There is no doubt that the legal sector, as with many other sectors, has recently undergone a period of extensive change and reform, with what might have taken decades to happen taking place over a couple of years. The effects of those reforms are only just beginning to be seen now, and where many firms have prospered (some of which may have been short-term), others have struggled to cope with management/technology/resource issues.
With a potential recession on the horizon, it is vital that management teams understand the drivers of profitability, and the key tools to unlock cash.
A strategic review is a key first step to understanding your business as it stands now. It highlights what is working well, and key areas for improvement. A business which does not have the flexibility to change and adapt to current market conditions is unlikely to succeed. More and more law firms are beginning to undertake strategic reviews in some form in order to unlock cashflow and to develop their business for the long term future.
A strategic review examines all areas of the law firm including:
- Systems and processes
- Use of technology
- Use of people
- Lock-up processes / WIP and debtor management
- Targets and KPIs
- Success rates
- Efficiency, recovery and utilisation rates
- Income and profitability
A review assesses the current intended procedures and what is happening in practice (often two different things), and then makes detailed suggestions, department by department, on specific improvements that should be made.
Realistic and measurable targets and KPIs are suggested that if met will have a direct correlation to the cashflow, profitability and future viability of the firm.
Communication throughout a review is vital to ensure that staff feel valued and involved. The process requires their honesty and input. It is their day-to-day activities and decisions which can have a direct financial impact on the firm. Without their understanding and involvement, many of the recommendations will not succeed, and suggested targets will not be met.
Speaking in general terms, the above is a process which sounds very simple in practice, but all too often, everyday business life gets in the way of conducting a process such as this internally.
Even the most successful of law firms benefit from a strategic review of some description, as part of a programme of continuous improvement. The markets in which firms operate are fluid and changing and there is always room for improvement and to learn and develop new ideas and processes.
If you would like to discuss how such a review would benefit your practice, please contact Andy Poole at email@example.com
Andy Poole is a Legal Sector Corporate Finance and Strategic Partner at Armstrong Watson, specialising exclusively in acting for lawyers. The legal sector team advises law firms throughout the UK on strategic, structural and other business improvement issues as well as providing efficient accounting, tax and SRA accounts rules services.