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"No Decision": The blind spot that prevents lawyers from doubling their income

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Not “a blind spot.” …

Not “a blind spot.”

“The blind spot...”

Yes, we’re saying there is one thing that, all by itself, robs you of the income your marketing and sales effort should produce.

If you fix only one thing, and change nothing else about how you pursue business, you’ll double your income without increasing your level of effort.

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  • 1. “No Decision” The Blind Spot that Prevents Lawyers fromDoubling Their Income Craig Levinson Mike OHoro
  • 2. The Blind SpotNot “a blind spot.”“The blind spot...”Yes, we’re saying there isone thing that, all by itself,robs you of the incomeyour marketing and saleseffort should produce.If you fix only one thing, and change nothingelse about how you pursue business, you’lldouble your income without increasing yourlevel of effort.There are many, many things lawyers can andshould do to increase their business developmenteffectiveness. We built the RainmakerVT suite ofvirtual learning tools to help you do that.Here, we’re going to share the Big Secret thatmakes the difference between frustration andsuccess. Please read on.2
  • 3. Only 2 Ways to Increase Revenue1. Increase the number of sales opportunities2. Convert a higher % of opportunities intosales 3
  • 4. Option 1: Create More SalesOpportunitiesMost lawyers go this route.Creating more sales opportunitiescan be done, but its expensive,and often pointless. If you’re notconverting the opportunities youhave now, how will having moreleads that you fail to convert help you?“I’m converting only one out of sevenopportunities. If I had 14 opportunities, I double mybusiness even if I’m no better at selling.”Your logic is flawless. However, it ignores twocritical factors: • Time • MoneyWhen it comes to marketing and sales, mostlawyers find they have a shortage of both.Worse, since you have no idea where the firstseven opportunities came from, you have no ideawhat it takes to get seven more.4
  • 5. How Much Does It Cost to CreateMore Opportunities?Law firms dont track such things, so lawyers canonly guess at their closing ratios or cost-of-sales.Two of the premier consulting groups in the legalindustry took an informed stab at estimating it,based on anecdotal evidence they collected overthe past two decades. They put the Cost of ClientPursuit at between $35,000 and $100,000 -- to geta client with annual fee value between$100,000-200,000.Surprising, isnt it? What could make it soexpensive?Because it’s an average. Like venture capital, theinvestments that pay off have to cover the onesthat don’t.When you spend three years “developing arelationship” with people in a company, win orlose, that cost becomes part of your average Costof Client Pursuit. 5
  • 6. So, let’s take a closer look at what it means toincrease the number of opportunities.At the midpoints of the consultants’ ranges, you’llspend $67,500 to acquire a $150,000 client.Operating overhead is 60%, leaving a 40% grossprofit ($60,000). As you see, you lose money onthis client Year One. Unless you keep it formultiple years and grow it, you can’t afford such“successes.” Gross fee revenue 150,000 Operating overhead 60% 90,000 Cost of Sales 67,500 Gross Profit/Loss -7,500Any or all of these numbers may be higher orlower, and some of the cost-of-sales total may bepart of overhead. That’s not important.What’s important is, if your overhead is undercontrol, there’s only one remaining variablethat you can influence: Cost of Sales.6
  • 7. 2. Convert a Higher % ofOpportunities into SalesWe said that one factor determines your Cost ofClient Pursuit beyond all others.It’s called the “No Decision” Factor.Years ago, a landmark Ohio State University studyshowed that, in 30% of selling situations, nothingis purchased. This figure is for full-time,professional salespeople. Since lawyers are part-time, relatively inexperienced salespeople, thepercentage of opportunities in which they lose outto “No Decision” has to be even greater.Why is eliminating “No Decision” so important?Simply, no matter how hard you try, how skilledyou get, how diligently you develop relationships,nearly one-third of those who might have hired youwill NEVER make a decision that leads to any lawfirm being retained.Unfortunately, lawyers have no way to know whichone-third that is. Until now. 7
