Marketing Mailbag : Bothwell Marketing, Inc.

MILKING MORE: Take Advantage

published in the Daily Journal

Dear Busy:
When you have more business than you can handle is the best time to do marketing. Bringing in new business is only a part of marketing. Whereas sales is a promotional activity which is not necessary during busy time, the more strategic aspects of marketing – positioning and price – can be improved when the market for legal services is strong.

Now is the time for firms to look at profitability. Firms should be asking their most profitable clients for more work, while clients who make up the least profitable 10 percent of the client base should be given the option of a rate increase or changing firms. Firms should constantly focus on the lowest and highest sectors of their profitability spectrum to expand high rate work while sifting out poor performance clients.

Lean times invariably result in firms entering into client relationships which don't meet firm guidelines. These were times when building volume seemed to be more important than maximizing profits. The danger lies when firms continue to serve unprofitable clients when the economic climate improves. Firms who do not aggressively manage profitability risk being left behind by firms who capitalize on the more profitable work that is available.

Firms should also take advantage of the current economic climate to be selective about new clients. Why take work from any client that comes along when this often results in tying up resources with clients who may turn out to be demanding and overly cost-conscious. By taking the time to decide which clients the firm wants to serve, the firm can avoid negative and unprofitable relationships and avoid fee collections and write-offs.

Firms should also beware of beauty contests during boom times. It makes no sense to participate in beauty contests if you already have a lot of work, unless winning would mean getting work in an area where you want to grow, at rates that are as or more profitable than those you currently earn. Ask up front whether the beauty contest you are considering is being staged only to identify the lowest bidder. To avoid wasting time, state your rates up front and ask if it is worthwhile to bid for the work at those rates.

Good economic times are the times to ask for retainers. Many major firms are even asking for stock or an ownership position in their clients' ventures. It is also not uncommon to request value billing beyond the hours and expenses invested. Top legal talent is being paid a premium in the form of bonuses and equity. Don't let memories of leaner times hold you back. In this flourishing economy, firms should maintain more profitable rates.

Be careful of the client who offers a large volume of work in exchange for lower rates. Investing a major portion of the firm's resources in low profit work does not make sense when there are other options available. Also be careful in dealing with clients who request an absolute airtight budget for time and expenses. Clients deserve an informed estimate of the cost of representation. However, a client who is overly cost conscious at the beginning of the relationship is likely to become even more so as their matter progresses.

During these good economic times, firms should also watch out for overly demanding clients. Clients who always want immediate attention soon becomes the client who overwhelms you with calls and requests. They are likely to eat up a lot of your time and be unwilling to pay for the extra attention. Making better selections of the clients and projects you take on can better position your firm for the future, and is the best way to avoid future problems with write-offs and collections. A time of growth should bring in more work, better profits and the financial ability to invest in shaping the firm's structure. Creating a firm foundation for the future is an essential element of strategic marketing.