Tag Archives: Finance

Legal Marketing Stats–How Do you Compare?

In surveys by organizations serving the law firm industry, one of the areas studied is marketing activities and spending.

Utilization of Marketing Tactics

Historically proven marketing tactics (yellow pages, legal listings, and client entertainment) are giving way to more focus on Internet-based strategies (Web sites, Search Engine Optimization [SEO],  paid search advertising, blogs, and newer forms of social media) to grow their practice. Firm size drives decisions as to what degree various marketing tactics are utilized. Smaller firms are most likely to use yellow pages and legal listings, but larger firms are more likely to rely on client entertainment. However, while client entertainment is still the leading choice among firms with 11-20 attorneys, it has been dropping off as a primary tactic. Web sites remain the preferred means of marketing over a multi-year period.

Significance of Internet Marketing

Law firms continue to use the Internet to promote their practice, and are using the latest techniques to attract potential clients. Search engine optimization increased throughout the period of 2005-2010. Additionally, more firms began using online legal sites to attract clients. Blog use soared during the same time period. This reveals a latent desire to explore new methods in addition to traditional tactics to attract potential clients.

Perceived Value of Marketing Tactics

Networking and word-of-mouth continue to be integral to building a law practice; however, online activities are also prevalent in integrated marketing campaigns. Web sites and related tactics are considered a primary marketing tool for growing a firm’s practice, and more money is allocated towards this tactic than ever before. Though blogs have been on the rise in efforts to develop clients, it should be noted that very little revenue is allocated towards this activity (1%).
While face-to-face interaction with potential clients is still important, client entertainment is decreasing in its value to attract potential clients, and less money is being allocated towards it than five to ten years ago.
Who Does the Marketing?
Solo practitioners increasingly use outside consultants and administrative staff members (office managers, assistants and secretaries). Mid-size firms (2-5 attorneys) have also increased their reliance on administrative staff members.
Larger firms (6+ attorneys) rely less on marketing consultants and more on other staff members, including marketing managers and related positions.
How Big is the Marketing Budget?
In relation to firm revenues, about one firm in four spends less than 1% on marketing activities. Interestingly:
  • More firms with 11-20 attorneys skimp on marketing than solo practitioners and smaller practices.
  • 39% of solo practices spend over 5%
  • 27% of practices with 2-5 attorneys spend over 5%
What does all this information mean to you as an attorney? I suggest the following:
  1. When small, spend bigger (%-wise)
  2. As you grow, curtail the spending (by %), but spend more wisely
  3. Look for Internet-based marketing strategies to fuel your growth
  4. Decrease your reliance on (but don’t do away with) client events
  5. Explore blogging and social media–either through in-house or contract resources

Un-Madoff Your SMB

Even if a business has strong financials, talent is not enough – integrity is needed. Master investor Warren Buffett’s position on business performance has been: “In looking for people to hire, you should look for three qualities: integrity, intelligence, and energy. And if they don’t have the first, the other two will kill you.”  Given his track record, good corporate governance seems to be an essential part of long-term business success. Whether we go back to Michael Milken and his securities fraud, or more recently to Enron and Bernie Madoff, we have a wealth of examples of how poor checks and balances led people with intelligence and energy to behave in ways that clearly lacked integrity and cost many other people millions of dollars.

A 2003 joint Harvard and Wharton study entitled Corporate Governance and Equity Prices found that companies with good corporate governance generated superior future returns and higher profits and sales growth. The study created a “Governance Index” (G-Index) for each company based on the number of these 24 anti-shareholder provisions the company possessed. The higher the index score, the worse the company’s stock performed. Using data from 1990-1999, the study found find that companies with a low G-index score (i.e., a “democracy” portfolio) outperformed companies with a high G-index score (i.e., a “dictatorship” portfolio) by a statistically significant 8.5 percent every year. By 1999, a one-point difference in a company’s G-index score was associated with an 11.4 percent drop in a stock’s market value. Further, firms with weak shareholder rights were less profitable and suffered lower sales growth than comparable firms in the industry.

A 2009 joint Yale-Harvard study finds that the outperformance effect has waned in recent years as investors have learned about the importance of good corporate governance and adjusted the stock prices of good and bad companies accordingly.

In other words, bad corporate governance is now discounted in stock prices. Small-cap stocks and privately held businesses, where data is less available, seem to dodge the scrutiny of the large-cap stocks and purchasers of their stocks can take a “ding” on the regular.

 

 

How can we change the pattern in small to medium businesses?

  1. Better corporate governance measures in privately held businesses should include a progression towards true, independent boards.
  2. The boards should be evaluated on an annual basis (check out the Center for Board Excellence.)
  3. Matters such as compensation, family members in the business, succession plans, etc. need to be discussed in board meetings and action plans developed.
  4. Organizational development principles should lead to better talent management and the assignment of shared decision-making outside the CEO’s office.
  5. Internal controls need to be examined and improved to mimic best practices of a public company in a Sarbanes-Oxley environment.
These are a start–what would you recommend?

 

Getting Entrepreneurs Unstuck

So many businesses start with grand visions and hopes, only to miss the mark along the way. In our home state of North Carolina, 26000 businesses are started each year; but, 23000 fail each year as well. Without getting into the dynamics of how many survive for three or five years, we can at least ask the question “why?” Why do so many businesses fail each year?

