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Dieter Dammeier Explains How a Law Firm Operates as a Business
When Dieter Dammeier launched his lawyer career, he learned quickly that he needed to treat his practice as a business. Many industry peers lean heavily upon their legal expertise but forego best business practices when launching their professional career.
Here are Dieter Dammeier’s five steps to treating a law firm like a business.
1.Avoid High Overhead When Starting Out.
Unless an attorney is joining an existing partnership in a fancy high-rise, there is no need to pay excessive rent for a luxurious office in order to keep up appearances.
Many attorneys launch their law firm business from their home office. Once they’ve grown and require a staff, they shop for a commercial office that they can afford.
Even a well-credentialed lawyer like Dieter Dammeier considers ways to keep costs reasonable. Otherwise, one’s operating costs quickly absorb revenues and put undue strain on the business by requiring more money than needed.
2.Learn How to Create a Break-Even Analysis
A break-even analysis tells the story of when a business actually makes money. The first step is adding up all fixed costs (costs that remain the same month-to-month) and variable costs (costs that fluctuate based on workload).
Most lawyers work on hourly compensation. A sample break-even formula might look like this:
Total Monthly Fixed Costs / (Hourly Rate - Variable Cost Per Hour of Work) =
Number of Work Hours Required to Break Even
When a business is breaking even, they are making just enough money to pay for all the costs associated with business operations. Most attorneys include a profit goal as follows:
(Total Monthly Fixed Costs + Desired Monthly Profit) / (Hourly Rate - Variable Cost Per Hour of Work) =
Number of Work Hours Required to Break Even
Attorneys that know exactly how much work they need to achieve their financial goals begin on much better footing and are able to plan accordingly.
3.Build Professional Relationships.
New law firms don’t get business until the community knows who they are and what they do. Attorneys need to venture into the community and build referral relationships with other professionals and market themselves.
Dieter Dammeier found that some of his best referral sources came from other attorneys. While one should not ask for referrals from direct competitor firms, there are scores of law practice types. It is common for personal injury attorneys to refer business to bankruptcy attorneys, and vice versa. Dieter notes however, that if they are willing to refer business to you, make sure that you return the favor when you can.
In addition to other attorneys, professionals from nearly every industry can benefit from knowing about the new law firm in town. The attorneys that take social risks and get to know their fellow professionals enjoy vibrant referral partnerships throughout their neighborhood, city, and region.
4.Learn the Arts of Client Acquisition and Retention.
When launching a new practice, all revenue will come from new client acquisition. Establishing referral partnerships with professionals in the community is easily the best way to jump start new client acquisition.
Eventually, it will be most beneficial to lawyers that they work hard to retain as many clients as possible. It is more expensive and time-consuming to chase new clients than to keep current clients on. Therefore, the more that a law firm can focus on pleasing their current clients, the faster they will grow.
For a law practice, Dieter Dammeier notices time and again that attorneys who know how to validate and coach their clients through a difficult legal matter win the day. Most people seek out an attorney during a challenging time of their lives. Unfortunately, many great attorneys simply don’t nurture people skills and struggle to build their law firm as a business.
Whether establishing a base of new clients or retaining old clients, law is a business revolving around helping people.
5.Choose Marketing Channels Wisely.
It is common for law firms to use different kinds of marketing and advertising to scale their business.
TV and radio ads – while not worthless – are losing their effectiveness compared to other marketing methods. For example, when most people realize that they should talk with an attorney, they will Google attorneys in their area and view recommendations and reviews of each attorney before making a decision.
Law firms that establish themselves online with clean, informative content will attract new clients. Also, law firms that establish listings on local business directories – Google Maps, Yelp, Justia, FindLaw, and more – are able to generate more prospective clients.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.