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    Business Development in a Recovery Economy

    Research shows the legal profession has begun a gradual economic recovery from the recent recession. It also shows how the recession has permanently changed the relationship between lawyers and business clients. In this part one of a two-part series on “Best Practices in Practice Development,” the author looks at new trends in practice development brought about by the recession and how lawyers can adapt and build business in a recovery economy.

    Larry Bodine

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    Wisconsin LawyerWisconsin Lawyer
    Vol. 83, No. 4, April 2010

    Money 
Chart At last there is good news: The legal profession has entered a recovery economy. The grinding downturn that brought layoffs of 5,259 lawyers – 4.3 percent of the lawyer workforce nationwide, according to the Nov. 9, 2009 National Law Journal – is ending. Four separate research studies support this conclusion:

    • The 2010 Client Advisory by Hildebrandt Baker Robbins. The legal market finally “bottomed out” at the end of 2009.
    • The Law Firm Group at Citi Private Bank. “We believe the worst is over,” said Dan DiPietro, advisory head of Citi, an arm of Citigroup.
    • The BTI Consulting Group in its “Premium Practices Forecast 2010.” It predicts corporate legal spending by large companies will grow nearly 5 percent.
    • The February 2010 Robert Half Legal survey of 300 attorneys from among the largest law firms and corporations.

    But there’s a catch. Relations between lawyers and business clients have changed permanently. The research studies cited above agree that law practice will not go back to pre-recession business as usual. Some of the changes include the following:

    • There is a client rebellion underway, reflected in the 25,000-member Association of Corporate Counsel’s “ACC Value Challenge,” which insists that lawyers cease billing by the hour. See www.acc.com/valuechallenge for the details.
    • For the foreseeable future, attorneys will face a buyers’ market for legal services, in which clients will increasingly focus on the overall value of the services they receive.
    • Law firms that had routinely (since 2006) imposed on corporate clients 4 to 6 percent rate increases annually will face resistance to any increase at all. Instead, clients will respond with demands for discounts in hourly fee arrangements.
    • Cost-cutting has reached its limit. Many law firms have already slashed staffing, occupancy, and travel expenses to the bone.
    • The only route back to prosperity is through business development – increasing the “top line” with new files, new clients, and new revenue.

    On a positive note, all the traditional in-person business development techniques work well in a recovery economy, and lawyers now have a host of online social networks to use to get new business using the Internet. More on that momentarily.

    A Silver Lining for GPs and Solos

    Happily, there is a silver lining for solo practitioners and small-firm attorneys, who make up the majority of State Bar of Wisconsin members. First, smaller firms were much less affected by the downturn than the nation’s largest law firms – those with net operating income of $34 million or more and 150 lawyers or more (the “AmLaw 100” and “AmLaw200”). Smaller law firms experienced less of a decline in demand, rates, revenues, and productivity, according to the Hildebrandt research. Many mid-sized law firms were actually hiring during the 2009 downturn.

    Larry Bodine

    Larry Bodine, Seton Hall 1981, is a business development advisor, helping law firms nationwide attract new clients and generate new business by using strategy, business development training, and individual attorney coaching. Reach him at (630) 942-0977 or com Lbodine LawMarketing LawMarketing Lbodine com, or visit www.LarryBodine.com.

    In fact, there is a major economic trend underway in which corporate clients are abandoning high-fee megafirms and actively seeking out boutique and small firms – because their services are just as good and their fees are hundreds of dollars less per hour. I attended the most recent national conference of the ACC and heard the following:

    “Milwaukee is the new Mumbai. Many general counsels are going to the #1 firm in a second-tier city to find a law firm,” said Christopher Mirabile, president, Association of Corporate Counsel, Northeast Chapter and managing director of the Race Point Capital Group.

    In other words, the Fortune 500 are looking for smaller firms. In the past, corporations had hired megafirms as a “cover-your-behind” tactic, so that if they lost a big case they could defend themselves by saying they hired a top law firm. This attitude has by and large vanished. Today, in-house lawyers are under strict orders to cut their legal spending and stay within their budgets. I have personally coached lawyers in small firms who have successfully lured major corporate clients from megafirms, simply by offering lower fees for equal skills.

    The Altman Weil 2009 Chief Legal Officer Survey found that only 10 percent of the law firms that chief legal officers hire are firms with more than 750 lawyers. However, 30 percent of the firms are “small” firms with fewer than 100 lawyers. This means there is a rare opportunity for small-firm lawyers to knock on the doors of corporate general counsel and get a warm reception when they introduce legal services that boost the company’s bottom line.

    Small-firm Practices Will Grow

    The practice areas of smaller firms were least affected by the recession. Big-firm practices like mergers and acquisitions, intellectual property prosecution and litigation, capital markets, corporate tax, and “bet the company” litigation saw significant declines in the last two years.