Mismanagement, making mistakes others have already made, inadequate capitalization, and poor knowledge of systems and process resources are all contributors to business failure. The reason many of these mistakes are made is the lack of a sounding board for many entrepreneurs–someone to whom they can turn for ideas, resources, and encouragement. For centuries, there were very formalized apprenticeship programs in many industries that helped new workers become business people. In modern times, we use the term “mentor” to describe someone who is willing to work with an apprentice.

Management of a business is tough work. Having a mentor can make a big difference. Some of the things a mentor can offer include:

  • Business strategy and planning to make sure their business is focused on a viable market with a winning product and/or service that has a competitive edge
  • Forecasting and financing ensuring that sales plans are realistic and that cash is well managed
  • Operational discipline and judgment to increase the chances of success by making fewer mistakes
  • Industry connections that can help accelerate the business and its operations
  • Start-up company experience that can instill the wisdom of what it takes to really start and manage an emerging business

Organizations like EntreDot and incubators like the Cary Innovation Center and REDii in downtown Raleigh are but a few of the many resources that smart business owners seek out. The value is in having someone on site who can walk and talk  you through an issue that is new to you. The “someone” is often one who has more experience in business, but can also be a peer in these incubator environments.

Getting “stuck” on a tough issue is okay; staying in that predicament can put jobs, ideas, and investments at risk of loss. Regardless of whether you live in a community that has ready providers of mentoring or have to seek it from elsewhere, it is vitally important to your success to get help. Becoming “unstuck” makes life more enjoyable, fuels the economy, and builds better communities. Best wishes!

JTECH Your Way to a True Competitive Advantage

First things first: what/who is JTECH? It’s the former name of a restaurant paging company that eventually became a subsidiary of MICROS Systems. It was founded by a couple of guys from Florida who owned a great restaurant that had too many “walkaways”–people who were not willing to endure the wait for a table seating. In the old days (19990s, mind you!), patrons of their restaurant (like diners in most other establishments) used to have to wait by the hostess stand for an indeterminate amount of time until a table became available. By providing the electronic pager, these guys gave their patrons the freedom–and most importantly, peace of mind–to leave the front door area, relax, and look forward to a sumptuous meal.

But, what of the “true competitive advantage?” To even throw the phrase out suggests that false competitive advantages exist! Don’t they? You be the judge. How many businesses do you know of where price is the main negotiating point in the sales cycle? Unfortunately, way too many. You see, when price becomes the only distinction between a business and its competition, then it is not long before that business enters into a death spiral of decline. At the point that price is all that separates one business offering from another, the battle for customers is lost.

What, then, is a legitimate means of creating a distinctive in the marketplace? Many will argue that Service separates them from others. Alternately, Quality (products) or Experience (Services) are touted as key concepts that persuade one to buy from us versus them. Yet, I have seen over and over (and over !) where these are just words in many situations, without anything to back up the claim–OR anything that is being said that the competition cannot also say!

The original owners of JTECH ended up leasing their restaurant to others because they had found a much better opportunity. It was a great opportunity because and only because they had found a way to monetize the value they had created for restaurants and their customers. True competitive advantage is objective, quantifiable, uniquely claimed, and not a cliche’. (With due thanks to Jaynie L. Smith.)

What was the statement that JTECH developed to carve out such a market -leading position? Of the 50 largest chains who use paging, 100 percent use JTECH! Obviously, they were not able to make this claim Day One. It was something that was earned, one customer at a time.  What absolutely amazes is the recurring bad habit in many companies (and agencies) of developing marketing messages without customer input. Existing customers will tell you why they selected you, what you do better than the competition, and what it would take for someone else to snatch the business away. If you don’t know what your customers would say for each of these categories, you are tuned out. If tuned out, you have no strong competitive advantage positioning!

 

How “professional” is your services firm?

Whether the billable workers are architects, CPAs, engineers, lawyers, or management consultants, there is a certain prestige that comes with being a professional services firm. The credentials on the wall, the exam that had to be passed, and the fees that can be charged for hourly work all distinguish these white collar technicians from those who procure their insights and performance of tasks often related to compliance.

In many of these firms, those without the primary certification–even those working at a director level–are misfits, not considered “professional” in their discharge of duties. In fact, the HR, marketing, management accounting, and similar roles are as accomplished in their respective fields as the billable personnel they serve. A healthy mutual respect would likely ensue and firms would benefit from the same array of expertise disciplines as a more general, “non-professional” services organization.

It is not uncommon for training and development, for instance, to be isolated to continuing education focused on technical skills to the exclusion of the softer, intangible skills that make for better managers, business developers, client relationship nurturers, and the like. When professional development includes fostering the “non-professional” competencies within the suite of requisite skills and roles of “professionals,” then services firms will have evolved.

From talent management and succession planning to emotional intelligence and employee engagement, there’s much to be gained from professional HR. Consultative skills, networking nuances, intentional brand building and thought leadership best practices can be modeled by the business development (or marketing) professional. And so on…

The time has come to either staff for these professional roles in house (which the regional and national firms are doing), or outsource the function on a fractional basis to competent providers (which needs to be done by everyone else.) Often,  the internal resource, regardless of firm size, is overtaxed perpetuating a stream of work tasks that existed before (s)he arrived and cannot carve out the time to address internal growth and development needs.

Find a solution!