The Holy Grail of Cross Selling 1: The Reasons

As the American writer Shirley Lord once said, “What really matters is what you do with what you have”. This could not be more pertinent for business developers in law firms today.

A 10% increase in turnover for a full year is a reality for any firm achieving the Holy Grail of a sustained cross-selling campaign. By cross-selling, I mean the consistent and successful sale of a professional service firm’s other skills to a single client. That client can be a corporate entity, a group or an individual – in the course of a year, any one of those entities is bound to require more than a single service offering from you, its lawyers, accountants or other advisers.

But why is this the Holy Grail? Why is it that so many firms fail to achieve any significant planned level of cross-selling?

In my experience, the senior management of a law firm, be it at executive or departmental level, believes that everyone has the skill and the duty to cross-sell. It is also my experience that a successful cross-selling campaign requires management, drive, support and, most importantly, measurement.

So why should a professional service firm embark on a form of cross-selling initiative?

Firstly, let’s take a moment to look at the cost structures of most professional service firms. My partner, Barry Wilkinson, holds the view that every firm can be broken down into the following categories:

1. Property.

2. Staff costs.

3. Professional indemnity.

4. IT.

5. Marketing.

With the exception of marketing and staff costs, which are variable, all the other costs are fixed.

Therefore, and bearing in mind that most staff are now operating with a reduced workload in this recession, anything that can be done to increase the top line of sales is going to have a fairly dramatic impact on the bottom line of profitability – especially if this can be done without increasing any of the marginal costs. The obvious candidate for this is to sell additional services into your existing client base, otherwise known as cross-selling.

The second reason for embarking on a cross-selling initiative at this time of decreased general demand is because, generally, a sale made to an existing client is a comparatively easy win. The firm has already established a level of trust with the client from the work that has been previously undertaken and, assuming the database has been properly maintained, they already have the contacts with whom the conversations can be initiated to establish the client’s needs.

It is my experience that during a downturn in commercial activity, it is barely and rarely economical for a firm to go out and target new work from new clients/prospects. There is usually only one primary reason why a potential client looks at changing advisers during this time. That is because they are looking to cut their costs on professional advisers (although I do acknowledge that there are occasionally service issues or a requirement for a new service that cannot be provided by the incumbent supplier that could lead to the opportunity for tendering to new work. Incidentally, this is where the importance of vetting opportunities to tender becomes so critical. Firms must resist the desire to respond to every invitation for a tender, and only accept those where the client has a genuine new need for new work, and is not simply motivated by the desire to cut costs.)

Last but not least, during this period of recession winning new work has a great morale-boosting effect on a firm, even if that new work is from existing clients. The importance of staff morale should not be underestimated when it comes to pulling a firm through tough times, and keeping staff turnover to a minimum when good times return.

Why (Our) Training is Useful

In his 2008 book, Strategy and the Fat Smoker, the ex-Harvard lecturer and professional service consultant David Maister explained ‘Why (Most) Training is Useless’. Even starting from the point of being acknowledged as the best in his field, he recognises that, if you don’t put into practice what you have learned, you may as well not have learned it in the first place (much like the ‘Fat Smoker’, who knows exactly how to lose weight and quit smoking . . .).

Without wishing to compare ourselves to David, we have found much the same (understandable) tendency in some of our training feedback – the urgent business issues take priority over the important training lessons. We regularly receive excellent feedback from (most of) our delegates, and are told how they are going to implement their own ‘profit improvement campaign’ as soon as they get back to the office.

But, when we follow up to see how they have got on, they admit that progress is less than they had hoped - the main issues being:

The partners do not ‘buy-in’ to the campaign

The ‘campaign leader’ does not have/is not given sufficient authority to implement the necessary changes

The fee-earning staff do not recognise the importance of the programme for the firm’s (and their own) continued success

The support staff are not included, and therefore do not understand the importance of their role

For this reason, our training is designed to make staff at all levels understand why this programme is important, and how to achieve the desired results from it. This includes how to achieve buy-in at all levels, what to measure, provision of template documents for measurement, and how to balance the ‘carrot and stick’ approach to ensure success.

We also follow up every training session with the offer of free, remote follow-up consultancy, to help with implementation.

Our in-house training programme includes:

Strategic-level training for senior staff on the management of the performance improvement campaign

In-depth training for fee-earning staff on the why, and how, they can help to improve their firm’s profitability

Training suitable for support staff on their role in the profit improvement process

The benefits of our rigorous, cost-effective training programmes lie in our ability to prepare your staff for successful implementation of what they have learned, and our dedication to helping you achieve the maximum possible results from your follow up campaign.

Tailored Consultancy

We have had quite a bit of demand recently for more information on our bespoke services. This post is a case study illustrating how we would tailor our consultancy services to our clients’ specific requirements. And how the “obvious” answer is not always the right answer!

The client is a high street firm, with the old three-legged stool mix of Conveyancing, Legal Aid and General Private Client work. We were asked to help following a difficult period of more than two years. One of the founders had retired and not been adequately replaced. The Legal Aid departments in particular, had become very busy but had not been managed.

Matter starts were plentiful - but not all matters were being progressed satisfactorily to completion - and the Legal Services Commission had inadvertently overpaid the firm and wanted its money back - which was not available.

