How To Increase The Profitability Of A Legal Business

The primary motive of every business organization is to make a profit, no matter the field. You may want to cite NGOs and charity organizations as examples, but these are not business organizations. They do not conduct businesses. For law firms of different sizes, the objective is always to carry out services on behalf of their clients to the best of their ability. That is the business of lawyers and law firms. You may also want to cite the lawyers who do a lot of good for other people for free using their legal skills and resources. However, these lawyers still engage in work-for-profit, to fund their pro bono legal projects.


As law firms kick off their activities and begin to make a profit, the immediate goal is to grow. There must be growth in terms of client base, employees, number of areas of specialization, volume and scale of cases at hand, branch offices, and most importantly, profit margin. The growth in different other areas of the firm will lead to a growth in its profit, and this is expected to increase every year.

Lawyers and their services are needed almost all the time, either for creating businesses, facilitating business transactions, or settling disputes. Despite this, many lawyers and law firms still find it difficult to sign new clients, and sometimes struggle to retain the existing ones. In many countries, the competition is fierce, and the different scales of practice between law firms create an extra difficult situation for the small-scale ones. For example, a multinational would find it more comfortable if their contracts were handled by a firm that uses software for legal documents, rather than a firm that edits documents manually, even if both outputs are of the same quality.

To remain profitable, a legal business must be intentional in setting goals and sticking to them. This article provides a few tips on how to achieve this.


Some jurisdictions – like many of the common law countries for example – are against advertising and promotion of business by law firms, to some extent. But a business can still formulate strategies in accordance with the stipulated limits, to promote its business and win clients. These strategies should be properly planned, and reasonable budgets should be allocated to executing the plans. It is very possible to promote your legal business for free and there are, in fact, simple ways to do that. However, when it comes to taking your business to the next level, a small portion of the firm’s budget should be made to serve this purpose. For example, some of the firm’s lawyers should be made to attend events that make the firm more visible to potential clients. The online presence of the firm should also be optimized in a way that places the firm and its services in noticeable positions. Websites, LinkedIn profiles, and even social media accounts should be regularly updated and kept active. These strategic activities would cost a bit of money, which law firms should not be hesitant to spend.


Law firms should improve their systems. Systems exist as part of the internal processes of a firm or company, regulating how work is done by employees, as well as other relevant routines within the firm. Lawyers working as sole practitioners are usually more restricted, as they can only handle a limited number of tasks at a time. For law firms, their systems should be arranged such that there is a workable flow of tasks from one lawyer to another, and there is always an alternative to complete pending tasks in the case of an absent lawyer for any reason. Having proper systems in place is what determines proper practice management. It means that the legal practice within the firm is properly managed. When this is in place, output and productivity will keep steady, which makes the firm more profitable, both practically and in terms of outlook. A few action points that may help with improving practice management are:

· Avoiding bad and energy-draining clients
· Working virtually when possible
· Gathering client feedback systematically, to help improve the system


The level of productivity of a firm will not matter if its entire money system is not managed properly. The first and most important method of management is raising your rates. Raising your rates when necessary, is a direct link to raising the firm’s profitability. When the firm’s standard of service increases, costs of providing services are likely to increase, which will require a corresponding increase in the rates at which clients are charged, otherwise, the firm begins to run at a loss.

In addition to raising your rates appropriately, you must also send invoices to clients on time. Many lawyers have fallen victim to receiving their service fees late after failing to send in their invoices promptly. Getting paid in advance is also a vital part of financial management. It is a good thing to trust your client to pay eventually, but paying in advance is a way of reciprocating that trust.


This may sound like a cliché piece of advice, but keeping proper records of expenses and income within the firm will go a long way in ensuring that the firm stays profitable. Proper bookkeeping and accounting is the only way to keep track of the firm’s level of profitability over any given period of time. Balancing the firm’s books will give the firm and its accounting officers a proper gauge of what the firm needs ahead of the subsequent months or years. It shows the areas where expenses need to be reduced in the firm, and the areas lagging in productivity. It is only with proper accounting that the right projections are possibly made.


Finally, just as every situation in life demands, having a “Plan B” strategy for unforeseen circumstances is vital in keeping your firm profitable. The competition in most legal industries is pretty heavy, and law firms lose clients just as fast as they gain them. With employees to pay, and a good number of running expenses to cater for, law firms should have alternative plans to most of their plans to improve profitability. For example, in-person marketing and promotion should be put in place, in case online marketing fails. More prudent budgets should also be prepared, in case the inflow of cash gets reduced for any reason. Lawyers are known to be a pretty versatile group of professionals. Such versatility will be very valuable in keeping their businesses alive and running!