What drives long term value?
In our previous article, we examined the Art of Business Development. During our high-level review, all roads were pointing to these buzz words long term value. Who are we creating long term value for? Client or firm? What does long term value even mean? Is it all just fluff? Or the secret to successful business?
How we do business today is not the same as how we did business a decade ago or one hundred years ago. There has been a shift which no firm can ignore. Clients are in control now more than ever before. Clients want more for less. They want you to understand them and provide them with solutions, delivered in a style that suits them. How does that demand fit your firm’s ability to supply profitably?
Before we get into the weeds of trying to define the drivers of long-term value, we need to set the record straight. For those who continue to confuse business development with marketing or sales, or worse yet, those who still refer to all professions outside the scope of their own as ‘non-lawyers’ and bundle various administrative, accounting, tech, marketing, BD, PR, and other professions into the bucket ‘non-’, it is important we eliminate all ambiguity and define our terms. (This will help us later).
To simplify and summarise:
Marketing is what businesses do to promote their business.
Sales is, as the word suggests, focused on the short-term goal of selling.
Salespeople use marketing to help promote their business to help them sell.
Business development is a little like sales, as the end goal is to sell, and marketing is used as an aide to promote the business and help the ‘sales process’. However, unlike pure sales, business developers are focused on improving profitability and generating revenues not only for the short term, but also, and much more so, for the long term.
When we talk about “creating long term value”, we mean creating value for both your client and for your own business or your firm. That brings us back to our question. How do we create long term value?
Some of the key components to any business development effort are:
Marketing & Communications
Relationships are based on respect and trust. Relationships exist amongst partners, colleagues, clients, employees, prospects, and strategic alliances. Whether you are building or managing relationships to enable long term value, navigating your relationships requires time, effort, commitment and for you to put your soft skills into action.
Seth Godin, a prominent business thinker, wrote in his book The Linchpin that we are living in the “connection economy”. The connection economy relies on relationships. The digital revolution has enabled the connection economy to reach a whole new level, with connection platforms such as LinkedIn connecting us with industry leaders, clients, prospects, potential employers and colleagues; Facebook connecting us to social networks; or dating apps and friendship apps connecting us to potential love interests or new friends. The connection age has monetised the value of relationships.
The connection economy exists today because relationships are not only the basis of being human, they are vital to the success of any business development effort.
So ask yourself, how are you navigating your relationships with your colleagues, clients and prospects to enable long term value and growth? Are your efforts fuelled by short term gains, or are you looking beyond any immediate reward, in favour of setting in motion a strategy that requires you ask questions, show interest, offer solutions, and build a solid foundation from which a long term valuable relationship will ensue?
How you manage your relationships remains at the core of any business development.
There are three stages to developing relationships with business development in mind:
1 – ASSESS
Define who your firm’s clients are.
What kind of relationship do you or your firm have with the client?
Is there any room for growth?
What scope or opportunity is there for you to grow your business with that particular client? By assessing your relationship, you can identity what opportunities exist for any potential growth.
What is the ‘connection value’ for that client?
Understanding the value of your relationship is important.
How can you maintain your connection and keep it safe from competitors?
Identify who your prospects are.
How do you plan to get in front of them?
How do you plan to develop that relationship?
Do you have a common ground? A mutual contact?
2 – UNDERSTAND
Legal business development is a form of consultative selling
Understanding is a powerful tool in any business development effort. Understanding your target prospects or clients, their business and their need for legal services, will make all the difference. We can only understand by asking the right questions, and in doing so, we are able to understand what our clients or prospects need from their legal service provider.
The significance of understanding your client or prospect should never be underestimated. When Ron Johnson moved from Apple to JC Penny, he restructured all the JC Penny stores. He put an end to the huge discounts often enjoyed by JC Penny customers and reorganised the departments from ‘womenswear’ or ‘menswear’ etc, into brand boutiques. This of course had little relevance to the low and middle-income customers that frequented JC Penny. Johnson rolled this out nationwide without conducting any market research or piloting it out first in a couple stores. What was clear from this, was that he did not understand his customer and he made a grave assumption based on what he thought they wanted. Creating long term values insists you have meaningful conversations with your clients to ensure you deliver to them what they want and need.
3 - EXPAND
Whether you are working to onboard a new client, or develop an existing client relationship, understanding your target client is key. Consultative sale techniques are useful in helping you forge a connection to your client or prospect.
Consultative selling involves asking the right questions and finding solutions to the problems your questions expose.
