“No Decision”The Blind Spot

that Prevents Lawyers

from Doubling Their Income

Craig Levinson Mike O'Horo

The 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.

There are many, many things lawyers can and should do to increase their business development effectiveness. We built the RainmakerVT suite of virtual learning tools to help you do that.

Here, we’re going to share the Big Secret that makes the difference between frustration and success. Please read on.

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Only 2 Ways to Increase Revenue

1. Increase the number of sales opportunities

2. Convert a higher % of opportunities into sales

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Option 1: Create More Sales Opportunities

Most lawyers go this route. Creating more sales opportunities can be done, but it's expensive, and often pointless. If you’re not converting the opportunities you have now, how will having more leads that you fail to convert help you?

opportunities. If I had 14 opportunities, I double my business even if I’m no better at selling.”

Your logic is flawless. However, it ignores two critical factors:

• Time• Money

When it comes to marketing and sales, most lawyers find they have a shortage of both.

Worse, since you have no idea where the first seven opportunities came from, you have no idea what it takes to get seven more.4

“I’m converting only one out of seven

How Much Does It Cost to Create More Opportunities?

Law firms don't track such things, so lawyers can only guess at their closing ratios or cost-of-sales.

Two of the premier consulting groups in the legal industry took an informed stab at estimating it, based on anecdotal evidence they collected over the past two decades. They put the Cost of Client Pursuit at between $35,000 and $100,000 -- to get a client with annual fee value between $100,000-200,000.

Surprising, isn't it? What could make it so expensive?

Because it’s an average. Like venture capital, the investments that pay off have to cover the ones that don’t.

When you spend three years “developing a relationship” with people in a company, win or lose, that cost becomes part of your average Cost of Client Pursuit.

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So, let’s take a closer look at what it means to increase the number of opportunities.

At the midpoints of the consultants’ ranges, you’ll spend $67,500 to acquire a $150,000 client. Operating overhead is 60%, leaving a 40% gross profit ($60,000). As you see, you lose money on this client Year One. Unless you keep it for multiple 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 -7,500

Any or all of these numbers may be higher or lower, and some of the cost-of-sales total may be part of overhead. That’s not important.

What’s important is, if your overhead is under control, there’s only one remaining variable that you can influence: Cost of Sales.6

2. Convert a Higher % of Opportunities into Sales

We said that one factor determines your Cost of Client Pursuit beyond all others.

It’s called the “No Decision” Factor.

Years ago, a landmark Ohio State University study showed that, in 30% of selling situations, nothing is purchased. This figure is for full-time, professional salespeople. Since lawyers are part-time, relatively inexperienced salespeople, the percentage of opportunities in which they lose out to “No Decision” has to be even greater.

Why is eliminating “No Decision” so important?

Simply, no matter how hard you try, how skilled you get, how diligently you develop relationships, nearly one-third of those who might have hired you will NEVER make a decision that leads to any law

Unfortunately, lawyers have no way to know which one-third that is. Until now.

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firm being retained.

Fur Coats in the Desert

Imagine that you sell fur coats over the phone. You’re working from a list of high-income people who’ve bought other luxury goods by phone.

You’re working hard, making the calls, extolling the merits of your coats. Results are poor. As you struggle, you might start thinking there’s

capability.

You’d be partially right, but not for the reasons you think.

What if, unknown to you, a third of your prospects live in Phoenix (assume it's an auto-dialing system where you can't see area codes). What if nobody you called in Phoenix thought to tell you where they lived, assuming you knew?

You might spend years calling those people, trying to cultivate relationships with them. You might even cultivate some and make some friends. But it won’t make any difference in your real sales problem, which you don’t even know about.

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something wrong with the coats, price, or sales

Most people in Phoenix don’t have to make a decision about a fur coat. Yeah, maybe there’s a case for owning one during a handful of cooler nights during the Winter, but does it really matter if they have one or not? Will they be unable to survive the Winter without one?

Endless Pursuit

Without a way to discern each prospect's location (and not even knowing to ask about it), you’ll continue to sink time, effort, and money drilling “dry holes,” with no chance to succeed.

You’ll waste time and effort that could be directed toward live prospects in Chicago, Toronto, and Boston.

Worse, you won’t have any reason to stop calling the Phoenix people, so your selling cost becomes infinite.

