The latest Bellweather Report from Lexis Nexis highlights the challenges facing small law firms and sole practitioners.
The Bellweather report is an annual survey of independent Law Firms through England and Wales, providing an insight into the small law sector.
Over half of the firms surveyed said they were growing, with 65% planning to grow organically through the next 5 years. That means gradually growing its client base and increasing marketing activity rather than mergers, acquisitions or lateral hires.
However those growth plans could be hampered.
81% of respondents to the Lexis Nexis Bellweather report detailed change management is the biggest challenge with keeping workplace practices and systems upto date and keeping up with Compliance, which was one of the top three threats to small law firms listed.
The report highlights that to survive, small law firms needs to adapt, focus on their internal processes, streamline workflows and embrace technology. The Covid pandemic pushed firms to adapt processes, procedures and workflows to cope with lockdown and remote working. But is it enough to thrive and grow?
Review of IT
The pandemic pushed firms to operate differently. To explore Cloud systems, utilise Microsoft Teams or Zoom for meetings and remote desktops of VPN solutions.
Is this enough to survive and grow post pandemic?
The 2022 Legal Benchmarking report from MHA suggest that only 43% of respondents were planning to change the way they use IT in the future.
With cost pressures on firms, increased compliance and more admin, it is essential for small firms to review their IT systems and invest in automation, case management and workflow solutions. That investment is paid back quickly through increased fee earner capacity due to less time on admin tasks.
Reviewing Practice Management Systems to invest in tools such as LEAP Legal, ActionStep, Hoowla or Clio which integrate with other systems in the LegalTech ecosystem, save time and increase efficiency.
Integrating with Office365, search providers or other tools, save time in switching between systems and replication of data input. Prepopulated document templates and forms, e-signing, client portals and automated workflow functionality save time in communicating with clients, creating documents or managing case files.
The reduction in fee earner admin time and more efficient systems should lead to increased fee earner billable work or marketing activities to facilitate business growth.
With cost pressures increasing due to Covid, Brexit or other circumstances, everything is getting more expensive…
Be it stationery, paper, or toner cartridges.
Delivery, couriers or travel expenses.
Staffing costs, National Insurance or other staff costs.
Procurement is essential to ensure that you are getting the best prices on your overheads. (And yes, while you can’t procure your staffing costs, you can outsource some of them, which we come to below…)
You should regularly review your supplier invoices and shop around to ensure that you are getting the best prices possible. You can do this yourself or engage a Procurement specialist to assist. They can utilise bulk buying to further get better prices on office supplies.
Review your finances
When was the last time you reviewed your debtor days or aged debt? Keeping on top of your Finances is essential to survival and growth.
Ensuring WIP is reviewed and billed regularly across the practice and that fee earners are recovering their salary and more. Do you have the reporting in place to review fee earner profitability? If not, you may need to invest in technology such as a new PMS to do this.
It is prudent for law firms to have good financial reporting in place, set a budget, set KPI’s and review actual performance against them. Management Accounts and Cashflow forecasts should be undertaken to give an actual snapshot of your financial position.
Ensuring aged debtors don’t build up and are chased regularly is essential. With banks pulling lending facilities, it is more important than ever to ensure working capital is maintained.
In the Lexis Nexis Bellweather report, salaries and the cost of technology were listed as the most significant operating costs for small law firms, with salaries being listed by 56% of respondents. The cost of hiring staff, including fee earners has also increased. It is important to reduce admin time through IT system automation to counter this and ensure that fee earner charge out rates are regularly reviewed to account for the increase in recruitment and staffing costs.
Post pandemic, utilising remote working and hot desking means a reduction in office space needed. Review your property requirements to see if you can downsize and reduce the cost of your rent bill.
You have several options to kickstart your tactical marketing but first off you need to work at creating a strategic marketing plan which is developed to help achieve your business plan KPIs or goals or objectives.
Have a look at your website with a fresh pair of eyes; is it easy to navigate and find information about your services? Can people find how to get in touch with you and are those call to actions visible? It’s easy to throw some PPC advertising budget at websites however if the content isn’t high quality or it’s a website that’s not performing (have a look at your bounce rate on Google Analytics) then this will be wasted money.
It’s important to look at where your target audience are, many social media companies offer packages to create generic content for you. However it’s important to first see where people are you want to interact with. Are they even on social media? You have to think about two strands for your social media; brand awareness and lead generation. Your content needs to be worked to deliver whichever is most important to you and that’s probably lead generation for a growth marketing plan.
There’s lots of marketing you can do, like advertising your services in local adbooks (conveyancing and wills do well here) or building a networking group in your local area and inviting key people (like accountants and marketing consultants!).
The key is to make sure your are talking to the right people in the right way with your marketing. Consistency is key, don’t expect results over night
As outlined above, staff costs are increasing, with staff costs being one of the main costs to small law firms.
However are those staff fully utilised? And are they needed? Can technology or automation reduce some of those tasks? Or outsourcing?
Outsourcing some of your support functions such as Legal Cashiering, IT Support or Marketing, ensures that you are only paying for services as you need them.
An outsourced Legal Cashiering provider such as Ascentant Accountancy will bill you per transaction processed, so you can scale your charges flexibility through busy or quiet periods. Can this be done with a member of staff? No.
There are many costs to employing a staff member inhouse such as salary, employer NI, employer pension contribution, benefits, license fees, holiday cover, desk space and more. We explored this in our blog on the true cost of employing a Legal Cashier here.
Keeping up with Compliance was listed as one of the top three threats to small law firms. By outsourcing your Legal Cashier function, your partner will ensure that you are kept upto date on changes to the Solicitors Accounts Rules or HMRC regulations. Ascentant Accountancy run regular Compliance checks on client/matter balances and financials to ensure that the Solicitors Accounts Rules are adhered to. This is reported electronically to the COFA at the end of each month.
An outsourced partner will be able to undertake all of the tasks undertaken inhouse, but more competitively, at a lower cost and on a more commercial basis. Also by outsourcing, you gain access to a team of experienced individuals. By outsourcing your Legal Cashiering to Ascentant Accountancy, you have access to a named Legal Cashier, a backup Legal Cashier for holidays and sickness and a Cashier Supervisor.
If you are considering Outsourcing your Finance Department and need Outsourced Legal Cashiering solutions, contact us on 01332 981920 or firstname.lastname@example.org to discuss your needs. We work with small and medium law firms across the country and have a flexible solution to meet every need.