How to Run the Business Side of Personal Injury Practice

Eighth in a Series of Quarterly Columns
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by
William L. Speizman
America's #1 Business Consultant to the Plaintiff's Bar

“You can be the best attorney in the world, but if you don’t know business you can’t be the most successful.” That’s the premise of my columns on the business of personal injury law practice. Of course, you need to read more than my columns to learn how to think business with the acuity with which you think law. You need to read books that can fill gaps in your business education.

In this column, I am going to recommend and briefly review three books that can expand your understanding of critical facets of the operation of your law business.

Basics Elements of Law Firm Financial Management
As I mentioned in a previous column, numbers are to the business of law as facts are to the practice of law. If you’re ignorant of either, you can’t be as successful as you could be.

“Knowing your numbers” begins with understanding your law firm’s three key financial statements: Balance Sheet, Profit and Loss Statement and Cash Flow Statement.

Managing By The Numbers: A Commonsense Guide To Understanding And Using Your Company’s Financials by Chuck Kremer and Ron Rizzuto with John Case (Perseus Publishers, 2000) provides a superb introduction to understanding and utilizing these three statements.

The book has three sections. Part I, “All You Really Need to Know about Financial Statements,” dissects each statement and teaches you how to make your way around in it.

Part II, “Understanding the Big Picture,” examines the interrelationships between the three statements. It explains why you need to attain three goals, not just one, in order to ensure the financial health of your practice. Those goals are a strong Balance sheet, good operating profit and reliable cash flow. Progress toward each goal is measured by one of the three statements and the changes it undergoes over time. Together, the three statements inform you of where you’ve been, where you stand and where you may be heading.

Parts I and II cover the first 74 pages of the book. Part III, covering the remaining 120 or so pages, addresses various complex analyses that can be performed using the information contained in the three financial statements.

Unfortunately, in Part III, you run into the book’s chief drawback. The authors draw their examples from businesses that purvey goods rather than provide services. The differences between the two, say a personal injury law practice and a bicycle manufacturing company, are vast enough that Part III provides only marginal assistance to you as a personal injury attorney. So I strongly recommend that you read and study the first 74 pages, but don’t take on the rest of the book unless it peaks your curiosity.

Warning: early in the book, the authors put forth the fictional SOHO company which they use to illustrate various points they make in their discussion. The two or three pages in which they describe SOHO are so dreary you may want to put the book down and never pick it up again. Don’t. Once you get past the SOHO set up the text accelerates to an engaging pace.

I’ll venture a prediction. As you read the first 74 pages of Managing By The Numbers, you’ll exclaim to yourself at various points “Aha! So that’s how that works”.

I highly recommend this book.

Fundamentals of Marketing Outside And Inside Your Law Firm
Marketing has two facets: client acquisition and client retention. Client acquisition is getting people with whom you’ve had no prior contact to choose you to handle their cases. Client retention is getting people you’ve helped before to bring you their subsequent causes of action and refer their relatives and friends who get injured. 

Client acquisition and client retention are different ball games. Each has its own rules. If you don’t understand those rules or apply one game’s rules while playing the other, you won’t be as big a winner as you could be. That’s true whether you market your practice or pay others to do it for you.

A Book on Client Acquisition
First, let me warn you that “Find a need and fill it,” is an outmoded marketing principle. Seventy-five years ago that adage might have provided effective guidance. Today, if all you do is find a need and fill it, you stand an excellent chance of losing some or all of the money you invest in marketing your law firm.

Most of the books that discuss the principles of client acquisition marketing leave it up to the reader to figure out how to apply them.

One book does much more. First, it provides a crystal clear exposition of a broad range of today’s, not yesterday’s, essential principles of marketing. Second, it allows you to watch over their shoulders as two top marketing professionals apply those principles and create highly effective client acquisition marketing materials. Third, it provides exercises you can complete which will help you learn those principles and how to apply them.

The book is The Lawyer’s Guide To Effective Yellow Pages Advertising, 2nd edition, by Kerry Randall and Andru (sic) J. Johnson. (American Bar Association, 2005).

Now before you groan, “Ugh! Yellow Pages,” I want to point out a few things. First, this book is masterful. Second, while it deals specifically with yellow page advertising, it covers principles that apply to virtually all forms of client acquisition marketing. For example, many of the authors’ points can be used to make your website more effective. Third, the book is written specifically for attorneys and draws its examples mainly from the legal profession.

I highly recommend this book.

A Book on Client Retention
Typically, this facet of marketing is overlooked by members of the plaintiffs bar. In fact, most personal injury attorneys are unaware that there are systematic procedures they can follow to maximize referrals and repeat business from current and former clients.

Some companies (and personal injury law firms) garner far higher volumes of referrals and repeat business than others. If you think their superiority has something to do with client satisfaction, you’re absolutely right. Engendering the high levels of client satisfaction that can generate steady streams of referrals and repeat business requires that a personal injury attorney do more than just “get them a good settlement.” One of the additional things you need to do is turn to J. D. Power & Associates, the people who wrote the book on customer satisfaction and learn all you can from them.

Chris Denove and James D. Power IV, executives at the firm, published Satisfaction: How Every Great Company Listens to the Voice of the Customer in 2006 (Portfolio). The book is a gem.

In the forward, J.D. Power III, founder of the company, writes,

After nearly four decades of carefully measuring customer satisfaction levels, we have amassed enormous institutional knowledge about what works and what doesn’t…In so doing, we realize we have a valuable message to share, and this book is the culmination of our desire to share the insights and the unconventional wisdom we have gathered over the years…The theme that forms the book’s foundation is a simple one: satisfied customers translate into profitable businesses.

Denove and Power begin by noting that excellent client service, the backbone of client satisfaction, bears a certain similarity to the weather. Everybody talks about it, but hardly anyone does everything they can to provide it.

Why do so many corporate executives, business owners and personal injury attorneys talk about excellent client service while so few do everything they can to achieve it? The authors submit that’s because a rock-solid relationship between client satisfaction and profitability had never been demonstrated quantitatively. As a result, most business owners aren’t motivated to go all out to achieve the highest level of client service they possibly can.

In the early chapters of their book, Denove and Power do what was never done before. Using a rigorous quantitative methodology, they demonstrate that customer satisfaction is a key driver of profitability.

Having established that client satisfaction is a primary driver of company profits, the authors ask, “What produces client satisfaction”?

Their answer takes you over, under, around and through the internal plumbing of great customer service, the primary driver of customer satisfaction. If you don’t acquire a firm grasp of the fundamentals of exceptional client service Denove and Power present, you’ll have to content yourself with marketing your law firm with one hand tied behind your back.

I highly recommend this book.

Conclusion
To achieve the success for which you are striving, you’ve got to be as competent at running your law business as you are at practicing law. Either that, or you must to be comfortable leaving your future somewhat to chance. Like all competitive activities, you’ve got to begin by learning the basics, the blocking and tackling of business. These three books can help you do that. Not only have I read all three, I return to them from time to time and reread the passages I’ve highlighted and the notes I’ve written inside their back covers.

Copyright 2009 William L. Speizman
All Rights Reserved

wlspeizman@gmail.com