That’s why we find the $35,000--$100,000 per client pursuit figure believable. Lawyers call on people who don’t have to make a decision, sometimes for years, despite no chance to win.

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It Can Be Very Simple, If You Let It

For lawyers, eliminating “no decision” isn’t as simple as asking prospects where they live, but it’s not much more complicated.

There are two simple processes that, combined, will painlessly eliminate “No Decision prospects” and enable you to replace them with viable opportunities.

Before we explain those, let’s see why it’s so important. Chart A shows the profound effect eliminating “No Decision” has on net revenue.

Chart A30%

No-DecisionNo-Decision Eliminated

Gross Annual Pipeline Value of 100 Prospects in Pipeline

20,000,000 20,000,000

Less No-Decision Factor 6,000,000 $0

Net Pipeline Value Less No-Decision Value

14,000,000 20,000,000

Closing Rate (40%) 5,600,000 8,000,000

Cost of Sales ($35,000 x 100) 3,500,000 3,500,000

Net Revenue 2,100,000 4,500,000

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Chart B shows how a 50% increase in the number of opportunities has less of an effect on Net Revenue than does eliminating “No Decision.”

30% No Decision

Pipeline30,000,000

Less No-Decision Factor 9,000,000

Net Pipeline Value Less No-Decision Value 21,000,000

Closing Rate (40%) 8,400,000

Cost of Sales ($35,000 x 100) 5,250,000

Net Revenue 3,150,000

Eliminating those who won’t decide anything increased revenue by 43% compared to having 50 more prospects in your pipeline. By eliminating “no decision,” you eliminate spending $35,000 on each of them. That’s where the increase comes from.

So, forget about increasing your pipeline. First, shrink it. Here’s how to do just that.

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Gross Annual Pipeline Value of 150 Prospects in

It’s All About Decisions

Law firms are implementing best practices in Management, Operations, and Information Technology. To maximize revenue and PPP, it’s equally important that they embrace modern Business Development methods.

To do so, it’s critical to teach their lawyers the “No Decision” concept and application.

First, understand that humans only make the decisions they must make. Because decision-making involves risk, we delay until we can’t any longer, because the consequences of not deciding are greater than the risk or discomfort of deciding.

Here’s an illustrative exercise we used for years in our workshops.

We’d ask, “By show of hands, how many of you are reasonably confident that some day you’ll die?” Chuckling, everyone raised a hand. Next, we’d say, “Keep your hand raised if you’ve already made arrangements your personal beliefs

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prescribe for that certain outcome.” Every time, at least two-thirds of the hands came down.

Our capacity for delay and denial is limitless.

Measured against our denial behaviors in the face of an acknowledged certainty, how do we convince ourselves that, just because a prospect could or should do something about a problem, that he or she will?

In business, “No Decision” primarily results from selling against a problem whose impact its stakeholders perceive as sufficiently low that they have 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

Alignment

Definitions:

• Stakeholders are people who have professional and personal reasons to care about the decision under consideration, i.e.,

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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

quickly reveals whether or not the other key stakeholders in the decision share the champion's 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

and have nothing to do with us.

(The CoDN process is critical when evaluating the validity of formal selection processes, such as

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internal “Champion” through a process that

reasons, that relate solely to his/her self-interest

“beauty contests,” many of which are set up merely as a lever to get incumbent law firms to lower their rates or grant other concessions. They are rarely legitimate opportunities for non-incumbents.)

Exposing the Cost of Doing Nothing: A Real-Life Example

Jim works at a 15-lawyer firm in Charleston, South Carolina. He handles all of the litigation matters for his client, XYZ Technologies, also based in Charleston.

Catherine is XYZ's General Counsel. She retains six small-to-medium Charleston law firms, each for a different legal specialty. She uses one prestigious New York law firm (which she inherited when she took the job four years ago) for all of XYZ's corporate work.

Lately, Catherine has complained about the “outrageous” rates charged by the NY firm. Jim's instinct, which is typical, is to approach Catherine and say, “I know you're not happy with the rates the New York firms are charging for your corporate

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work. We can do that work just as well for half the price. 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 Jim's 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 doesn't have to decide, “No Decision” wins again, despite whatever earnest effort Jim and his competitors make.

Fortunately, Jim resists his instinct. Instead, he embraces a disciplined, Cost of Doing Nothing investigation.

