that occurs in terms of your marketing spend. This means there is a certain amount of money that is required to first be competitive in these spaces. The initial spend can be fairly significant. But once you have reached that level, it then only requires an incremental increase to continue on a growth trajectory. This is very difficult, and often impossible if you are a solo practitioner or only have a few attorneys on your team. So many attorneys are hamstrung by this initial conundrum. They want to grow, which means they need more revenue, but they do not have the initial marketing spend or the attorneys to service the new clients that would generate the additional revenue. This often leaves them trapped in a fixed mindset with a team they simply cannot scale.
Without a growth mindset (which means you likely have no growth or succession plan), the associates you have on your team will eventually stagnate. They will wonder why they are continuing to work at your firm, and eventually, they will leave to start their own practices or join different firms with more compelling visions for the future. I have seen this happen to more firms than I can remember over my 25 years leading my own law firms and providing marketing services to countless others.
Finally, with no new goals, no new employees joining the team, and no real prospects to expand their experience or compensation, you will see morale begin to drop in your team, and you will eventually lose your best employees to greener pastures.
The Financial Data Point You MUST Have to Grow Successfully
In order to embrace the growth mindset, there is one piece of financial data that attorneys must understand. It is the answer to this simple question, “What is the increased net revenue to your firm each time you add a new attorney to your team?” For divorce firms, who we primarily serve, an acceptable range would be somewhere between $17,000 – $25,000 per month depending on billing rates and performance. If you can do better than that, you are crushing it. With this number in hand, you can then accurately tailor your marketing spend to scale. One major advantage of digital marketing (at least the way we handle it) is that it is very predictable. Digital marketing alone has made it possible for law firms to grow at a rate that was previously impossible using only traditional advertising.
One Step Backward to Take Two Steps Forward
Now, although this isn’t rocket science, I also don’t want to make it sound easier than it really is. The major hurdle you face once you have embraced the growth mindset and gotten a handle on your net profitability is the inevitable dip in cash flow as you bring on each new associate. If you hire a motivated, qualified associate, as a rule of thumb you should be able to scale that attorney to a full (or at least decently profitable) caseload in approximately 90-120 days. During this period, you will have less cash flow, but if you perform a simple breakeven analysis, you will see that in a very limited time, you can break even with regard to the new salary and added marketing spend. We have done this many times in our own three law firms. And yes, sometimes you have to tighten your belt a bit, but not for long, and it is well worth it. Beyond this, you will be driving to that tipping point I mentioned before, and each successive hire will become easier.
Different Strategies to Grow Your Practice
There are many avenues and techniques for growing your law practice. Beyond simply expanding in your local market, you can expand to other cities in your state. In New Mexico, we have offices in Albuquerque, Rio Rancho, and Las Cruces. In Nebraska, we have offices in Omaha and Lincoln. In Colorado, we are expanding from Denver up to Fort Collins. When you have saturated your own state, you can look at opening offices in other states (we have firms in Colorado, Nebraska, and New Mexico). If you do not have the appetite for multi-state expansion, you can grow into another vertical. In New Mexico and Colorado, we have expanded into criminal defense and estate planning. An easy way to do this is to hire an attorney who has experience in two fields. One strategy we have used is to hire former prosecutors or public defenders who also have experience in divorce and family law. This allows you to scale into your new vertically slowly, while still remaining profitable on the divorce side.
Pulling It All Together
Sure there are some marketing agencies out there led by attorneys. Many of them have never really practiced, and almost all have never run highly successful practices. I practiced divorce and criminal defense for 15 years before launching Cardinal Concepts and I remain the CEO of all three law firms to this very day. We have 68 employees with gross revenues approaching 12 million dollars. While the idea of seriously growing a law practice can scare the pants off your average lawyer, we have taken the stress and unpredictability of growth out of the equation by making our very best marketing campaigns and strategies available to our own marketing clients. So if, and when, you are ready to make the leap into a growth mindset and really expand your practice, reach out to us at Cardinal Concepts and we’d be happy to walk you through it.