This is the third in a series of four posts about how law firms can anticipate, prepare for, and respond successfully to the next recession or economic downturn. We are investigating three basic rules that describe how a relatively small group of law firms — of all sizes, practice specialties, and locations — not only have survived the Great Recession that began in 2009, but actually have emerged from it stronger than before.
These "survival secrets" are:
- Pay close attention to the business.
- Look for innovations in client care.
- Master new, dynamic approaches to planning.
In the first post, we surveyed a checklist of issues and tactics that describe an overall strategy of paying attention to the business. In this post, let's consider client retention tactics: taking care of your clients through innovations in client care.
A recession or business downturn, whether economy-wide or specific only to a particular client, is no time to start "cutting back" or "managing client expectations" downward. Instead, it is a great opportunity to improve client retention, client loyalty, and the unique marketing force that only clients can contribute. It should be a time to raise expectations and meet them through innovations in your firm's relationship with every client, but particularly among the relatively few clients that drive your firm's financial performance in good times and bad ones alike.
yet another "80-20 Rule"
In most commercial law firms, a relatively small number of clients — often fewer than 20 per cent — produce a disproportionately large share of the total fee revenue — often more than 80 per cent. The degree of concentration can be much higher in litigation firms and somewhat less in high-volume practices such as collections, asset recovery, and intellectual property. This relatively small number of top clients also usually are the most profitable tier in the firm's client base.
In some firms, they might be the only clients that, as a group, consistently return a substantial profit for the firm, compared to the huge group of relatively small clients, which, as group, usually lose money for the firm.
first into the lifeboats
When financial troubles strike, these top clients must be the first into the lifeboats. They provide more than most of the cash.
They frequently understand, better than do most smaller clients, the competitive advantages that your firm presents to the market.
They are also usually powerful sources of referrals of new clients. Losing even one of these top clients during a recession can cripple your firm's financial performance long after the crisis is over.
A recession-proof law firm will not only keep most of its best clients through an economic downturn. It can sometimes even increase the average fee productivity and profitability of the entire client base. The most powerful way to do this is to deliver a reassuringly high level of responsive services that not only address legal issues, but also help guide clients through stressful times.
Does you firm do any of these things?
Examples of "downturn tactics" for client retention and growth include:
- legal services checkups to ensure that each client's special recession-related business and legal issues are being addressed
- promoting and participating in clients' post-recession business planning
- seminars about legal issues that your clients face during the recession
- multidisciplinary client service teams to ensure a thorough, integrated design and delivery of legal services
- offering extended payment plans, without late charges, for client fees — without the client having to ask for these concessions in advance
- discounted legal services for clients' employees
Most of these tactics are simply good client care anytime. They could save your law firm when the next financial crisis strikes.