Owning a law firm is a dream for many attorneys, but the reality of running one can be overwhelming. According to the Small Business Administration, approximately 43% of all small law firms will fail. The reason isn’t a lack of legal expertise, but the business acumen required to run a successful practice. It takes more than being an excellent attorney to have a great law firm. Here are five major failures that we see repeatedly with law firms and how you can avoid them.
1. Failing to Create a Team
The Problem
Many attorneys know the law inside and out but weren’t taught how to run a business in law school. This often leads to them trying to do everything themselves, turning their practice into an overwhelming job rather than a thriving business. They work more hours because they don’t have a team to share the workload.
The Solution
To avoid this pitfall, you need to build a team. Roles should be clearly defined even if your law firm consists of just 2 or 3 people. You need:
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- An intake team to handle new client inquiries.
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- Paralegals to assist with case preparation.
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- Attorneys to handle the legal work.
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- Financial personnel to manage your finances.
Key performance indicators (KPIs) are essential for keeping your team accountable. For example, an intake person should know their appointment set rate, show rate, and hire rate. By surrounding yourself with intelligent individuals responsible for different aspects of your law firm, you free up your time to focus on growth.
2. Failing to Take Care of Business
The Problem
Many law firm owners focus solely on their clients and neglect the financial health of their business. They often look at their bank account balance at the end of the week and think everything is fine without considering the bigger picture.
The Solution
To avoid this, establish relationships with:
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- A bank for your business accounts.
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- An accountant or hire someone in-house.
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- A bookkeeper to manage daily financial operations.
You need to learn how to build your business without accruing debt. To keep an eye on expenses, sign every check or approve major credit card purchases yourself. Safeguard your trust account and be selective about the clients you work with. Ensure they can pay you, and keep a close watch on your accounts receivable.
3. Failing to Hire the Right People
The Problem
In a small law firm, there’s no room for subpar staff. Every employee needs to be sharp and efficient. Poor hires can lead to issues, from bad client reviews to inefficient case management.
The Solution
Hire superstar employees who are not just good enough but exceptional. Each year, stack rank your employees into A, B, and C categories:
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- A players are your rock stars.
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- B players are very good but need some mentoring to become A players.
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- C players are those who will never become A or B players. They either don’t get it, don’t want it, or don’t have the necessary skills.
Replace your C players as they can burn out your A players and drag down the overall performance of your firm.
4. Failing to Invest in the Right Technology
The Problem
Many attorneys aren’t technically inclined and may neglect the technology that could streamline their operations. This can lead to inefficiencies and wasted time.
The Solution
Invest in technology that automates repetitive tasks and integrates various aspects of your business. Essential tools include:
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- Practice management software to manage clients and workload.
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- Automated intake systems to nurture leads and follow up with potential clients.
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- Accounting software connected to your practice management and intake software.
By integrating these tools, you can automate many parts of your business, giving you back more time and allowing you to scale more effectively.
5. Failing to Track Marketing ROI
The Problem
Law firm marketing is expensive, and many firms fail to track their return on investment (ROI). They often focus on generating more leads without understanding which marketing strategies are effective.
The Solution
Track all your marketing campaigns meticulously. Look at:
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- How many leads came in
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- How many were qualified
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- How many turned into appointments
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- How many became clients
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- What the revenue was from these clients
By analyzing these metrics every month, you’ll understand what’s working and what’s not, allowing you to optimize your marketing spend. For example, a criminal defense firm in the Pacific Northwest found that 80% of their new business came from referrals, not their expensive Google Pay-per-click campaign, which was costing them $2,100 per new client.
Schedule a Free Strategy Call with The Rainmaker Today
Running a successful law firm requires more than just legal expertise; it requires sound business practices. By avoiding these five major fails—failing to create a team, take care of business, hire the right people, invest in technology, and track marketing ROI—you can put your firm on the path to growth and sustainability.
If you’re struggling with any of these issues, consider seeking help. We have helped more law firms grow into eight and nine-figure businesses than anyone else in America. Don’t become part of the 43% that fail. Reach out to us today and let’s turn your law firm into a thriving business.
Ready to take your law firm to the next level? Contact us to schedule a consultation and start your journey to success today!
