Most people have heard of Pareto’s Principle or the 80/20 Rule. In a business application it means that 80% of revenues come from 20% of your customers. Whether or not the rule is equally applicable to the law business, is not as important as what the principle should compel you to do.
You need to dissect your accounting data, and analyze it to determine who your key revenue generating clients are. After undertaking this important market research, you should then take appropriate action to enhance and develop your firm’s relationship with those clients. One client of mine knew it did a lot of trucking company work, but had no clue as to how much. They were truly surprised to learn, after we reviewed their financial data, that it accounted for nearly half of their total revenues.
An article by Anne Parys in this month’s Law Practice Today talks about the 80/20 Rule. Anne mentions six rules for dealing with both percentages that are very good which I’ll paraphrase as:
*Get to know your top revenue clients in detail – not just in terms of dollars, but work effort, attorneys involved, work performed, overall legal expenditures, who else does their legal work;
*Look for opportunities to introduce other lawyers and practice areas to these clients, if appropriate;
*Spend a lot of time on the care and nurturing of these key clients – i.e., what have you done for them lately;
*Scrutinize the other 80% for hidden jewels -both for additional work and potential referrals;
*Don’t be bashful, ask happy clients in either grouping for referrals (Anne’s suggested approach is good – let them know that the firm always welcomes quality clients, and high quality referrals usually come from valued clients); and
*Fire undesirable, unwanted clients – gives you more time to nurture the ones you do want.
Your marketing efforts will improve dramatically if you spend time applying the Pareto Principle to your firm.