As the American writer Shirley Lord once said, “What really matters is what you do with what you have”. This could not be more pertinent for business developers in law firms today.
A 10% increase in turnover for a full year is a reality for any firm achieving the Holy Grail of a sustained cross-selling campaign. By cross-selling, I mean the consistent and successful sale of a professional service firm’s other skills to a single client. That client can be a corporate entity, a group or an individual – in the course of a year, any one of those entities is bound to require more than a single service offering from you, its lawyers, accountants or other advisers.
But why is this the Holy Grail? Why is it that so many firms fail to achieve any significant planned level of cross-selling?
In my experience, the senior management of a law firm, be it at executive or departmental level, believes that everyone has the skill and the duty to cross-sell. It is also my experience that a successful cross-selling campaign requires management, drive, support and, most importantly, measurement.
So why should a professional service firm embark on a form of cross-selling initiative?
Firstly, let’s take a moment to look at the cost structures of most professional service firms. My partner, Barry Wilkinson, holds the view that every firm can be broken down into the following categories:
2. Staff costs.
3. Professional indemnity.
With the exception of marketing and staff costs, which are variable, all the other costs are fixed.
Therefore, and bearing in mind that most staff are now operating with a reduced workload in this recession, anything that can be done to increase the top line of sales is going to have a fairly dramatic impact on the bottom line of profitability – especially if this can be done without increasing any of the marginal costs. The obvious candidate for this is to sell additional services into your existing client base, otherwise known as cross-selling.
The second reason for embarking on a cross-selling initiative at this time of decreased general demand is because, generally, a sale made to an existing client is a comparatively easy win. The firm has already established a level of trust with the client from the work that has been previously undertaken and, assuming the database has been properly maintained, they already have the contacts with whom the conversations can be initiated to establish the client’s needs.
It is my experience that during a downturn in commercial activity, it is barely and rarely economical for a firm to go out and target new work from new clients/prospects. There is usually only one primary reason why a potential client looks at changing advisers during this time. That is because they are looking to cut their costs on professional advisers (although I do acknowledge that there are occasionally service issues or a requirement for a new service that cannot be provided by the incumbent supplier that could lead to the opportunity for tendering to new work. Incidentally, this is where the importance of vetting opportunities to tender becomes so critical. Firms must resist the desire to respond to every invitation for a tender, and only accept those where the client has a genuine new need for new work, and is not simply motivated by the desire to cut costs.)
Last but not least, during this period of recession winning new work has a great morale-boosting effect on a firm, even if that new work is from existing clients. The importance of staff morale should not be underestimated when it comes to pulling a firm through tough times, and keeping staff turnover to a minimum when good times return.