How do law firms stay profitable? 

With the cost of living increasing, new law reforms, and a possible recession looming, you may be asking yourself, “how do law firms stay profitable in 2024?”

The past few years have not been the easiest for those operating in legal work, from the introduction of fixed costs in 2013 to the recent whiplash reforms and the recent extension the fixed recoverable costs scheme.

Unfortunately, we have witnessed quite a few law firms go into administration due to these challenges. So, how do the best law firms stay competitive, and how can you enhance the profitability and client satisfaction of your law firm?

Invest in a good case management system

It’s hard to believe that in 2024, some firms in legal services have not yet made the switch to go paperless. Going paperless can be a difficult transition; however, there are so many benefits to working digitally and utilising legal technology, including increasing law firm profits, improving efficiency and streamlining operations.

A digital case management system will improve your law firm operations and reduce administrative tasks. It can increase staff efficiency by mitigating the need for file handlers to rummage through mountains of paperwork to find particular documents.

All of your documents will be stored in one place meaning fee earner’s time will be freed up, allowing them to focus on more complex practice areas and increase their billed hours.

A reduction in paper files means that less storage space is required, freeing up areas in your office for additional staff, or allowing you to downsize your office, reducing your real estate costs, thus, increasing profitability and cash flow.

A digital case management system will also allow staff to work remotely, meaning more flexibility for your staff and more opportunities for work to be done on the go.

Develop your case management system

Developing your case management system and streamlining processes will improve your law firm profitability and efficiency.

Development can enable law firms to adapt to modern law reforms, ensures data protection, and helps them keep up with technological changes in the legal world.

A case management system, such as Proclaim can be optimised to allow for process automation, MI report creation, integration with other IT systems, workflow optimisation, and bulk data solutions.

• Process automation – The adoption of software that acts as robotic process automation (RPA) such as Proclaim Case Management Software to implement process automation is essential to maximising profit margins. Through process automation, tedious, administrative, robotic tasks that fee earners currently perform can be eliminated, providing them with more time to focus on the more complex issues, and consequently, resolve more cases much quicker.
• MI reports – Financial, management information, dashboard, KPI and trend reporting will enable your firm to obtain and analyse information, which in turn can help you experience the growth you desire. Furthermore, with the correct setup you can ensure that all key reports are scheduled to run automatically and to be disclosed to predefined contacts or locations at specified times. Thus ensuring fee earners are never missing the information you need to make key business decisions.
• Case management integration – Most case management systems have the ability to integrate with the systems of your key suppliers so as to build seamless systems with vital business partners, for example, ATE policies, medical reports, counsel’s opinion to list a few. Should any of your existing partners have a digital environment of their own, Proclaim or otherwise we can help make the transfer of data between each system as seamless as possible.
• Workflow optimisation – Businesses that communicate well will almost invariably perform better than their competitors who do not. Effective case management system development will ensure that you have a case management solution that can not only facilitate such communication, but will also allow your business to stay on top. Through case management system workflow optimisation, you can ensure that you have a system that guarantees you communicate promptly and effectively with your client base, team members and business associates.
• Bulk data solutions – Every law firm will rely on data from external parties, whether it be something as trivial as a medical appointment or something more substantial like a new clients details. If you’re relying on getting this from an external source which doesn’t have web service readily available then you’re often left with time consuming task of manually keying the data into your case management system, which as well as being time consuming, opens up the possibility of the data becoming corrupt by being erroneously entered manually.

Manage your legal costs effectively

The issue of managing and settling legal costs at the end of each case is one which all departments will have to do, regardless of their practice area.

So, how do law firms stay profitable through legal costs? Effective management of legal costs will help to limit your expenses and maximise the profits received through legal costs following the settlement of a claim.

One of the main mistakes often made is the perception that costs should only be considered on conclusion of a case. It is imperative that costs are considered from the outset of a case, ensuring the retainer is properly constructed, and success fee is calculated in a compliant manner with bespoke risk assessment, and setting appropriate hourly rates for billable work, dependant upon the likely complexities/value of any claim/instruction.

Successful negotiation of legal costs, such as Solicitor’s hourly rates for billable tasks will help to ensure that you are obtaining maximum profit from each case.

Using an experienced Costs Draftsman to assist you in drafting your Precedent H, Bill of Costs and Replies to Points of Dispute will significantly assist your firm in recovering the maximum amount of legal costs and disbursements. They can also assist you through the process of Detailed Assessment. Hard work in conducting a case can however, be undone by failure to properly manage costs from the outset (such as setting appropriate billable hourly rates, or to adequately budget costs).

The unsuccessful conclusion of a case is an inevitability for all law firms. Following such an outcome, the losing party is required to pay the winning party’s legal costs. Effective negotiation of the winning party’s Costs Budget and Bill of Costs will significantly assist in limiting your outgoings following a failed case, and ensuring adequate ATE protection in place is also imperative.

A good case management system, such as Proclaim, can be instrumental in helping with legal costs management and legal billing in several ways.

Proclaim can automatically track the number of billable hours worked on various tasks, appointments, and communications related to a case. Time tracking software ensures accurate timekeeping, reducing the chances of under billing or over billing clients.

Utilise your data effectively

Law firm data is the key to effective practice management and business development. Law firms collect and store large amounts of data every day which can be utilised to help make important decisions and maximise profits, as such the collection process is important and automation in this area can help significantly. A key facet of any successful business is the ability to recall and analyse large volumes of data as and when needed in a meaningful manner. Whilst some case management systems come with out of the box reports, most businesses soon find they need to develop their own bespoke reports to cover their unique business needs.

Examples of real time tracking data that can be reported upon and analysed to make important business decisions include:

• KPIs
• Fee earner performance
• Client feedback
• Client service and matter inception data
• Profit and loss data
• Marketing data
• Amount of work in the pipeline

Market your firm effectively

Without any type of marketing, your client intake will inevitably low. The most profitable law firms in the UK ensure they invest in their marketing efforts to ensure they stay ahead of competition. Digital marketing is one of the best and most cost effective ways of getting your law firm noticed an attracting as many clients as possible. Marketing of your law firm may include:

• Search Engine Optimistaion (SEO)
• Article writing and blog posts
• Social media marketing

Having a well designed website that is easy to fins on search engines, and will convert website visitors into clients is key to increasing your long term profits. One of the best things about digital marketing is that everything can be tracked and reported upon, so you can discover which strategies are working well, and which strategies require improvement.

How can LPS assist?

“How do law firms stay profitable?” is a question we have been asked many times by our clients over the years. We provide a range of services to all types of legal professionals to help their firms revenue increase and adding to the law firm’s success.

If you would like to speak to an expert about how our team can help your firm maximise profits through leveraging technology, we can be contacted via e-mail at enquiries@legalpracticesupport.co.uk, or get in touch with us via Live Chat or the contact form, below.