“I cut my staff by nearly 40% and my marketing and advertising by two-thirds. I had no choice” This was a comment I recently received from the owner of well-known law firm that employed around a dozen people prior to COVID-19. Sound familiar? Unless you are currently practicing estate planning, family law or bankruptcy, this might sound familiar to you. And if you plan to grow your practice over the next decade, you should also know that this line of thinking will only hurt you. Why?
BECAUSE MARKETING WHEN THE ECONOMY GOOD IS COMPETITIVE, BUT MARKETING WHEN THE ECONOMY IS BAD IS AN OPPORTUNITY
The last recession in the US happened in 2007-2009 and was referred to as the “great recession” due to its severity and 5.1% decline in GDP. At the time, subprime mortgages began failing and took major financial institutions down with it. It was during the trough of this great recession that I started consulting law firms on marketing and advertising. At the time, my advice was simple: “Be fearful when others are greedy and greedy when others are fearful.” This was good advice provided to me by arguably the most successful stock investor in history: Warren Buffett. But why is such simple advice so hard to follow?
BECAUSE MANY ATTORNEYS ARE NOT BUSINESS DISRUPTORS, THEY ARE FOLLOWERS
I can’t tell you how many times I initially heard an attorney ask me what the “other guy” is doing before they decide what is best for him or her. This is where I have to level set the attorney so they can clearly understand that what their emotions are telling them is different than what logic should dictate. It is not hard to turn on the news these days and become very fearful of all the headwinds facing us and as we know, fear causes indecision, reduced risk-taking, and causes us to retreat – all natural human reactions. But good business people like Warren Buffett use this to their advantage while bad business people do not. The trick is to recognize that fear in your competition can become a strong opportunity for you but ONLY if you truly see the opportunity for what it is and what we now know about the US economy…
WE ARE IN A RECESSION THANKS TO COVID-19…BUT FOR HOW LONG?
The traditional definition of a recession is at least two consecutive quarters on declining GDP. In June 2020, economists officially announced we are in a recession…which was not a hard sell when you are quarantined in your homes for months on end. Despite COVID-19, some would argue we were overdue for the next recession since it had been over 10 years since the last one – a little longer than usual. But this recession is clearly different, and everybody wants to know when it will end? Will it be like the Spanish Flu of 1918 and last over 2 years (without a vaccine) or will we find a vaccine before a possible flare-up again this winter? Unlike other recessions when we were encouraged by our government to “go out and consume,” the popular answer to fighting COVID-19 absent a vaccine is the opposite: to stay at home and away from other people. And even if we develop a vaccine, how long will it take to distribute it to over 320 million Americans and worse yet, will they even take it? Recent reports indicate that fully a third of all Americans indicated that they WILL NOT take a vaccine even if it is developed. Which leads most attorneys to this fundamental question…
HOW CAN I MAKE MONEY NOW?
Most attorneys know that the legal industry is not a monolithic business model. Rather, one of the first lessons I learned was that the legal industry is a combination of many different business models operating under a legal umbrella and subject to differing changes in business cycles. Back when I started working with attorneys during the great recession, some of my most successful clients were ironically in many of the same practice areas that are now trending upward as a result of COVID-19. What is unique with about COVID-19 recession however is the rapid emergence of estate planning, family law and the rapid decline of personal injury. Bankruptcy tends to be highly cyclical as well but due to the suddenness of the economic decline and fluid government safety nets, bankruptcy, employment law and domestic violence appears to be ticking time bombs just waiting to rapidly trend up. Due to record low interest rates, real estate law is also trending higher but will most likely trend highest in those areas that will benefit most from the pandemic migration shift in the US which could continue for months and even years. So, the winners and losers from all this seem to be coming clear but as we saw last spring, anything can change. Which leads me to my best advice…
NOW IS THE TIME TO TAKE MARKET SHARE AWAY FROM YOUR COMPETITION
