Category: Firm Finances

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Your Firm Is Profitable. Is It Going Anywhere?

Your firm can be busy and profitable and still have no strategy. The phones ring, revenue grows, everyone works hard, yet nobody can answer the basic question: what are we trying to become? I’ve seen this before in my practice. Activity hides drift, sometimes for years, until pricing pressure or a failed succession exposes it.

The pressures are stacking up. Clients want pricing certainty and are questioning whether routine work needs to be outsourced. AI is changing how legal work is produced, and early signals indicate the biggest changes will first affect associate and paralegal work. Add succession pressure and rising operating costs, and standing still keeps getting more expensive.

Why firms drift

Drift starts in the partnership. Ask five of your partners what the firm should become, and you’ll get five answers. One wants a new market, another wants to protect the firm’s client base and culture, and each sounds reasonable on its own. Funded from the same profit pool, they starve each other.

Without shared direction, the firm tries to accommodate everyone. This leads to many unranked goals and no agreement on what to forego. Hiring and technology become ad hoc, and marketing follows the loudest voice. Does that sound familiar?

A real plan breaks the pattern by focusing actions and decisions on the firm’s chosen direction. The key takeaway: a strategic plan empowers intentional decisions, not just more activity.

Strategy begins with what you will not do

Most plans list aspirations: improve profitability, attract talent, serve clients better, and strengthen culture. Every firm wants these, so they aren’t a strategy.

Strategy starts when partners choose where the firm will compete and, tougher still, what it will stop. Without exclusions, priorities just crowd an already full agenda.

The main takeaway: strategy drives resource allocation. Commitment to a focus, such as an industry, should be visible in how you hire, train, market, and choose clients. If resources and attention do not shift, the strategy is only words.

Put the economics inside the plan

This is where most plans fall apart, and where I spend most of my time with firms. Growth requires capacity, and capacity is expensive: on average, a firm doesn’t break even on a new associate until three to five years of call. New practice areas take years to mature. AI may cut production time while demanding new spending on software and workflow redesign. A plan that ignores these connections can deliver growth without an acceptable return to the partners.

Build a financial model to test ambitions. Link demand to lawyer capacity, pricing, realization, staffing, and capital needs. Focus on profit per partner; revenue growth means little without it. This analysis forces real conversations. Firms are often top-heavy and lack leverage below, limiting growth. Promising new services may lose money under current pricing. Sometimes, partners need to take home less to fund the future. Partnership decisions buried in the plan indicate a problem.

Alignment gets tested when it becomes personal

Partners easily agree on growth and quality. Things change when plans affect compensation, client ownership, autonomy, or resource allocation. A credible process accommodates these issues. Confidential interviews reveal what groups never do, and a well-facilitated retreat helps partners resolve and commit to decisions. An outside facilitator is valuable if the managing partner is also an advocate in the discussion.

Execution is where plans die

To clarify: Every priority must have an owner, milestones, a budget, and sufficient time. At quarterly reviews, leaders must make decisions, such as redistributing resources or stopping failing work. Consequences for missed commitments are essential. Without them, partners assume strategic work is optional under client pressure, and strategic efforts often lose out.

Start with an honest diagnosis

Before booking the retreat, figure out where your firm is weak. Some firms lack clarity about direction. Others know where they want to go but have never connected the ambition to their economics or built the discipline to execute. The process should fit your firm’s condition rather than a generic retreat agenda.

The Profits for Partners Law Firm Strategic Planning Diagnostic is a short assessment covering strategic clarity, market focus, economic alignment, leadership alignment, execution discipline, and future readiness. It shows where to focus first.

TAKE THE LAW FIRM STRATEGIC PLANNING DIAGNOSTIC

A strategic plan’s main purpose is to give partners confidence to choose and commit. Takeaway: If your plan doesn’t guide decisions and screen distractions, it needs improvement. Contact me if you want to discuss where your firm stands.

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Pricing the Client, Not the Work: A More Flexible, Value-Driven Approach to Legal Billing

I often see lawyers debating on LinkedIn about the merits and disadvantages of hourly billing versus value-based pricing. I don’t see it as a question of doing it one way vs. the other. Each client will have their own unique needs regarding how they prefer to be billed. And it doesn’t have to be just one way. The right way to price/bill is the one that best meets your client’s needs.

We need to start offering options: that could mean two or three different options, including hourly billing or value-based pricing, or a hybrid billing option, which includes a monthly retainer plus hourly billing, etc. This is my twist on “Price the client, not the work”, as Ron Baker recommends.

Clients Have Different Needs, So Give Them Different Options

Some clients still prefer hourly billing. Others want predictability through flat fees or monthly retainers. Some are open to value-based pricing or outcome-contingent models. A few are even willing to pay a premium for guarantees or guaranteed availability.

All of these models can coexist. Your job is not to convince every client to fit your preferred pricing/billing method. Your job is to understand what the client values, then design a fee structure that reflects that.

In Implementing Value Pricing, Ron Baker lays out a clear, eight-step process for moving firms toward value-based pricing models. But even Baker doesn’t argue that it’s all or nothing. Instead, it’s about moving along a continuum, away from pricing based on effort, toward pricing based on value.

Hourly Billing Isn’t Going Anywhere, But It Shouldn’t Be the Only Option

Let’s be realistic: hourly billing isn’t disappearing anytime soon. And that’s okay. What we can do is evolve from relying on it as our only pricing model.

