How to Manage Cash Flow When Legal & Client Intakes Are Down
The practice of law can be ultra-competitive. If your legal intake volume is dropping, you may be seeing an alarming trend that could threaten your law firm’s long-term sustainability. To us, that means three things.
- You need more calls.
- You need better intakes.
- You may need to take some emergency steps while those things happen.
Those are the three steps if your firm is teetering on the red line, but there’s a lot to unpack. You are hopefully not yet in a position where you must borrow money or manage your resources in a way that affects the quality of your service or your potential clients. Skip to step three if you are. Ideally, though, you can address your problem before that happens. It starts with intakes, which start with marketing.
#1 Marketing Equals Client Intake for Your Firm
The temptation for law firms is the same for almost every other business. When the going gets tough, the marketing budget is first on the chopping block. That’s an incredibly short-sighted conclusion, however. The fewer people who see your message, the fewer people in your client intake process.
Cutting marketing can be cutting your own throat.
That does not mean you can’t spend your marketing dollars more intelligently and cut waste. It would be best if you were doing that constantly, though, in our experience, many firms tend to let marketing run on autopilot. Here are a few things your law firm can do to manage cash flow in its marketing budget.
- Analyze your spending and focus on your core business. The temptation is often to cut the big expenses. That’s a trap. If you’re using a firm management suite with marketing analytics like GrowPath, you can dive into your marketing spend and find your ROI. Where are you getting the best return on those dollars? Are the cases high quality? What are you paying for?
- Now may be the time to spend more, not less. Marketing isn’t an expense. It’s an investment. Less advertising means fewer leads. More advertising means more leads, which leads to more cases and fees. It’s understandable if you’re unable to do this when money is tight, but it’s something that generally pays dividends down the road. Borrowing to advertise is risky, but firms have done it, and some still do.
- Consider production budget versus media budget. Generally, law firms are looking for simpler commercials, ads, and so on that have a shelf life. If you’re spending too much on ad production, you may not have enough to obtain the reach and frequency you need to saturate your target audience effectively. Likewise, if your state allows direct mail, are you sending high-dollar mailings when a simpler piece would suffice?
- Consider the media expenses and act accordingly. You may like that your commercial runs in primetime, but that’s the most expensive time to advertise. Or, if your state allows it, maybe you spend a lot on direct mail and postage.
- Is your content marketing optimized? Pretty much every firm has a website. How long has it been since you touched it? Google changes its rules with frustrating regularity and rewards those who actively maintain and update their content and web presence.
Data helps with all these things. Your firm should know where its intake calls come from. Everything else is a test. Focus on your bread and butter. You can only do this effectively if you collect your data diligently and analyze it for insights. GrowPath helps firms collect and sift data to get more out of their marketing budgets.
#2 Focus on Client Intake and the Intake Process
If you haven’t already, any cash flow issue necessitates a long look at intakes – which is where future cash flow comes from. When someone calls, what’s happening? Are you finding the valuable cases or letting them slip away? Are you turning down cases that could make money if you work them efficiently?
At a glance, this doesn’t involve moving money around – but it might. Getting cash to flow means getting cases, which starts with intakes.
- Are you answering the phone effectively? This is a question that applies to firms of all sizes. In smaller firms, intake is generally either a team effort or the call is routed to an attorney… who may be busy. Juggling a future client with a current one is never a good thing. For larger firms, skilled and efficient intake personnel – on-staff or outsourced – are critical. Either way, the wrong person on the line could cost you cases.
- Are you responding promptly? It wouldn’t matter if you were the only firm for miles, but that’s not usually true. No matter the size of your firm, shorten your response time, preferably from an attorney. That can help you boost your new client pool.
- Are you asking the questions that get you cases? Not every intake has multiple possible cases, but you could be missing out on significant revenue if you’re not inquiring about mass tort possibilities. For example, GrowPath’s patented Buzzwords™ feature helps firms spot revenue-generating mass tort cases in real-time, right on the call.
- Are you turning down cases that could make you money? It’s understandable to want to focus on high-value cases, but if you can work efficiently, run-of-the-mill cases pay, too. Those keep the lights on, so make sure your “take” threshold isn’t too high. Efficient work here is the key to getting back in the black.
Case flow equals cash flow. If you’re not getting cases, you’re not getting paid, plain and simple. Take a long, hard look at your intake process, start to finish, and you may find something that can turn the tide. If you don’t know where to start, consider upgrading your firm’s case management tools here.
#3 Keep Your Firm Afloat While Your Revised Legal Intake Process Works
The worst-case scenario is that your firm is staring at negative numbers with no end in sight. When intakes dip and trend downwards, it can feel like the sword of Damocles. The earlier you commit to solving the issue, the better, but these trends do sneak up on firms. That’s why we go on and on about case management software and features that collect and analyze data.
If your firm is on the brink, you need solutions now. Here are a few law firm cash management options you can explore while intakes (hopefully) recover.
- Cut costs. You don’t need us to list all your firm’s expenses, but there are certainly some you’ll need to cut. Look for significant cuts you can make – service providers that can scale come to mind.
- Negotiate expenses. Some service providers can offer reduced service for reduced cost – even on contracts. Creditors can sometimes be flexible, but you must ask. See if they can lower your rate, extend your payments, or even refinance your debt for a lower payment (but pay attention to the rate).
- Borrow to make ends meet. If you’re in a bind, you can seek a loan to help you bridge the gap. This can frighten some firm managers, but it’s not all that uncommon. Many firms borrow to finance big cases. This is a bit different, but the basic idea is the same: you’re betting on your firm’s success.
- Reduce staff costs. You don’t have to start hacking staff or laying lawyers off. It’s likely that people at least suspect there are financial troubles. You may want to start with reducing hours, not staff. If you need to furlough people, talk to them about it. And if you must outright lay people off, do it graciously. Side note: if you can analyze data, this is an opportunity to make targeted reductions of your least productive staff – whether by hours or by letting them go.
- Sell assets. If your firm owns its real estate, you can consider selling or mortgaging that asset to get some cash – though moving expenses must be considered if you sell. Can your employees work remotely (and do they want to)? If so, you may be able to reduce your real estate footprint and costs as well.
The key to these tasks is to keep the firm afloat, not send an “abandon ship” message. The hope is that these struggles are temporary, so maintain your relationships. No gloom and doom, just the lull before a boom.
Data Flow Equals Cash Flow: Could This Have All Been Avoided?
Firm management is a business position, not a legal one. When you have accurate data and the ability to analyze it, you can head many problems off before they happen and solve the ones that happen much faster. Data collection and analysis require the right products. Products we make. You can see why we’re so adamant.
Data can solve many law firm problems – from legal intake to cash flow. It’s predictive, relevant, real, and objective. It can even be automated. If your firm isn’t collecting or cannot analyze it, you leave yourself at the mercy of opinions, whims, and intuition.
That might work with a jury or an insurance adjuster. It’s just no way to run a business. The moral of the cash flow story is to increase your data flow. And if you need help with it, you only have to schedule a demo.