Corporations measure profitability using a price-to-earnings ratio, dividing the stock price by earnings per share. Law firms are businesses, but they are not typical businesses so typical models don’t apply. Traditionally, law firms are privately held partnerships. Lawyers are the product, and clients pay for the service of legal advice and representation. 

Because the legal industry has its own business model, following the same old advice about how to increase business profitability doesn’t work (anymore). Instead, law firms look at strategies that are unique to profitable law firms. 

How Do Law Firms Measure Profitability? 

Profitability depends on two factors (for firms big and small): 

1) how many clients the firm brings in (and retains) 

2) how many costs can be cut

Direct Profit

Direct profit is built by getting more clients, charging bigger retainers, and winning large settlements. The more successful a firm is at these things, the more likely they are to gain even more retainers and clients. 

A firm that consistently increases profits by demonstrating success in these areas also attracts the attention of lawyers who come with a book of established clients. 

Indirect Profit

Profit is about more than counting billable hours. Law firms increase profitability indirectly by creating value that in turn covers costs. This allows them to assume greater risk, and greater risk ultimately translates into greater profit. 

Modern Strategies for Increasing Law Firm Profitability

Let’s look at five of the best ways to increase the profitability of your law firm in 2021.

1. Track Billable Hours Better 

There are a few common ways that firms leave billable hours on the table. Inconsistent billing practices cause major issues, so it is vitally important to develop a consistent system of tracking hours and billing clients.

If your partners or associates have gotten lax about meticulous billable hours tracking, you may need to send out a refresher that helps them understand the importance of tracking hours accurately and quickly. Look for apps that make tracking hours a matter of a few swipes on a smartphone.

2. Look for Emerging Niche Practice Areas

The legal landscape is always changing, and there are changes in what individuals and companies need when it comes to legal services. Who on your team keeps track of trends and consistently seeks out new opportunities to develop expertise? 

This is an essential question: What kind of legal work do people need in 2021 that they didn’t in previous years? 

The Canadian Bar Association wrote about niche legal markets way back in 2009, pointing out that lawyers were finding unique practice areas, such as “animal law, dental law, international adoption law, cottage law, and elder law.” Now, more than a decade later, there are even more opportunities for representing the unique interests of unconventional clients.

If you are among the first firms in your area to provide a niche legal service, you will also be the first to expand on that boutique offering if it proves successful. That means you get to charge more because you provide a premium service that clients can’t get elsewhere. 

3. Outsource Non-billable Work

When you are looking at your firm’s workflow, ask yourself: can someone else do this cheaper, faster, or more effectively? 

If so, outsource! Stick to your best and delegate the rest. We recommend outsourcing administrative duties, marketing, sales, HR, and Managed IT Services. When you outsource these areas, your associates, partners, and administrative staff focus on the most important tasks at hand: finding and retaining clients and winning cases. 

4. Get Feedback from Your Clients

Do you know if your clients are happy with the services you provide? Do you know if your clients plan to return to your firm the next time they need legal representation? What about referrals—will they refer you to their friends, colleagues, and contacts? Why or why not? 

Client feedback is incredibly useful for retargeting clients as part of a marketing strategy. Remind past clients of the excellent services that you provided. 

5. Use Technology and Go Virtual

Use technology to stay competitive. Improve your firm’s systems by choosing a Managed IT Provider with a proven track record—let lawyers focus on law and let MSPs manage IT. 

A Managed IT Service Provider takes care of your firm in three main areas:

When you choose a Managed IT Provider, you save on payroll while also minimizing losses from things like cyber attacks. No staff hours are lost to solving IT crises or managing your digital cloud. 

The world has gone virtual. Law firms offer virtual services. Don’t be the last firm to get on that bandwagon. It’s time to increase your profitability, starting with your technology infrastructure.

Check out Vertex’s Technology Checklist for 2021

Vertex provides Toronto-area law firms with exceptional Managed IT Services. We’ve put together a Technology Assessment that points out your strengths and weaknesses when it comes to using technology to increase profit margins. We’re excited to tell you more about how Managed IT Services can increase law firm profitability in the coming year. 


We also provide a no-obligation full assessment of your technology situation to identify gaps. Get in touch with us today to discuss how we can support all of your IT needs.