Hybrid models are often more practical and better aligned with both firm and client interests. A client might be on a monthly flat fee for routine advisory work, with defined scope projects priced at a fixed fee, and a litigation file on a success-based arrangement.

The point is flexibility. And when you build tailored fee structures, you change the conversation from “what’s your hourly rate?” to “how can we work together in a way that makes sense for both of us?”

Unique Pricing Drives Unique Value and Breaks the Race to the Bottom

If your pricing model looks like everyone else’s, then you’re just another commodity. That’s when clients start comparison shopping based on price alone.

But if you’re structuring your pricing based on deep knowledge of the client’s goals and preferred ways of working, you’re no longer interchangeable. You’re delivering something tailored and valuable. You’re a legal professional, not a plumber.

And most importantly, you’re helping the client win, which means you’ll win too.

Track Your Time Even When You’re Not Billing It

One more essential point: I believe you should still record time, even when using non-hourly billing models.

Time tracking isn’t just for billing. It’s how you understand your internal costs, opportunity costs, and profitability. If you abandon time tracking altogether, you lose visibility into whether a fixed fee or value-based arrangement is actually working for your business.

Think of it as managing a portfolio. You need data to know what’s sustainable and where the value really lies.

Value Pricing Doesn’t Mean Taking All the Risk

A lot of firms resist alternative billing because they think it means giving up control or taking on all the risk. But that’s not the point.

A good pricing model finds a win-win. The client gets predictability or performance incentives, whatever they need most. The firm gets fair compensation aligned with results and client satisfaction.

Bartlit Beck LLP, the original poster child for alternative billing, still did 50% of its work on an hourly basis in the early years. Why? Because not every client was ready to make the shift. Some simply weren’t comfortable. And even the most visionary firms need to meet clients where they are.

Stop Arguing. Start Listening.

We don’t need to keep arguing about which model is superior. Hourly billing is not the villain. Value pricing isn’t a panacea. What matters is what your client wants and needs.

If you build pricing options around that, you’ll build trust and long-term success for both you and your clients.

References and Further Reading:

  • Ron Baker, Implementing Value Pricing: A Radical Business Model for Professional Firms
  • The American Lawyer (1995), Diamonds Are This Firm’s Best Friend – Profile of Bartlit Beck and its hybrid approach to alternative fees
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Strategic Planning Isn’t Just for Big Firms

The misconception persists that strategic planning is reserved only for the boardrooms of large corporate law firms. This just isn’t true. Small and mid-sized law firms often benefit more dramatically from strategic planning than their larger counterparts, yet they’re the least likely to embrace it.

Having worked with firms large and small, I’ve witnessed remarkable transformations when smaller practices commit to strategic thinking. The difference isn’t just noticeable, it’s often the deciding factor between thriving and merely surviving.

Clarity in Direction

Most smaller firms operate in a reactive mode, chasing whatever work comes through the door. This approach might keep the lights on, but it rarely builds sustainable growth. Without strategic direction, firms become vulnerable to market fluctuations and miss opportunities that align with their strengths and capabilities.

A strategic plan creates intentionality. It defines not just where you want to go, but why that destination matters and how you’ll measure progress along the way. This clarity transforms daily decisions from reactive choices into purposeful steps toward your vision.

Resource Optimization

Resource constraints force smaller firms to be surgical in their decisions. Strategic planning ensures those decisions create a cumulative impact rather than a scattered effort. When you understand your priorities, you can confidently invest in technology that serves your goals, pursue training that builds competitive advantages, and focus on practice areas where you can truly excel.

This focus prevents the common trap of spreading resources too thinly across competing initiatives, which ultimately dilutes your firm’s effectiveness.

Adaptability in a Changing Market

The legal industry’s transformation isn’t slowing down. Client expectations continue evolving, technology reshapes how legal services are delivered, and new competitors emerge regularly. Smaller firms actually have an advantage here, as they can pivot faster than larger firms, but only if they anticipate change rather than react to it.

Strategic planning builds this anticipation into your firm’s DNA. It creates frameworks for evaluating emerging trends and prepares your team to respond strategically when shifts occur in your market.

Team Alignment and Motivation

In smaller firms, every team member’s contribution has a significant impact on overall performance. Strategic planning aligns these individual efforts toward common objectives, creating momentum that’s greater than the sum of its parts. When everyone understands how their work contributes to the firm’s success, engagement and accountability naturally increase.

This alignment also strengthens your firm’s culture and reputation. Clients notice when a firm operates with a clear purpose and consistent values across all interactions.

Risk Mitigation

Short-term thinking is a luxury smaller firms can’t afford. Strategic planning compels you to consider potential risks and opportunities that extend beyond the current quarter. This longer view enables proactive decision-making that strengthens your firm’s resilience and positions you to capitalize on favourable conditions when they arise.

Conclusion

Strategic planning isn’t about creating elaborate documents that gather dust on shelves. It’s about developing a living framework that guides decisions and keeps your firm moving purposefully toward its goals. The process doesn’t need to be complicated, but it does require thoughtfulness and honesty about where you are, where you want to go, and what it will take to get there.

In today’s competitive environment, the question isn’t whether your firm can afford to engage in strategic planning; it’s whether you can afford not to. The firms that will thrive in the coming years are those that plan intentionally today.