The Most Dangerous Number for Law Firms
Keeping your law firm resilient and prepared for change is critical for its long-term success. This resiliency relies, in part, on your ability to pivot and stay agile in the face of change. But how can you achieve this resiliency in practical terms? Start by avoiding the number one.
The most dangerous number in business
What is the average client worth to your firm? If you take into account not one case but the lifetime revenue each client represents to your firm, it might be a lot.
The problem arises when one client represents so much of your firm’s earnings, that their departure would be catastrophic. This is known as single-client dependency, and it is one of the most critical factors that can affect your law firm’s valuation. For example, if you’re considering selling your company, banks will inquire whether you have any clients worth more than 5% of your revenue.
That is why marketing author Dan Kennedy used to say, “The most dangerous number in business is ONE.” When an entire business depends on just one market, client, or partnership, it is always one stroke of bad luck away from failure. With so many circumstances beyond your law firm’s control, it is better to set your business to be resilient from the start and avoid single-client dependency.
How to keep your law firm agile and profitable in the face of change
The world is changing fast and, in order to adapt, modern law firms require a better model that allows them to grow with peace of mind. This means having flexible expenses that can scale up and down as your law firm grows, in order to maintain profitability regardless of the circumstances.
This is the model Amata is proud to provide. Our scalable solutions help modern law firms access everything that they need to support their growth — virtual assistants, trained paralegals, professional offices, and networking spaces — but without the rigidity that can undermine your law firm’s resiliency.
Law firms should be able to evolve as the needs and expectations of their clients change. Take, for example, the size of the average law office. In the past 20 years the average space allocated per attorney has gone from 1,400 sq. ft. to 700 sq. ft. today, and that number continues to shrink every passing year. Law firms are taking a hard look at their office costs and would prefer to allocate those funds to technology, automation tools and compensation.
The extreme are the law firms who opted for a fully remote environment. No dress code, no commute, and flexible hours. But while remote work can have some perks, some recent studies are finding that going “fully remote” can create new problems such as feelings of isolation and decreased productivity. Many of our clients have come to the conclusion that working from home simply didn’t work for them – personally or professionally.
So, is there a balance? How can law firms remain flexible in their costs, while keeping a professional image that leads to increased clientele?
A new model for growth
When a law firm loses a significant client, the immediate challenge is maintaining cash flow. This is where the importance of flexible office plans becomes evident. In an industry where expenses can quickly pile up, having flexible arrangements can be a lifeline.
This is what happened with one law firm serving the Chicago area since 1997. The team was forced to work remotely during the COVID-19 pandemic, and started to question the necessity of a high-maintenance lease they had been paying for the past 13 years.
When this firm contacted Amata’s team in 2021, they were ready to try a new approach. They hired virtual office services, including phone answering, call forward and automated receptionist features. This allowed them to enjoy the benefits of a brick-and-mortar office, such as reliable customer service and confidential lines for client calls, without the need for an in-house physical presence.
As a result, this firm was able to drop its monthly expenses from over $21,000/month to about $550/month. And they did it while maintaining a professional office space, receptionist services, and the ability to add or drop offices without penalty.
Flexible office plans provide law firms with the agility to adjust their expenses according to fluctuations in their client portfolio. This law firm is an example of how flexible solutions can reduce costs, cut operational inefficiencies, and unlock growth without the risks of fixed costs.
Amata gives law firms everything they need to grow in today’s changing landscape. We provide a range of solutions, from phone answering and virtual office management to document filing and legal research. Our objective is to free up your time, resources, and staff so you can focus on doing what you do best – winning cases!
Inquire here about our tailor-made solutions that can ensure profitability, even in the face of change.