At the time we became involved, the firm was not profitable, not generating cash, was losing good people and, in some areas, was losing its reputation.

We did our initial analysis, but in this case extended it and interviewed around far more people than usual – not just partners and fee earners. We had to find out WHY things were so awry. We identified over 50 action points, grouped under key headings, including:

Financial management
Management of the partnership
People issues
IT
Negotiations with creditors

Our ratio analysis showed that the most important underlying issue was people performance - too many people producing not enough output.

The obvious remedy was to cut back and institute immediate staff cost savings. However, we had identified that previous cutbacks had caused much of the problem. Low profitability had led to low salary reviews and non-replacement of good people who understandably left.

So we did the exact opposite of the obvious. We put in place a very, very focused programme of file completion, billing and collection. This not only generated the cash to satisfy the lenders but also meant that the remaining good staff could be paid more. Those staff not up to scratch were replaced with better, albeit in some cases more expensive, staff.

What we did was to turn a vicious cycle of decline into a virtuous cycle of recovery.

We persuaded the individual partners to take responsibility for specific aspects of the recovery programme. One of the partners, despite a lack of accountancy training, successfully took responsibility (with our help) for hands-on management of the finances.

Within a relatively short period of time, all the creditors had been paid in full and the firm’s overdraft is well within manageable levels. Its reputation has been recovered, and in some areas the firm is continuing to grow and take on significant new clients.

If you would like to see more case study examples, please click here.

Supermarket Law . . .

According to the Law Gazette today, 69% of survey respondents ‘agree they would be concerned about the quality of (legal) service offered’ by banks and supermarkets. This may well be the case – after all, banks are currently very much out of favour.

But the really discernable difference between the banks’ and supermarkets’ approach and traditional firms of solicitors won’t be in the quality of service offered. It will be in the definition of service- speed, efficiency, response -not personal service. They will provide “transactions” not “relationships”.

This will enable these alternative providers to sell their legal services at a much lower price than their law firm competitors. And in areas that are susceptible to a high-volume, low-value approach, price will be the ultimate determinant of success. There is simply no reason why most consumers would pay more than they need to for a “transaction” – for example a Will, or for the Conveyancing work on their property.

The consequence of this is clear – firms that are in business in these areas must become as tightly run as possible, or they won’t be in business for much longer. They must be able to provide the same service in a shorter time, and at a lower cost. This means that IT and delegation become absolutely vital to processing matters as efficiently as possible. Not every task in a transaction requires a qualified solicitor!!

The other area where the supermarkets and banks will take advantage will be in the marketing of their services. Many firms do not even know what different services they sell to each client – and consequently they have very little chance of taking opportunities to cross-sell. This is a question of database management, and of a simple but coherent firm-wide strategy to target existing clients for their services. Most firms won’t be able to compete with the marketing budgets the banks and supermarkets will throw at potential clients. But not maximising opportunities with existing clients is unforgivable, and potentially fatal for the firm.

If firms want to compete with alternative providers, they need to sharpen up in those areas which affect the delivery, not the law – or current client perceptions won’t much matter for long.

The Legal Services Act and Legal Service Standards . . .

We regularly ask clients to evaluate themselves and their colleagues across a range of criteria. We have found that, unsurprisingly and quite understandably, most lawyers pride themselves first and foremost on their legal skills. But in a market that is bound to shrink in the next couple of years, it won’t be a simple case of the firms with the best lawyers leading the way.

What many professionals don’t realise is that it’s actually very difficult for clients to judge the quality of their work. What they can judge very easily, however, is the quality of service they receive. So, here are a number of areas where firms can ensure they stand out, and keep clients loyal:

1. Keeping in Touch

An image of disinterest or complacency will be fatal to any client relationship. Firms need to demonstrate a proactive attitude, appointing a dedicated Client Relationship Manager and allowing clients to make appointments and track progress in their case online where possible. More than anything, simple phone calls and messages to check that the client is happy go a long way and cost nothing.

2. Flexibility and Service Standards

Firms need a ‘client-centred’ approach, with flexible working hours and ‘out of hours’ meetings when possible, as well as service standards that include standardising the way staff communicate with clients, and must always be on the lookout for new services the firm could offer.

3. Finance

Paying for legal work can really be off-putting for potential clients, and anything the firm can do (within reason) to help will be a major factor in purchasing decisions. This includes fixed price quotes and guarantees up front, and the option of 0% finance. Flexibility in billing and collection, allowing clients to view the accounts ledger online, and updating them of the status of their account will all help your own capacity to plan as well as make life easier for the client.

4. Promotion

It is important to demonstrate that your firm is a market leader, and this can be done through profile-raising events with a ‘wow’ factor in the local community, a ‘green strategy’ and other illustrations of CSR such as community and charity work, and holding networking events. These will all enhance the firm’s image, while of course being worthwhile in themselves.

5. Feedback

Getting meaningful feedback involves more than just handing out a few questionnaires – although this is a good start. Client ‘focus groups’ for feedback can be very useful, as can using a ‘mystery shopper’ to contact the firm for quotes and to get an idea of how clients are treated, the client for feedback, and the competition for obvious reasons!

In more and more ways, law firms are being forced to adhere to standards that are the norm in other areas of business. The quicker they do this, the better for everyone involved . . .