How can the Pareto Principle benefit your law practice?

pareto principleThe Pareto Principle (also known as the 80/20 law) essentially states that 80% of the effects result from 20% of the causes. The ratio could be skewed in some situations to 90/10 or 95/5, but the idea is the same. Here are a couple of applications of the rule for your law practice that I want you to consider:

  • 80% of the revenue of a law firm come from 20% of the clients
  • 80% of the complaints and headaches of a law firm come from 20% of the clients

In other words, if you have 20 clients on your roster, the majority of your revenue is going to come from 4-8 of those clients. In addition, you are likely to have a couple of problem clients that cause you the most headaches in your firm. The hope, of course, is that there is no overlap between these two groups!

How can I put the Pareto Principle to work in my law practice?

For starters, you need to know who the top 20% of your client’s are. Put together a list of your client’s and start the ones that give you the most pleasure to work for or are producing the most revenue for your firm (hopefully these people ARE one and the same). These are known as your “A” clients – you want more of these. Going forward, you want to focus your efforts and attention on these clients. They will get the best possible service from you and your firm. Your goal is to turn them into raving fans or mavens so that they will go forth and spread the good news of your firm to everyone they know.

Now, take a look at this same list and put an X next to the people who are your biggest headaches. As lawyers, we all have these clients. They are the people who call you everyday, have unreasonable expectations, and demand constant attention and hand-holding. Assuming for a moment that none of the people on this list also have stars next to their name, you need to get rid of these clients. Nothing good is going to come from your relationship with these people. Let them be a headache for some other lawyer. You may need to give them some of their money back – that’s ok. You will fill the void with better, more enjoyable clients that you actually want to work with.

What to do if some of your best producing clients are also your biggest headaches?

This is a huge quandary of sorts. There is no doubt you will in fact see some overlap on these two lists. You have to weigh the amount of revenue this person produces for your firm with the size of the headache that you are willing to work with.

Sometimes, especially in my chosen practice – family law, the problem is not the client, but rather with you as the attorney not setting clear boundaries. There are a couple of things that I have done which have helped to resolve issues with problem clients.

  1. I stopped taking unscheduled phone calls unless it is a potential new client and my assistant is unavailable to handle the call (i.e. she is on vacation). This sounds harsh, but the way I present it to clients in a way that they understand and actually appreciate.
  2. I stopped checking email every 5 minutes. Email gets checked at the end of the morning and at the end of the day. At those times I respond to any quick items that don’t need a lot of time and forward on any action items to my task list. I use a lot of filters and plugins in conjunction with Gmail to keep unwanted email out of my inbox. It gets filtered to other folders for me to check later.
  3. I am very careful and selective about the clients that I let into my practice. One of the best ways to eliminate problem clients is to not take them in the first place. Refer them to other lawyers. You are trying to build a successful and entrepreneurial law practice – these headaches will only keep you down.

These three adjustments to my practice have truly changed the amount of work I am able to get done on any given day, and have helped to eliminate the problem clients from my practice. They are still there, but they have been trained that they can only reach me if they schedule a phone conference, and they know that I only check email a couple of times a day. To date, I have never had a client fire me for either of these practices (and honestly, I doubt it will ever happen).

Many young lawyers are scared to turn clients away – don’t be. Sometimes it is the clients you DON’T take that will define your practice.

Don’t forget to follow me on twitter @jwhart518.

Comments? Questions? Want to share a story about how you have implemented the 80/20 rule in your law practice? Feel free to comment below.