By Gary Holstein, Practice Advisor
“I would love my practice-if only it weren’t for some of my clients,” lamented a personal injury attorney that I recently spoke with. When asked why he doesn’t select his clients more carefully he advised me that he has to “pay the bills.” Unfortunately, this thinking does not make good business sense and can actually impede the growth and profitability of a law firm. Additionally, it can also have a profoundly negative effect on the stress level of the attorney and other staff.
When attorneys take any case that comes across their threshold we call it “threshold” law. The decision to be less selective comes from a scarcity viewpoint. Attorneys worry that the availability of clients is diminishing and feel pressured to take what they can get because they don’t know where the next opportunity may come from.
It Pays To Become Selective About Clients And Cases
Curiously, in most firms, 60-80% of the revenue for the firm comes from around 20% of the cases. Often, a large percentage of a firm’s cases takes up the time and resources of the firm, but provides little revenue. In many instances, these cases add more to the stress level than to the bottom line.
Law practices have limited capacity based on certain constraints: their physical space, their current technology, and most significantly, their staff’s time. If firms fill their capacity with the wrong cases, they have little left over to handle the more appropriate-and profitable-cases. This is not a profitable business model!
If we label the cases that are most appropriate for a practice as “A” and “B” clients, then those who don’t belong in your pipeline are the “C” and “D” clients. You will maximize the financial health of your firm and provide better service to your clients if you terminate (in an ethical manner) some of your “C” and “D” clients and prevent them from getting into your pipeline in the first place.
Tailor Your Marketing To Change Who’s In Your Pipeline
All law firms have a “pipeline” – the work-in-progress inventory of open and active cases or matters. Getting clients into that pipeline is the function of marketing. Marketing tools include advertising such as the yellow pages, billboards, newspaper, radio and TV. Marketing vehicles include public relations, the Internet, a Web site, newsletters, speaking engagements, and publications. All of these tools and vehicles cast a wide net for prospective clients: mass-marketing is not intrinsically selective. Firms who use this method need to conduct their own internal selection processes.
Implementing a referral marketing system is highly effective in producing a predictable supply of the kind of clients you want to serve in your practice. When cultivating your referral sources, you can identify the type of cases that are most appropriate for your practice and influence, to some degree, the kind of cases that get referred to you. Then you need a methodology for selecting and de-selecting cases that goes beyond using a gut-level feeling and your short term financial needs.
Create A Filter
That methodology is a client intake system. Think of the system as the filter that lets good clients into your pipeline and screens out others. The client intake system defines a series of characteristics that you apply to determine where on the “A” to “D” spectrum clients fit. Each firm puts its own spin on the basic approach.
Built like a scorecard, the system is set up to evaluate the following characteristics of each potential client: case compatibility with your practice area, attitude, personality, level of cooperation, value of the case, fee collection probability, referral source (quality), and the expectations of the client.
For each of the criteria, potential clients are rated “A” through “D.” For example, an “A” client would be low maintenance and very cooperative whereas a “D” client would be very difficult and require much maintenance.
If the potential client scores low in the “collectible” column, it drops them out of the “A” and “B” status. If your client can’t pay, and you aren’t interested in taking the client in on a pro bono basis, none of the other criteria matter.
Other factors that downgrade the client’s score include a client with unrealistic expectations, a referral from a general source like the yellow pages, or a case outside of your practice area.
Often attorneys ask “How can I evaluate the person’s attitude or personality in the first phone call or meeting?” There are red flags to listen for when talking to a prospective client. For example, if you are evaluating a client’s financial attitude, listen for questions and statements such as:
- “How much is this going to cost me?”
- “I know a lawyer who is cheaper.”
- “I can only pay one half of the retainer.”
When evaluating clients’ future level of cooperation, the following may indicate problems:
- They mention they are switching lawyers or have switched.
- They request that the attorney guarantee a particular outcome.
- They do not want to hear a realistic appraisal of their case.
When evaluating their attitude, consider the following indicators:
- Is their anger disproportionate to the matter?
- Do they appear to be seeking “revenge” or hiding information?
- Do they have a negative view of attorneys in general?
While these are only a few of the questions that help create your filter, they are important considerations if you are going to implement an effective and successful client intake system. If you want to maximize the capacity of your firm, lower your stress, and excel financially, filter who gets into your pipeline. End your Open Pipeline Policy and get absolution from the 7th Deadly Sin!
Previous articles in the series:
- Sin #6: Marketing Is Drudgery
- Sin #5: Playing The Lone Ranger
- Sin #4: Stop & Go Marketing
- Sin #3: Break The Chaos Paradox
- Sin #2: Seeing A Stranger In the Mirror
- Sin #1: Relying On The Kindness of Others