Best Practice: What is primary financial problem for most firms?

Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. Our firm, a seven attorney personal injury firm in the southwest, seems like we can never get to the next level financially. Do you find that excessive overhead (expense) is the major problem for law firms? A. Not really. In fact, in many cases I find that law firms should be making larger investments in their future and spending more money. Often monetary and time investments in marketing, talent, and technology are insufficient in many firms. The problem in most firms is insufficient leveraged fee revenue. In other words - many small firm practitioners - only think in terms of whether they have adequate work to keep themselves busy - they do not think in terms of being a net exporter of work so they can keep themselves busy plus two or three other attorneys and or paralegals. A well leveraged practice is what takes you financially to the next level. In reality - more marketing is needed - to create a sufficient volume of work to support this leverage. Once this is accomplished - attorneys must learn how to manage and supervise others - and the compensation system must shift emphasis from personal working collections to responsible (billing attorney) collections. John W. Olmstead, MBA, Ph.D, CMC,  is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA General ListServ, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.