3 Proven Ways Laws Firms Can Increase Profits Without Raising Rates (& Why They Must)

Law firm leaders face a perennial need to increase profits. That will never change. However, the tools and strategies to generate and save more money are evolving quickly.

Proven methods to cut costs, sell more services, capture more billable hours, and more have emerged—all of which help firms generate higher profitability rates without hammering clients with rate increases. Learn why law firms must find more creative ways to protect their bottom lines and how they can follow demonstrated tactics to do so.

Clients may no longer willingly accept rate increases.

Despite falling demand for services, Big Law firms expect to raise rates by 8% in 2023, the highest increase on record for Wells Fargo’s survey. But today’s corporate legal departments (CLDs) may not be as willing to swallow annual rate increases as before, considering:?

• Many CLDs are actively reducing the number of outside law firms they hire. Throughout 2021, nearly 60% of companies consolidated 80% or more of their legal work with ten or fewer law firms.
• Others are keeping litigation work in-house or sending it elsewhere. For nearly six out of 10 CLDs, the most common strategy to control litigation costs is to move more work in-house. More than half strive to better balance workloads across firms, managed services providers, and specialists.
• Nearly all CLDs (97%) plan to require their firms to describe the technological tools they use and how they make them more productive and efficient.

Rate increases could knock your firm out of the running at many organizations dealing with economic uncertainties (i.e., all of them). Keeping rates the same may give your firm a leg up on the competition. Here’s how to avoid raising rates while still increasing profits:

1. Allocate firm resources more effectively.

Use legal analytics software to track, analyze, and optimize matter management decisions and allocate firm resources cost-effectively. Matter metrics reveal whether goals, milestones, and budgets were met and, if not, where breakdowns occurred. Target specific revenue leaks and opportunities such as:

• Assign work based on lawyer skills, existing workloads, and performance data, not guesswork or tradition.?
• Identify lower-value work to move off the desks of highly paid partners to less costly providers.
• Spot and assist underperformers.?

Real-time analytics keeps your finger on the pulse of firm operations. Who doesn’t want to tell clients you spotted an issue early and stopped matter costs from accelerating out of control? Today’s clients are eager for more transparent conversations like this.

Plus, over time, you can discover which matters resolve at higher profit margins to build out your firm's most profitable practice areas.?

2. Seek more value from each client relationship.

Win more work by getting more out of each client relationship. Identify immediate cross-selling and upselling opportunities through metrics-driven relationship insights.?

Develop more precise and accurate budget forecasts that win over clients who demand transparency. Hard data backs claims of results for the nearly 7 in 10 law firms using legal analytics to pitch or demonstrate expertise to clients—almost all (98%) of whom agree that legal analytics delivers value for their legal practice.

Help lawyers respond to client questions quickly with the most up-to-date information possible using online client portals and real-time collaboration and communication tools. Client and matter tracking tools that include project management features, expansive search functions, and dashboard analytics keep lawyers on the same page as their clients and a step ahead in handling any issues.?

3.? Automate administrative tasks.?

Researchers estimate that the time wasted on nonbillable tasks adds up to at least 700 hours and over $200,000 per year in lost billable time each year for a lawyer with a modest billing rate. In other words, automation is too beneficial to ignore.

Software is tireless, accurate, and doesn’t get bored or overwhelmed with tedious work. Some of the first tasks law firms automate to boost profits are 1) time entry and timesheet generation, 2) prebill routing, review, and approval, 3) e-billing, and 4) e-payment. Removing the human element from these processes helps firms:?

• capture significantly more billable hours than with manual time entry,?
• increase accuracy and comply with billing guidelines to reduce fee write-offs and write-downs, and?
• speed invoice approval and collection times.?

Efficiency gains give lawyers more time to hone legal skills, build valuable relationships, and bill more hours. For more benefit, consider automating additional workflows such as:?

• standard client intake and correspondence?
• templated document generation and management
• email and calendar management tasks (automatically sort, archive, respond, notify, etc.)

Add more higher-value work rather than raising rates

When your firm quickly resolves matters more cost-effectively, you satisfy more clients who then trust you with higher-value matters and refer you to colleagues.?

Law firms have relied on Amicus Capital Group to help them build robust, scalable, and efficient legal practices for over 25 years. Call 877-926-4287 today to discuss customized financing solutions to help you reach your goals.