  • 8. Fur Coats in the DesertImagine that you sell fur coats over the phone.You’re working from a list of high-income peoplewho’ve bought other luxury goods by phone.You’re working hard, making the calls, extolling themerits of your coats. Results are poor. As youstruggle, you might start thinking there’ssomething wrong with the coats, price, or salescapability.You’d be partially right, but not for the reasons youthink.What if, unknown to you, a third of your prospectslive in Phoenix (assume its an auto-dialing systemwhere you cant see area codes). What if nobodyyou called in Phoenix thought to tell you wherethey lived, assuming you knew?You might spend years calling those people, tryingto cultivate relationships with them. You mighteven cultivate some and make some friends. Butit won’t make any difference in your real salesproblem, which you don’t even know about.8
  • 9. Most people in Phoenix don’t have to make adecision about a fur coat. Yeah, maybe there’s acase for owning one during a handful of coolernights during the Winter, but does it really matter ifthey have one or not? Will they be unable tosurvive the Winter without one?Endless PursuitWithout a way to discern each prospects location(and not even knowing to ask about it), you’llcontinue to sink time, effort, and money drilling“dry holes,” with no chance to succeed.You’ll waste time and effort that could be directedtoward live prospects in Chicago, Toronto, andBoston.Worse, you won’t have any reason to stop callingthe Phoenix people, so your selling cost becomesinfinite.That’s why we find the $35,000--$100,000 perclient pursuit figure believable. Lawyers call onpeople who don’t have to make a decision,sometimes for years, despite no chance to win. 9
  • 10. It Can Be Very Simple, If You Let ItFor lawyers, eliminating “no decision” isn’t assimple as asking prospects where they live, but it’snot much more complicated.There are two simple processes that, combined,will painlessly eliminate “No Decision prospects”and enable you to replace them with viableopportunities.Before we explain those, let’s see why it’s soimportant. Chart A shows the profound effecteliminating “No Decision” has on net revenue.Chart A 30% No-Decision No-Decision EliminatedGross Annual Pipeline Value of 100 20,000,000 20,000,000Prospects in PipelineLess No-Decision Factor 6,000,000 $0Net Pipeline Value Less No-Decision 14,000,000 20,000,000ValueClosing Rate (40%) 5,600,000 8,000,000Cost of Sales ($35,000 x 100) 3,500,000 3,500,000Net Revenue 2,100,000 4,500,00010
  • 11. Chart B shows how a 50% increase in the numberof opportunities has less of an effect on NetRevenue than does eliminating “No Decision.” 30% No DecisionGross Annual Pipeline Value of 150 Prospects in 30,000,000PipelineLess No-Decision Factor 9,000,000Net Pipeline Value Less No-Decision Value 21,000,000Closing Rate (40%) 8,400,000Cost of Sales ($35,000 x 100) 5,250,000Net Revenue 3,150,000Eliminating those who won’t decide anythingincreased revenue by 43% compared to having 50more prospects in your pipeline. By eliminating“no decision,” you eliminate spending $35,000 oneach of them. That’s where the increase comesfrom.So, forget about increasing your pipeline. First,shrink it. Here’s how to do just that. 11
  • 12. It’s All About DecisionsLaw firms are implementing best practices inManagement, Operations, and InformationTechnology. To maximize revenue and PPP, it’sequally important that they embrace modernBusiness Development methods.To do so, it’s critical to teach their lawyers the “NoDecision” concept and application.First, understand that humans only make thedecisions they must make. Because decision-making involves risk, we delay until we can’t anylonger, because the consequences of not decidingare greater than the risk or discomfort of deciding.Here’s an illustrative exercise we used for years inour workshops.We’d ask, “By show of hands, how many of youare reasonably confident that some day you’lldie?” Chuckling, everyone raised a hand. Next,we’d say, “Keep your hand raised if you’ve alreadymade arrangements your personal beliefs12
