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Bankers in the Know: How to Become "Financial Counsel" to Law Offices

Posted April 22, 2015 by Susan Bell

Lawyers: the butt of jokes and the protagonists of TV dramas; Americans have a love-hate relationship with the legal profession. But if you are a banker, there is a wealth of opportunity to win business from the 165,000 law firms in the U.S.

How to Bank a Law Firm:

  • Law firms may experience cash shortfalls throughout the year, especially in Q1 due to aggressive year-end collections and employee bonus payments. Think: Line of credit
  • Slow growth in demand and cost-cutting by corporate clients are forcing law firms to adjust their business models and operate more efficiently. Think: Cash management services; IOLTA accounts
  • Investments in technology can increase productivity and protect client confidentiality. A recent Bloomberg article cites the growing concern about cyberattacks against law firms. Think: Line of credit; term loans
  • With rent averaging 5-6% of revenue, firms are constantly assessing the cost-benefit of renting versus buying office space. Think: Real estate loans

Here are a few of the top banking solutions used in this industry and the percent of firms utilizing the product (based on Barlow Research Associates, Inc., data):

Wire transfer services: 60%
Business credit card issued in your company's name (Visa, MasterCard, Amex, etc.): 37%
Automated clearing house services (ACH): 32%
Point-of-sale credit card processing: 29 %
Money market mutual funds or short-term investments: 23%
Unsecured short-term loans or working capital line of credit (less than one year): 22%

So what is your opening argument to get in the door with a law firm?

Know the issues that partners are most concerned about.
Lawyers are people too, and just like everyone else, they Law Firms growthhave worries about their business that keep them up at night. So just like a lawyer, ask good questions about these issues:

  • Slow growth in demand: Demand for legal services fell during the recent recession and has been slow to improve.  Overall demand grew about 6% annually from 2004 through 2007, but stagnated in 2012 and 2013. Demand rose only 1% in 2014.
  • Protecting client confidentiality: Breaches in confidentiality can lead to lost clients and expose the firm to lawsuits or fines. The conversion to electronic communications is creating new challenges for maintaining confidentiality.
  • Lack of management skills: Firms may suffer from weak management because the skills to be an effective lawyer don’t always translate into being an effective business manager.  Most lawyers obtained liberal arts degrees before law school and have little, if any, business training. Firms know they need to operate more efficiently in the current environment, but may not know how.
  • High overhead culture: Even though revenue at some firms is declining as clients demand more efficiency, partners and associates may still expect opulent office furnishings, lavish expense accounts, first-class travel, and the other perks they’ve become accustomed to.

"There's much more reticence on the part of clients to pay big legal fees; they are looking at ways to reduce their cost," said one lawyer. "We're having to look at ways to reduce our cost to meet those challenges."

Build a campaign targeting lawyers

Now that you know some of the pain points of law offices, here's an actionable idea: build a sales and marketing campaign around firms' disproportionate Q1 expenditures. These seven steps could go a long way with securing more business for you in this lucrative industry:

  1. Find out how many firms are in your market...what's your market share?
  2. Train bankers around the specific pain points and challenges discussed in this blog post...go ahead–forward them a link!
  3. Create marketing collateral materials specific to law firms.
  4. Customize your product offerings to fit the specific needs of firms (low interest rate, low fees, etc.).
  5. Create a targeted ad campaign in your market through social media and traditional media.
  6. Go where the lawyers go; consider sponsoring lunch at a trade association meeting, for example.
  7. Offer free seminars to teach firms better business finance management.

In summation, a direct quote from a lawyer about banks...

"Most banks offer the same types of services," said one attorney. "So it really gets down to relationship development, and that comes from knowing your client. That's the way we build our client base up–we want to know everything there is to know about that client–what makes them tick. I think banks should do the same things with law firms."

Want to have this kind of in-depth analysis for nearly 300 other industries?

All of the information found in this post came directly from the Vertical IQ Industry Profile on Law Firms. Take our advice, and consider a Vertical IQ trial. Contact us for more information or to schedule a demo.

Tags: attorneys, Bankers in the Know, Industry research, law firms, lawyers

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