This month’s guest post is by David Blumentals all the way from Sydney. David is focused on providing CRM software to the legal sector based on the Microsoft Dynamics platform. His firm has clients in Europe, the Asia Pacific rim and America and he is a recognised expert in his field.
If you want to know more about what David does please click here……
I talk to a lot of law firms who are considering the implementation of a CRM system for Client Relationship Management, and many of them still don’t have a firm grip on what CRM is, why they need it and what results it can bring to them. They aren’t sure what they should spend and they wonder, “How do I justify this system?” Many firms have also put their CRM projects on hold as a result of other IT projects, the economy, or because they think what they have now is OK. What priority should you give to CRM system?
Let’s clarify what you need to know, and if you need a CRM system.
It’s All About Acquire – Engage – Retain!
The goal of most law firms is to make a profit by acquiring, engaging and retaining clients. The truth is… that most law firms do a poor job of marketing, managing clients and growing business development.
So why do you need CRM? Because the problem is… you don’t know which clients you will lose, how many you have called on, or what the rest of your firm is doing that will affect your success or failure. Just knowing how many calls to clients or prospective clients have been made is often done by asking them!
For years, law firms relied on lawyers to maintain good relationships with clients. They kept their own client records in rolodexes, followed up on new opportunities with sticky notes and grew the client base and service reputation by doing great legal work. But when lawyers change firms, or the partners don’t know what the lawyers have promised (and vice-versa), this gets many firms in trouble.
Six Good Reasons You Need a CRM System
- Centralised Information – How many new client prospect telephone calls do your lawyers make each day? Does everyone who communicates with a client know what other practice groups said to them or did for them? Is all client information kept in one area or program for easy client service reference? Do you have several databases of information that you need access for a 360 degree client view?
- Quality Data – Are you able to identify (let alone manage) the top 10% of clients that give you 90% of your revenue? Do you know what is happening with each of these clients “real-time” – for example, leadership changes, new acquisitions, new product or service offerings?
- One View Of The Client – Are you able to access all the information you need from one screen? What is your revenue per lawyer, per BDM, per marketer? What are your win, loss and no-decision rates? What’s your matter turnaround time? How many business development calls are completed per lawyer? What’s the average amount of time required to complete each step in developing a new major client? Do you know how many client service issues each client has had and why? Do you know which clients consume most of your lawyers (billable vs unbillable) time?
- Ongoing Client Care – What is the workload by practice group or by lawyer? What are the numbers of existing client contacts and repeat business? What’s the average matter size, billing and payment frequency? How do you rate your marketing or lead generation program / marketing event effectiveness? What are the win-rate comparisons for different client types?
- Cloning Our Best Rain Makers – What are the success rates and profitability comparisons for individual partners and lawyers? Can you communicate quickly with message broadcasts to your client base?
- Risk Management (High Availability/Disaster Recovery) – what happens when a key rain maker leaves the firm? Do you have critical client data on PC’s that could be lost or taken and should be on one database?
If you don’t know the answers the questions above (or you have no idea where to get them), you should definitely consider a CRM system for your marketing, business development and client care.
Why Should CRM Be A Priority?
The simple answer is: because it can have such a profound effect on your firm! It greatly affects staff satisfaction and turnover, the ability to target and close new business, the management of client interactions and profitability. How much do you think these few functions alone can affect your law firm?
Sometimes firms lose deals because one hand doesn’t know what the other was doing. How much would actions like this affect your law firm? How many times does this happen at your firm? How do you know? And how do you know how many calls your lawyers make on clients? Or… how much time do the lawyers spend with that “one problem client?” And how could it be fixed?
Answers to these questions are what justify the need for CRM software! When firms start to probe, they find that many things are going wrong and being covered up and they’re costing the firm a bundle! And don’t say that your firm has everything working perfectly, because this happens at every law firm! Do an anonymous survey of the “worker bees” and you will find out.
Even If You Have Some Form Of CRM…
Even if you have a CRM system, things can go wrong, because more than a software system, CRM is a cultural change, and many firms don’t invest time and effort into the new culture. Many managers believe once the software is installed and integrated (or sometimes not integrated) that all of their problems will drift away. Not the case! Many staff don’t understand the system, don’t want to change, want to do things the old way, and then you still have no way of knowing what is going on. The cultural change cannot be a choice!
How Do You Estimate What Your ROI On CRM Will Be?
To determine the cost of not implementing CRM, put some numbers to the following:
- How many existing clients did your law firm lose in the past 12 months and what were the annual revenues?
- How many new business opportunities did you lose in the past 12 months and what were they worth?
- Estimate the value and gross margin of the business opportunities you missed for timing or lack of follow up?
Another way to look at it:
On average, a new client will use your firm for 5 years.
If the average client generates 10 matters/assignments per year at an average size of £2,000…
The lifetime Income from a new client would then be: 5 years x 10 matters/assignments per year x £2,000 value = £100,000.
Therefore, with an average gross margin of 30% each new client will generate a lifetime gross margin of £30,000.
If you have:
100 clients = £3,000,000
500 clients = £15,000,000
1,000 clients = £30,000,000
What Is CRM Worth? The Question Really Boils Down To:
- What are you not closing in business opportunities that you could with more efficient opportunity / deal flow management?
- What do you not know about your current clients and how many will go to the competition at what revenue loss to you?
- What level of client service are you providing now, and how do your inefficiencies translate into extra costs or lost revenue opportunities?
- What are the costs to the firm of not knowing and acting upon clients that cost more than they are worth?
- How effective are your lead generation efforts and how much could CRM save you?
Add up all of the lost opportunity costs and the real costs of inefficiency and you will easily prove to yourself that you are losing, spending and costing far more than you expected. And, in nearly all cases, your total will be more than the cost of the CRM implementation. Consider CRM on a par with a Total Quality Management (TQM) process. I seriously doubt you will find any firms that tried TQM and found they were more profitable when problems were swept under the carpet.
Take The Plunge!
Either jump on board with CRM and invest, knowing you need it, or get out the calculator and pencil and start adding up what you’re going to lose!
It is fairly easy to see where the benefits of CRM lie in most law firms. If you are close to the processes that turn a prospect into a client, and guarantee his or her satisfaction, you know what would help your law firm be more successful. The next step is to take action to document, justify and convince yourself that the investment in CRM will help guarantee your firm’s long term success.