Traditionally, law firms make the most of their revenue by increasing the number of billable hours to their clients. But in the absence of work and litigation coming through the door, firms have to think about alternative ways to keep their ledgers in the black.
This has been by far the most obnoxious step taken by many elite law firms to maintain their revenues at the cost of profit. The hourly rates of equity partners and associates have increased manifold as the increase in revenue far outpaced the increase in the number of hours logged by the attorneys. This time-honored practice of making up for weak demand by charging clients more per hour may come back around to bite the firms instead, as clients increasing to ask for discounts.
Cut unproductive staff
Revenue can be increased by cutting down on loss factors. Most law firms run on a fair amount of margin and latitude, and it is in times like this that things have to be re-evaluated. Many lawyers simply aren’t logging enough number of billable hours. The senior lawyers with hiked-up hourly rates are logging fewer hours than ever before. If firms are to survive this crisis, unprofitable staff must be let go. Underperforming divisions can also be dissolved.
Diversity beyond litigation
Litigation has been, traditionally, the biggest driver of revenue at most law firms. But at a time when too many lawyers are chasing too little work, firms must diversify their potential sources of revenue instead of relying on just one. Transactional practices like, most visibly, mergers and acquisitions are having their heyday as struggling companies look to their competitors as saviors; sometimes the merger is officially announced as the firms change names, other times it is a merger ipso facto as virtually all the employees of one firm simply shore up to another.
For too long have firms tried to do all the things for all the people. They are now realizing that the “one size fits all” model does have its limits. Firms are now refocusing around geographic territories or socio-economic groups to better target their services. This stereotyping can be bad for publicity, but when it comes to increasing revenues, this technique simply works and in uncertain climates, keeping the firm in the black is a greater priority than PR.
Reflect on their relevance
The 21st century has been disruptive, to say the least. With technology progressing at a rapid clip, laws have struggled to keep pace. Enterprising law firms can look to this key market and potentially tap into the uncertainty that stems from working beyond the present purview of the law. Tech companies need the advice and experience of lawyers to understand the legal ramifications of their work under present law, and if need be, how to most effectively push for legal reform. These services are not what law firms have conventionally provided, but the times necessitate the adoption of new revenue models if they are to survive. Traditionally, law firms have always had litigation to count upon, but as more and more companies and individuals opt for settlements to prevent bad publicity in an increasingly connected world, they must look to greener pastures.