    Six Techniques to Prosper in 2010 

    The law firms that prosper in 2010 will be the firms that employ these six techniques:

    1. Offer clients fee arrangements they want (that is, not based on the billable hour). Predictability is the key element that clients seek.
    2. Emphasize efficiency to save clients money, boost their business, and entice them to become continuing “customers.” For example, a firm could hire a private investigator instead of using multiple depositions to learn the facts of a matter.
    3. Generate referrals because of superior client service. The best source of new business is a referral from a client. Clients might not have the background to judge whether one lawyer is more skilled than another, but they immediately recognize prompt communications. Smart lawyers will make sure they are easily reachable, return calls within 24 hours, and have a backup person to handle calls when they are occupied. According to the Small Business Success Index published by Network Solutions, more than three out of four small businesses (such as law firms) will rely on the strategy of offering superior customer service to succeed in the recovery economy.
    4. Practice preventive law. This means anticipating a client’s needs before the client does – or recognizing a recurring problem the client faces – and helping a client reduce risk. For example, if a business client is repeatedly facing employment discrimination claims, a smart lawyer will offer to train the company’s middle managers to develop better practices. This illustrates the approach of looking for new services to meet client needs.
    5. Use creativity as a strategy for success. Lawyers should adapt now and not wait for change to ambush them. The leading sources of ideas to grow a small business are, in order: clients, newsletters and trade journals, competitors, employees, suppliers, conferences, books, and consultants, according to the Small Business Success Index.
    6. Market vigorously, using face-to-face meetings and online social networking. Remember that no one likes being sold to; “pitching” a prospective client by reciting your credentials, honors, and admissions will not attract new business. Instead, the better approach is to treat a new-business meeting as an interview, and ask questions about business or personal problems that you can solve with legal services. Online, lawyers should position themselves as informative sources of new developments.

    Conversely, research shows that the following practice areas are expected to grow in 2010:

    • Bankruptcy
    • Foreclosure
    • Labor and employment
    • Regulated companies
    • Insurance defense
    • Personal injury
    • Medical malpractice

    Because a harsh economy still exists for most Wisconsin residents, I would add to this list:

    • Litigation, because business disputes increase during an economic downturn. Additionally, car crashes, a major source for personal injury work, are not affected by the economy.
    • Matrimonial law, because unemployment and money troubles put stress on marriages and lead to divorces.
    • Wills and estate planning, because there are 37.9 million Americans age 65 and older – accounting for 13 percent of the population – and they have a median net worth of $190,100.
    • Drunk driving and criminal law defense, because these cases are not tied to the economy.

    Looking Ahead to 2010

    “For most law firm leaders, 2009 will be etched in their memories as the year they would most like to forget. In many ways, it was the worst year for the legal market in at least the past half century, particularly as it followed a difficult 2008,” the Hildebrandt report begins.

    BTI Consulting of Boston reported that spending on outside counsel dropped 10.8 percent in 2009. Citi Private Bank found that demand for law firms it surveyed fell by 4.1 percent last year, a stark contrast from 2001 to 2007 when demand rose by 4 percent a year.

    Yet many firms managed to thrive, thanks to strong collections in the fourth quarter of 2009, extensive expense cutting, reductions in personnel, and tighter controls on promoting attorneys to partner or shareholder.

    All the research points to a gradual improvement in the economy of the legal profession. “We forecast that profits per equity partner for 2010 will be flat to up 5 percent across the market,” Hildebrandt states, matching the prediction of BTI Consulting. A firm’s results may vary, depending on location, practice, and client mix.

    “Pressures to provide discounts, fee caps, multi-year rate schedules, and alternative (nonbillable-hour-based) pricing were increasingly common as reflected in declining realization rates across the market,” Hildebrandt reports. These pressures will continue and will be long-lasting. Remember, it’s a buyers’ market. (Please see the accompanying sidebar, “Six Techniques to Prosper in 2010.”)

    A Social Media Boom

    When you’re going after muskie, you go fishing where the muskie are. The same is true for clients. In the last year an enormous business conversation – and source of new business – has moved online. According to a 2009 Leader Networks report, 78 percent of lawyers have joined an online social network and 71 percent of in-house counsel have also joined. The types of social media lawyers are using include having a blog, a Twitter account, or a LinkedIn profile. Consider these astonishing statistics:

    • 1.3 million lawyers have LinkedIn profiles.
    • Facebook has 400 million users, and Facebook gets 37.4 trillion page views in a year.
    • Twitter transmits 50 million tweets per day.
    • There are 5,187 lawyer blogs in 72 subcategories, according to
      Blawgsearch.com.
    • There are 234 million Web sites.

    For more details on these statistics, please visit http://alturl.com/78yf.

    Online networking is no substitute for face-to-face business development efforts, such as visiting clients, taking referral sources out to lunch, and attending meetings of trade associations that your clients belong to. You could even take a client along the next time you go deer hunting.