  • 13. prescribe for that certain outcome.” Every time, atleast two-thirds of the hands came down.Our capacity for delay and denial is limitless.Measured against our denial behaviors in the faceof an acknowledged certainty, how do we convinceourselves that, just because a prospect could orshould do something about a problem, that he orshe will?In business, “No Decision” primarily results fromselling against a problem whose impact itsstakeholders perceive as sufficiently low that theyhave the luxury of doing nothing.Lawyers can expose this easily and quickly by • exploring the Cost of Doing Nothing, and • understanding how to achieve Stakeholder AlignmentDefinitions: • Stakeholders are people who have professional and personal reasons to care about the decision under consideration, i.e., 13
  • 14. the decision outcome will affect them directly. Literally, they have a stake in that outcome.) • Cost of Doing Nothing (“CoDN”) process is a disciplined sequence of questions that reveal whether or not a prospect has a problem about which he or she MUST do something. • Stakeholder Alignment is an extension of the CoDN process. It helps one guide his or her internal “Champion” through a process that quickly reveals whether or not the other key stakeholders in the decision share the champions opinion about the CoDN being too high. • The Champion is a prospect stakeholder who, through your facilitation, has concluded that this problem’s CoDN is unacceptable. The Champion is motivated to have the company reach a decision for his/her own reasons, that relate solely to his/her self-interest and have nothing to do with us.(The CoDN process is critical when evaluating thevalidity of formal selection processes, such as14
  • 15. “beauty contests,” many of which are set upmerely as a lever to get incumbent law firms tolower their rates or grant other concessions. Theyare rarely legitimate opportunities for non-incumbents.)Exposing the Cost of DoingNothing: A Real-Life ExampleJim works at a 15-lawyer firm in Charleston, SouthCarolina. He handles all of the litigation mattersfor his client, XYZ Technologies, also based inCharleston.Catherine is XYZs General Counsel. She retainssix small-to-medium Charleston law firms, each fora different legal specialty. She uses oneprestigious New York law firm (which she inheritedwhen she took the job four years ago) for all ofXYZs corporate work.Lately, Catherine has complained about the“outrageous” rates charged by the NY firm. Jimsinstinct, which is typical, is to approach Catherineand say, “I know youre not happy with the ratesthe New York firms are charging for your corporate 15
  • 16. work. We can do that work just as well for half theprice. Can I get you to sit down with my partner,Pat Smith?”This is not the best approach for Jim to take.Why?1. Catherine will recognize that this sales pitch is primarily in Jims self-interest, not hers.2. Jim is using up a favor (“Meet my partner”).3. The approach lumps Jim with the five other Charleston firms who likely will approach Catherine in the same clumsy fashion.4. Jim learns nothing about whether or not Catherine must make a decision about shifting the work from NY to SC.If Catherine doesnt have to decide, “No Decision”wins again, despite whatever earnest effort Jimand his competitors make.Fortunately, Jim resists his instinct. Instead, heembraces a disciplined, Cost of Doing Nothinginvestigation.16
  • 17. A Respectful ApproachJim approaches Catherine.“Catherine, I know youre not happy with the ratesthe New York firms are charging for your corporatework. Everyones probably telling you that theirfirm can do the same work in South Carolina formuch cheaper. Whether or not that’s true isirrelevant. Which SC firm is the best choice is thewrong question. Until you decide whether or notit’s in your best interest and a good decision tomove to move the work away from NY, you don’tneed any SC firm. Wouldn’t it be more helpful toset aside parochial interests and help you evaluatethe real issue?For now, forget about which Charleston firm youmight retain if you decide to make the shift.Were your advisors. Why dont we sit down – andthis is completely on the house – and let me helpyou gain some clarity about whether its in yourbest interest even to consider taking this businessaway from the NY firm?” 17
  • 18. A Simple, Reliable Process thatClients AppreciateJim asks five simple, direct questions that revealthe strategic, operational, financial, and emotionalimpact of shifting XYZs corporate work fromNY to SC. This process results in the clientassigning a dollar estimate of how much moneythey would save (or make) each year by taking theaction being considered.Catherine says switching firms could easily saveXYZ $400,000 per year.With $400,000 per year in savings, switchingseems like a no-brainer, right? Not necessarily.Jim has only explored one category of impact –financial. People don’t make decisions solely forfinancial reasons.Do we always buy the cheapest house, car, stereo-- or doctor, or accountant? Money is important,but it’s only one factor.Lets look at the rest of the picture.18
