Pricing Tips to Maintain Profits in 2021 and Beyond

Aug 25, 20214 min read

Updated: Aug 26, 2021

by Rob Stote, Managing Director of Pricing and Profitability, BigHand

Despite the huge pressures placed on law firms in the last 18 months, many have leveraged flexible and admirable resilience into strong profitability and growth.[1]

Firms often focused on client communications and made strict expense cuts to forge ahead. Partners everywhere began to proactively check-in with their clients and carefully address client concerns long before they hit the billing cycle. Such foresight from increased engagement often leads to new opportunities that likely wouldn’t have come up otherwise.

On the expenses front – travel and entertainment dropped to nothing as real estate overheads were slashed and people adapted to work effectively from home. And now the question is, how can this be sustained as they begin to return to the “normal” office working environment?

Expenses will creep up as law teams start to commute back to the office and travel to meet with clients. Law firm leaders need to revisit the familiar trio of People, Process and Technology to future-proof profitability and sharpen underlying processes and working practices to beat the competition.

People

Are you resourcing legal work with profitability in mind? As Sean Monahan from HBR Consulting said in a recent BigHand whitepaper [2] “Many firms have spent time developing and deploying their profitability metrics in recent years, and the next natural step is to look toward resource management to ensure firms can call in the right resources throughout the lifecycle of a matter.”

Resource management can be just as important as LPM and Pricing when it comes to maintaining margins, especially with those teams under increased pressure since the pandemic began. As partners have increased engagement with clients, conversations around pricing have naturally increased too. Ensuring work is completed at the right level and cost to the business will become even more important as costs begin to rise over the coming months.

Partners should be able to easily use lawyer time in the best, most cost-effective, way to maximize billable hours and profitability.

Process

Is your firm clear on the profit margins of every legal matter? This was a question we asked in BigHand’s recent survey of 250+ legal finance professionals. Respondents reported that 25% of firms do not track profitability per matter and only 41% track profit margins on every single matter. An obvious question arises from these figures: how are firms ensuring profitability without some analysis of profit margin at a matter level? Moreover, without this data, how can firms look to make improvements to their pricing strategies?

It’s essential to maintain tight control over profit margins throughout a project, from accurate scoping and pricing to effective delivery and meeting client expectations. Law firms need to implement strong controls over every aspect of their matter management processes to maintain profitability as costs begin to rise.

Technology

Are your teams still relying on Excel to tracking matter budgets? According to our research, 27% of North American firms rely on Excel as their primary platform to track budgets. However, Excel doesn’t provide lawyers with the legal matter pricing and planning tools needed to track real-time insight. As client pricing conversations have increased, it’s important for firms to have technology in place to streamline pricing and budgeting processes based on the data.

BigHand client Jon Lindrus, Manager of Pricing & Analysis at Foley and Lardner said, “For us, the technology is about providing the partners with an effective way to track and manage their matter budgets, and make more informed decisions as a result. It’s clear, for example, when to use different resources on a matter, or when to notify the client of budget spend.”

The added visibility gained through a dedicated legal pricing tool will lead to more informed decision-making around profitability and ultimately increase margins.

Chris Oddy, Head of Pricing & Commercial Development, Womble Bond Dickinson confirms, “It’s very obvious that the matters we have tracked with BigHand have had better recoveries than those we have not.”

“We also know that we are making a better margin on some matters that otherwise would not have been economic for us as a business; using the insight from BigHand, we’ve been able to change the delivery model to make these matters viable, while ensuring client satisfaction.”

Law firm pricing has come a long way in the last 10 years, but having the right people, processes, and technology in place in this area is no longer a luxury – it is now imperative to maintain profitability post-pandemic. Law firms need to act now and implement the right tools to maintain profits in the coming months. Deliver accurate pricing up front with real-time and continuous monitoring of budgets throughout a matter lifecycle, and seamless provision of cost transparency to clients, partners, and finance teams.

Join BigHand’s Managing Director of Pricing and Profitability, Rob Stote, as he and other legal pricing experts share insight and top tips for maintaining and increasing profitability in 2021 and beyond: Pricing tips to maintain profits in 2021 and beyond this Tuesday, August 31, 12-1 pm ET. RSVP free!