As the client quote at begging this article demonstrates, many law firms responded to the effects of COVID-19 by laying off staff and cutting their marketing budgets. “How can we maintain our overhead if our case load is down?” they would respond. My answer? Simple…Don’t cut your marketing budget, let your competition cut theirs. Why? Because history clearly shows that businesses that cut their adverting and marketing during economic downturns result in both immediate and long-term declines in sales and profits. Conversely, those businesses that either maintained or increased their marketing budgets during a recession significantly growth market share and growth both during and in the years following the decline by as much as 256% over their competition! Ever since the start of COVID-19, I have tracked precipitous declines in attorney demand for TV, radio, social, and digital ads. The result in many instances has been purchasing power and marketing reach for a fraction of the cost attorneys were paying only 6 months ago. Why? Because many attorneys reduced or stopped their spending (demand) leading to an abundance of supply at heavily discounted rates. Now, some attorneys would respond that the rates were so low because there were fewer clients and cases to attract and to some degree, they are correct. But this leads me to an important question you need to ask yourself…
ARE YOU TRYING TO WIN A BATTLE OR WIN THE WAR?If you are planning to retire in 2 years, you can skip this section. If you aren’t, then you need to remind yourself that successfully growing your practice is a war and this war is typically fought for years and decades and not every battle can be won along the way. If you are addicted to direct-response “demand fulfillment” marketing (i.e. Google Pay-Per-Click and buying leads) then you know the minute you turn off the spigot, you have little/no asset value to continue to grow your practice. You are literally at the mercy of your vendor/s and what they alone can continue to provide you. Conversely, smart firms know that marketing is all about demand fulfillment AND demand generation meaning that their goal is to establish a dominant market presence at each step in the clients’ buying journey. This process requires a more long-term vision of this process that will transcend and even take advantage of recession buying opportunities when they arise – not retreat from them. That is why studies have clearly shown us that businesses that market the most during recessions end up winning the war in the end. The same principle applies to your law firm business as well. Which takes me to the question I receive the most…
HOW MUCH SHOULD YOU SPEND ON MARKETING?
As I have previously written and spoken about countless times, law firm marketing budgets are based on three primary factors: Practice Area, Market Competition, and Growth Objectives. To keep it simple, I typically advise firms to start their marketing budgets at 10% of their EXPECTED revenues and adjust accordingly. Why? Because the firms I have worked with over the years that grew the fastest and had the highest ROI spent around 10% of the annual revenue on marketing across all practice areas. The good news about COVID-19, is there is such a thing, is the fear that remains with many of your competitors which means if you buy right, you can get a lot more with that 10% than you could 6 months ago. In some instances such as with personal injury, bankruptcy, domestic violence, etc., you may not see the full benefits of this spending until well into the months and years ahead but you need to remind yourself that you are investing in the long-term growth of your practice and not just what you can salvage out of today’s anemic economy. The attorneys I know who understand this best are actually increasing their budgets – even at the expense of furloughing and/or reducing staff to help make ends meet when needed. Ironically, I saw this happen during the last great recession with a number of firms I worked with and they are now many times larger than they were then and their competition that decided to cut back have all declined.
SO, WHAT SHOULD YOU DO NOW TO IMPROVE?
If you haven’t done so already, this is a great time to take stock and update your marketing strategy. Most firms today are falling behind on the latest and most effective marketing technologies and mediums and if you don’t already have a marketing strategy in place with a long-term, goals-based view, well, now is the time to get started. This is the first point of failure for most firms for if success doesn’t have clear goals and objectives, then you are only left with dreams and that is the worst way to plan for business success.
Next, once your plan is in place, assemble all the resources you need to successfully compete and win. Remember, “successful” attorney marketing has become very complex and the old days of relying on a single jack of all trades person who can “do it all” is a recipe for disaster. Attorneys become proficient in different areas of the law for a reason and marketing has followed the same path so assemble the best “team of experts” that can help you outperform your competition both now and moving forward.
Finally, remember that no matter how high or low the economy appears at any one time, Warren Buffett has proven that if you do the opposite of the emotional business reactions of others, you can and most likely will come out ahead. “Be fearful when others are greedy and greedy when others are fearful.” So the next time your competition tells you that they “cut their staff by 40% and their advertising and marketing budget by two-thirds” in response to the economy, you will know that NOW IS THE TIME TO BE GREEDY…in a good way that is!
NEED HELP IN GETTING STARTED OR HAVE ADDITIONAL QUESTIONS? FEEL FREE TO CONTACT ME TODAY FOR MORE HELP:
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