Many law firms are successful in finding creative and intelligent solutions for legal challenges faced by businesses and individuals. However, since the legal profession is advisory in nature, in practice some lawyers struggle to put down the mic when meeting with clients or prospects. Developing relationships is centred on asking the right leading questions. This is not too dissimilar from a talk show host. Good business developers ask the right questions in order to extract as much market intelligence they can. This enables them to position a solution fit for the client or prospect’s business.
ASK THE RIGHT QUESTIONS!
The management of your relationship with your clients and prospects is crucial to any successful attempt at achieving long term value. Touchpoints with clients and prospects need to be systematic. More often than not, lawyers will be in touch with clients whilst there is an open matter. In between matters, there may be little interaction between the lawyer and client. Similarly, relationship development with prospects may be placed on hold when more pressing instructions require a lawyer’s immediate attention. Neither of the two examples are conducive towards achieving long term value and both compromise the integrity of the business development effort. It is not uncommon for business development professionals to use CRM software to help in the management of their clients and prospects and ensure systematic and thoughtful follow up, however such relevant software is rarely available at a huge majority of law firms today.
Business development is not reactionary or impulse driven. Business development requires you to be prepared and ready to identify market opportunities.
By markets, we are talking about i) delivering best in class solutions to your clients or prospects for the market in which they operate; ii) being responsive to changes in the market and being able to adapt effectively; and iii) identifying or adjusting your service offering to market opportunities. It is not enough to only identify an opportunity to enter a new market. Devising and executing a strategy to enable you to capitalise on the opportunity is critical in bringing you one step closer to achieving long term value.
Example: Some law firm practices are very niche. Transactional lawyers that operate in the distressed loan market may find themselves quiet during a bull economic cycle with low interest rates. Quiet transactional teams remain a huge fixed cost to a law firm, and further no one really enjoys being quiet. Being able to pivot into an inversely cyclical transactional market, preferably in which existing credit and distressed loan market clients operate, not only keeps legal teams engaged, happier and busy, but further, helps develop their legal skills. This helps entrench the firm’s commitment to its client and may ultimately boost the firm’s bottom line, with more content employees.
Identifying opportunities to reach new customers by entering into new markets is one important gateway to unlocking long-term value. Clients operate in specific markets and at the core of creating long term value is being available in that market for your client.
iii. Marketing and Communications
How you communicate internally amongst your peers and colleagues, and externally - to your clients, prospects and strategic alliances, impacts your success in creating long term value. It is important that you not only utilise marketing to create consistent positive impact, but that you go one step further to ensure your efforts yield long term reward.
Marketing is not business development. However, marketing can be a powerful tool in enabling business development and creating long term value.
Many firms send out numerous client alerts to keep their clients and contacts informed of changes in the law or other news items. Client alerts can provide useful information to clients, but they can also be irrelevant and dull. Some law firms view the effort of ‘getting into the client’s mail box’ as enough to satisfy the relationship effort – “they know we are thinking of them as we have just sent them a generic email”.
If we were to reflect back to what creates long term value, our first driver was relationships. Sending an email alert does nothing to help your relationship with your client. Back in 2015 when changes were made to carried interest, the partners at the firm I was working with wished to send out a client alert informing their clients of the changes made to carry. However, unlike the hundreds, if not thousands, of client alerts that had been sent out by this firm, I succeeded in persuading the partners to take a more strategic approach. This time, we gave enough information to tickle some interest, and sent the alert to both clients and prospects. Unlike any previous client alert we ended on a sales pitch - classic ABC (Always Be Closing).
“Should you wish for any more information about this, or should you wish to meet with [name of partners at the firm] to discuss this in person, please let us know”.
The goal here was to get the conversation started. By starting conversations with our clients and prospects we are able to set ourselves apart from other legal vendors who were also sending out emails on updates to carry. This effort cost us a little more time since we did end up visiting a few handfuls of clients and prospects and our partners had a few telephone conversations arranged. However, the reward of being able to develop our relationship with existing clients and gain further credibility and drive forwards our relationships with prospects far outweighed the extra time investment. The lesson here is how you use your marketing directly impacts your efforts in long term value creation. Sending out generic client alerts, or sponsoring events without having a plan on how you will generate an actual return from any such investment does not help you or your firm’s effort in achieving long term value creation.
Creating long term value draws on the various interactions of relationships, markets and marketing to work together. Managing how you promote your business, and navigating your efforts to ‘sell’ over the long term, all the while adding value to your client’s business, and of course your own, requires planning and a commitment that remains systematic, relevant and which can never be put on hold to attend to ‘more pressing matters’. Creating long term value is not something you do intermittently, it is something you do consistently.
Opportunities are up for grabs and many are being overlooked. So, what are you waiting for? Allow Autem to be your growth accelerator.