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What Really Matters—Auditing Your Client Base

A core analysis is a powerful method for determining where the strength of the firm lies and where real opportunities exist for developing more business, profitably. It provides information allowing you to increase revenues and profits through improved resource allocation and reduced waste. After an audit of its client base, the firm can concentrate its efforts where they are most likely to lead to success. The core analysis provides an improved platform for planning, decision making, and management, and sets the stage for increased firm profitability.

With the clarity provided by an analysis of key clients over time and the identification of industry clusters, the firm’s focus can be sharpened—the firm can get better at what it is good at. For example, the firm’s current key clients are the most likely to have a relationship with the firm which will allow further business development through partnering arrangements, and the core analysis will solidify The firm’s information about those clients.

Surveys of clients indicate that inadequate client service is the most-often cited reason for firing a law firm. Having identified its most important clients, The firm can form client teams or key client accounts, create partnering arrangements, and conduct client service reviews—with those key clients first, in order to make certain that where it counts most, client service is impeccable.

Expertise in an industry or a practice area is the primary reason cited for choosing a firm in the first place. Information from the core analysis will help the firm determine where it currently has depth to showcase, and where it may need to broaden its reach in alignment with the market’s needs.

A Full Core Analysis Includes:

  • An analysis of the firm’s top clients each year for the past five years and aggregated over a five-year span
  • How much turnover exists—or the average life span of a client
  • The average value of a client—serving many small clients can drive down productivity)
  • An analysis of the top clients by practice group (and/or office or department)
  • The average value of a client for each unit
  • How much of those top clients’ work is spread to other units
  • An analysis of the ROI on marketing investments for each unit
  • An industry analysis of the firm’s clients
  • An analysis of realization and profitability by client, by industry, by group
  • Review of A/R and WIP, and aging of investment in client services
  • Recommendations regarding which clients are right for a client team approach
  • A review of the competitive health of the firm
  • Brand strength
  • Billing rate comparison to competitors
  • NIPP and RPL comparison—to AmLaw 200 and NLJ 250 firms (if appropriate)
  • What’s working for the firm and what’s working against it
  • Core Analysis may lead to recommendations on mergers, acquisitions, spin offs, lateral hiring, etc.
  • Core Analysis and review of the firm’s compensation system may lead to recommendations for changes in the compensation model

Following the RULES for Law Firm Profitability — Article in LMA’s Strategies:  The Journal of Legal Management, March 2004