  • 19. Even if the perceived economic impact is a hugemultiple of the likely cost of the solution, Jimcannot assume that it constitutes an imperative toact.Only insiders at XYZ know whether $400,000 peryear justifies going through the offsettingoperational, strategic, and emotional costs ofswitching firms.As the collaborative investigation continues,Catherine admits that shes not particularly fazedby the hassle of switching firms. Its a bit of ahassle, but shes done it before with littleinterruption to the day-to-day workings of herdepartment.Jims questions raise a red flag, however, and theyhelp Catherine crystallize the fact that she hassome real concerns regarding her job security.Yes, shell be a star for saving the company somuch money, but she admits: “I cant seem toshake one concern – the fact that Ill be the soleperson responsible if the Charleston firm screwsup the corporate work. I guess I take comfort in 19
  • 20. the fact that Im safe if the incumbent NY firmscrews up, because I didnt hire them.”Jim now sees clearly that the negative personal,emotional impact on Catherine will very likelycontinue to trump the positive financial impact ofmaking a switch.Jim tests this by offering what seems like anobvious conclusion, "Catherine, it sounds liketheres no way you can accept the risk ofswitching. Am I hearing you correctly?" Its alwayswise to test apparent "deal-killers.”Contrary to traditional law firm thinking, this asignificant win for Jim.Catherine has confirmed that, at least for now,trying to cross-sell the corporate work has nochance to succeed, and Catherine certainly won’twelcome such an attempt from Jim (or anyoneelse).Jim has avoided drilling an expensive "dry hole."Rather than wasting time on that, he can nowfocus on more legitimate opportunities.20
  • 21. By doing so, hes also earned some goodwill, andreinforced his standing as a valuable advisor toCatherine, one who will subordinate his owninterests in favor of helping her solve her decisionproblem.Finally, while Catherine wastes time and energyfending off the other Charleston lawyers trying toget the untouchable corporate work, when Jimcalls, he’ll always be welcome because she’llknow that it’s not a pitch.ResultsFacilitating a decision creates immediate benefits:• Cost of Sales stops immediately; it’s like getting a check for $35,000.• Lawyers have more time to pursue legitimate opportunities.• The CoDN process is preferred by qualified buyers, because it places their best interests above those of the firm. 21
  • 22. Contrary to what you may hear from old-schoolsales trainers, aggressively pursuing a sale is notthe most effective way to get hired. Helping aprospect make a good decision is.If youre the lawyer who helps a prospect come tothe realization that the CoDN is too high – and thathe or she must take action – youve delivered realvalue, and you’re well positioned to land thebusiness. After all, if, as a result of your guidance,the prospect got sufficiently comfortable to reach adecision, which is she more likely to do? Hand itto the lawyer who helped her figure it out, or goshopping, hoping to find another lawyer in thehope that he or she has an equal grasp of theproblem?There’s no way to know for sure, but we’re prettyconfident that we know which way to bet.22
  • 23. SummaryHere are the advantages of eliminating “NoDecision”: • Frees time and money to replace “No Decision prospects” with viable prospects • Immediately ends cost-of-sales, and reduces the firms overall cost (see Chart A) • Helping a client make a good decision is the way to cross-sell other services, reducing the firms overall cost of sales (Charts A & B) • The simplicity of this decision process: • ensures that lawyers learn it easily, letting them convert a greater percentage of opportunities • expands the pool of potential rainmakers • enables junior lawyers to tee up opportunities for more senior partners • enables many more lawyers to effectively mine business from existing clients 23

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