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Jim approaches Catherine.

“Catherine, I know you're not happy with the rates the New York firms are charging for your corporate work. Everyone's probably telling you that their firm can do the same work in South Carolina for much cheaper. Whether or not that’s true is irrelevant. Which SC firm is the best choice is the wrong question. Until you decide whether or not it’s in your best interest and a good decision to move to move the work away from NY, you don’t need any SC firm. Wouldn’t it be more helpful to set aside parochial interests and help you evaluate the real issue?

For now, forget about which Charleston firm you might retain if you decide to make the shift.

We're your advisors. Why don't we sit down – and this is completely on the house – and let me help you gain some clarity about whether it's in your best interest even to consider taking this business away from the NY firm?”

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A Respectful Approach

A Simple, Reliable Process that Clients Appreciate

Jim asks five simple, direct questions that reveal the strategic, operational, financial, and emotional

NY to SC. This process results in the client assigning a dollar estimate of how much money they would save (or make) each year by taking the action being considered.

Catherine says switching firms could easily save XYZ $400,000 per year.

With $400,000 per year in savings, switching seems like a no-brainer, right? Not necessarily.

Jim has only explored one category of impact – financial. People don’t make decisions solely for financial reasons.

Do we always buy the cheapest house, car, stereo -- or doctor, or accountant? Money is important, but it’s only one factor.

Let's look at the rest of the picture. 18

impact of shifting XYZ's corporate work from

Even if the perceived economic impact is a huge multiple of the likely cost of the solution, Jim cannot assume that it constitutes an imperative to act.

Only insiders at XYZ know whether $400,000 per year justifies going through the offsetting operational, strategic, and emotional costs of switching firms.

As the collaborative investigation continues, Catherine admits that she's not particularly fazed by the hassle of switching firms. It's a bit of a hassle, but she's done it before with little interruption to the day-to-day workings of her department.

Jim's questions raise a red flag, however, and they help Catherine crystallize the fact that she has some real concerns regarding her job security.

Yes, she'll be a star for saving the company so much money, but she admits: “I can't seem to shake one concern – the fact that I'll be the sole person responsible if the Charleston firm screws

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up the corporate work. I guess I take comfort in

the fact that I'm safe if the incumbent NY firm screws up, because I didn't hire them.”

Jim now sees clearly that the negative personal, emotional impact on Catherine will very likely continue to trump the positive financial impact of making a switch.

Jim tests this by offering what seems like an obvious conclusion, "Catherine, it sounds like there's no way you can accept the risk of switching. Am I hearing you correctly?" It's always wise to test apparent "deal-killers.”

Contrary to traditional law firm thinking, this a significant win for Jim.

Catherine has confirmed that, at least for now, trying to cross-sell the corporate work has no chance to succeed, and Catherine certainly won’t welcome such an attempt from Jim (or anyone else).

Jim has avoided drilling an expensive "dry hole." Rather than wasting time on that, he can now focus on more legitimate opportunities.

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By doing so, he's also earned some goodwill, and reinforced his standing as a valuable advisor to Catherine, one who will subordinate his own interests in favor of helping her solve her decision problem.

Finally, while Catherine wastes time and energy fending off the other Charleston lawyers trying to get the untouchable corporate work, when Jim calls, he’ll always be welcome because she’ll know that it’s not a pitch.

Results

Facilitating 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.

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Contrary to what you may hear from old-school sales trainers, aggressively pursuing a sale is not the most effective way to get hired. Helping a prospect make a good decision is.

If you're the lawyer who helps a prospect come to the realization that the CoDN is too high – and that he or she must take action – you've delivered real value, and you’re well positioned to land the business. After all, if, as a result of your guidance, the prospect got sufficiently comfortable to reach a decision, which is she more likely to do? Hand it to the lawyer who helped her figure it out, or go shopping, hoping to find another lawyer in the hope that he or she has an equal grasp of the problem?

There’s no way to know for sure, but we’re pretty confident that we know which way to bet.

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Summary

Here are the advantages of eliminating “No Decision”:

• Frees time and money to replace “No Decision prospects” with viable prospects

• Immediately ends cost-of-sales, and reduces the firm's overall cost (see Chart A)

• Helping a client make a good decision is the

way to cross-sell other services, reducing the firm's 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

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