    That said, if a client can’t find you with Google, you are invisible on the world’s largest source of information. Creating a profile on Google Local or LinkedIn is a method to create an online presence. It makes it easy to contact you. It’s a way to showcase your knowledge about a client’s problem. It’s an excellent way to get your marketing message out. It’s a practical way to meet potential clients and generate leads for yourself. It’s an excellent way to stay in touch with current and past clients, too.

    Twitter is one way to connect with current and potential clients. I was a vocal skeptic of Twitter.com as a source for new business until I heard a webcast in January 2010 in which Robert C. White, a technology lawyer, said he tweeted about an article relevant to mobile technology and as a result obtained two mobile phone companies as clients. What was significant is that he is a 55-year old baby boomer, not a youthful member of the “Net Generation.” He is a partner at a 140-lawyer firm, not a technophile trying to drum up business using a laptop in a Starbucks. He practices at the oldest commercial law firm in his county – not at a start-up or virtual law firm. You can follow him at http://twitter.com/soflatechlawyer and read more at http://alturl.com/m7t4.

    Lawyers can use Twitter to tweet about news releases, articles of interest to clients, new laws and regulations, and speaking engagements. It’s also useful as a way to monitor selected tweeters. By carefully selecting who you follow, you can avoid the inane, time-wasting tweets we’ve all heard about. (Please see the accompanying sidebar, “Key Points for Lawyers Using Social Media.”)

    Recommended Social Networks for Lawyers

    Facebook. Facebook is the largest online network, but it’s not the best place for lawyers to find business, because its emphasis is personal, not business-related. It is, however, an excellent place to attract recruits. Smart law firms have created Facebook firm pages because many law students use the site. To read how the firm Curtis, Mallet-Prevost, Colt & Mosle optimized its Facebook recruiting page, see http://alturl.com/a4dc.

    Key Points for Lawyers Using Social Media 

    Here are some key guidelines lawyers should follow when using online social networks and blogging:

    • Restrict your messages to facts, current events, trends, and news.
    • Never offer legal advice online – or else you’ll create unwanted clients.
    • Don’t take a position on a court opinion or statute – it may conflict with a position a colleague down the hallway is taking in a brief.
    • Never discuss confidential matters.
    • Clarify that you’re speaking for yourself and not the firm.
    • Don’t call people names or defame them.

    In fact, your firm should have an online social media policy. You can find templates online using Google. 

    LinkedIn. I recommend that lawyers create a profile on LinkedIn.com – it’s free. Your profile should be made public and include a color photo of yourself. Whereas Facebook is for staying in touch with people you used to know, LinkedIn is for meeting new people and making new business connections. LinkedIn is the de facto online directory for all professionals. It has 60 million profiles, from 200-plus industries, 150 countries, and the executive ranks of all the Fortune 500 companies. Remember, 1.3 million lawyers have LinkedIn profiles.

    When you buy a Corvette, it’s useless if you just keep it in the garage. The same is true with a LinkedIn profile – you must make use of it. For example:

    • Invite your current contacts to connect with you. Also invite potential clients and referral sources who you meet in person.
    • Ask delighted clients for recommendations. Note that rule 7.1 of the Wisconsin Rules of Professional Conduct for Attorneys, Communications Concerning a Lawyer’s Services, does not prohibit nonpaid testimonials.
    • Join a group on LinkedIn that your clients and referral sources belong to.
    • Once in a group, participate in discussions or, better yet, demonstrate leadership by starting a discussion.
    • Use the “Ask a Question” feature to send a message to your connections only. Use the same feature to distribute newletters, announce speeches and articles, and deliver relevant news items. Your message will arrive as an email with the LinkedIn header, which tells the recipient it is not spam but was sent by someone they have connected with.

    Although I enjoy online social media, it’s still true that nothing beats a word-of-mouth recommendation to get new business, according to a new study by ARAnet. See http://alturl.com/bqsk for more details. Recommendations from friends or family members remain the most influential resource on advice for those looking to purchase products and services.

    Conclusion

    To be successful, you must adapt to the recovery economy. The profession is not returning to pre-recession business as usual, because we are in a buyers’ market. Major corporations are looking for boutique and small-firm lawyers, so be ready to ask them about their business needs, which you can solve with legal services. Create a LinkedIn profile today and connect with people you meet, join a group, join a discussion, and ask a question.

    Editor’s Note: Part two of this two-part series on “Best Practices in Practice Development” continues in the May Wisconsin Lawyer, in which the author will identify the four sources of new business and provide practical techniques to bring new business into your firm. On May 6, at the State Bar Annual Convention, the author will show attendees what areas of law are growing, how they can capture this legal work, what clients are buying, and how to design an effective business development plan incorporating four key elements. For more information about the author’s program “Business Development in the Recovering Economy” and other convention happenings, or to register for the State Bar Annual Convention, please visit www.wisbar.org/convention.




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