Centers Of Influence Are Key To Small Law Firm Rainmaking
By Frank Carone January 31, 2018, 5:02 PM EST - LAW360
The year 2018 is poised to be another challenging one for law firms, as clients increasingly move legal work in-house and look to alternative legal services providers and technologies. While the impact likely will be across the board, small law firms, give their typical client bases, may face the strongest headwinds, prompting the need to review and retool their business development strategies. The good news is that the skill of rainmaking is one that can be learned and enhanced by following a systematic, methodological, data-driven approach. By identifying, mapping out and following such an approach, law partners can substantially improve their ability to source clients, build revenue and improve their financial prospects in any environment.
Examining Client Sourcing Strategies
Step one in the process of partners becoming rainmakers is to examine client sourcing strategies, ensuring efforts are as advantageous as possible. Many who conduct this exercise thoroughly will find the need for realignment.
In a national survey of 378 small law firms, partners ranked client referrals as the most important means of business development. Overall, three-quarters of these partners say that they get a meaningful number of new clients because of the high-quality work they’ve done with existing clients.
This represents a disconnect as studies reveal that while professional services providers, including law firms, obtain most new clients from existing client referrals, their best new clients — i.e., the ones providing the largest pool of investable assets — overwhelmingly come from “centers of influence,” as detailed below.
Further, a law firm’s ability to cross-sell legal services is widely recognized for its value, but less frequently accomplished. The same survey mentioned above shows only about a fifth of law partners report proficiency in this area.
Prioritizing referrals from centers of influence and cross-selling legal services are two clear areas on which law partners can focus in order to “make it rain” this year.
Understanding Centers of Influence
Centers of Influence are comprised of noncompeting professionals, organizations or groups that can boost market access and credibility through referrals, testimonials and word-of-mouth. Their value stems from the availability of potential new clients as well as advocates: those who have strong motivations to recommend high-quality services as a means of assisting an influential peer and thus increasing their own standing in the group. For example, accountants, insurance brokers and bankers, or groups of such professionals, can often serve as valuable centers of influence for attorneys, especially if their clients tend to be of similar size.
Considered this way, it makes sense that centers of influence play an exponentially valuable role. In fact, studies have shown that the revenue differential between centers of influence referrals and client referrals is a dramatic 21.1 to 1. This means is that for every $100,000 in revenue a client referral is worth, a referral from a center of influence is worth slightly more than $2 million in revenue over the projected life of the relationship.
Put simply, a law firm can bring in much more revenue through centers of influence referrals than client referrals.
Center of Influence Assessment Instrument
Core to becoming an adept rainmaker is developing a deep understanding of the respective world of each prospective center of influence. This is accomplished on a one-to-one basis through consideration of the following:
Attributes — the central and often defining characteristics of the other professionals, such as their technical expertise and particular competencies, as well as their strengths and weaknesses.
Contacts — the people the center of influence know and can access.
Resources — the “assets” and means at the center of influence’s disposal.
Intent — the center of influence’s preferences, needs and wants as they translate into interim objectives, which feed into larger goals.
Crucial Concerns — the dominant and persuasive issues and interests the persons are presently dealing with.
These components make up a useful center of influence assessment instrument: a framework to help partners at small law firms make in-roads into centers of influence for referral purposes.
Cross-Selling Legal Services
Aside from accessing new clients, the ability to maximize client relationships by cross-selling legal services represents another way for small law firms to generate revenue. Operationally, maximizing client relationships involves providing multiple and different legal services to the same client. For example, after the divorce, the newly single client’s estate plan is redone.
While cross-selling makes tremendous economic sense, and can meaningfully benefit clients, law firms are notably bad at it. The survey referenced above shows small law firms don’t often proactively seek out opportunities to provide clients with additional legal services. Instead, partners report that when such opportunities arise they are overwhelming client-driven. The missed revenue potential here is significant.
One case analysis of a full service large law firm (more than 100 partners) shows that cross-selling clients on needed additional legal services increased revenue by as much as 400 percent per client.
Just as a deep understanding of the client is advantageous to obtaining centers of influence referrals, it’s crucial for recognizing additional client needs. While some are fairly evident, many times only in developing in-depth knowledge of the client — including goals and objectives, as well as critical concerns — is it possible to determine what additional legal services make sense.
Beyond knowing what additional legal services are appropriate for the client, it’s often necessary to be able to position those services in an effective and meaningful way. While there are times clients will just follow the advice of their attorney in this regard, most likely the attorney must provide a solid rationale for these added services.
This is easier said than done as identifying and positioning additional legal needs both represent stumbling blocks for many law partners.
The biggest obstacle partners face is a psychological inhibition to refer. This makes some sense as there are serious risks associated with making referrals even to a partner. These risks multiply if a client can provide more business for the lawyer directly. To the extent possible, referral risks need to be mitigated. Furthermore, incentives need to be put in place that make the risks worth taking. A wide variety of incentives are possible with revenue sharing, in one form or another, topping the list.
Just as with penetrating centers of influence, what’s core to making cross-selling highly effective is to systematize the approach and methodically apply it, focusing efforts to achieve interim goals with the end-result being a dramatic increase in revenues and income.
Law partners who achieve rainmaking success are those who put in the time and effort required to get results. The path there isn’t inherently complicated. It does require the development of an in-depth plan for sourcing new, high-caliber clients with explicit well-reasoned goals, as well as the means to competently execute the plan. Most importantly, it demands hard work, a solid commitment and a systematic, methodical approach.
Frank V. Carone is an executive partner and litigator at the law firm Abrams Fensterman Fensterman Eisman Formato Ferrara Wolf & Carone LLP. He serves as counsel to the chairman of the Kings County Democratic County Committee. He is also a mayoral appointee to the NYC Taxi & Limousine Commission and chairs the newly formed New York State Bar Association Committee on Transportation Law.