Market Your Law Practice Like a Startup

The other day I responded to a question on /r/lawfirm (for the uninitiated, that’s a Reddit group) and it was pretty well received, so I thought I’d clean it up a little and post it here.

Before I do, I should point out that the ideas I present are from the Lean Startup philosophy. The term “Lean Startup” is taken from Eric Ries’s book of the same name, and it has become something of a bible in the world of technology entrepreneurs. So much so that it would be difficult for tech startups to attract investment if they were not following Lean Startup principles.

If you run a practice or otherwise have a management interest in a law firm, I highly recommend that you check out Ries’s book and/or Ash Maurya’s companion, Running Lean.  I recently presented a CLE to 40+ person group of small firm lawyers and was shocked (but not necessarily surprised) to hear that only two people in the room had ever heard of the Lean Startup since it is so popular in the business world. Check it out; you’ll start to realize the benefits of the approach almost immediately.

So the question posted to Reddit was this:

I’m taking a loan out to finance marketing for my solo criminal practice. I’m borrowing around 12K and I want to invest it one or two of the following mediums: pay per click (Adwords), seo, mailers, or bar bathroom ads. I have a basic website already.

I handle DWI’s so the bar bathroom ads might make sense. I’m planning on spending between $1500-$2000/mo and I will do that until the money runs out. I just hope business will pick up enough by then to continue to fund my ad campaign from the legal fees I generate.

How would you spend the money (think marketing only) if you were me? Which do you think would provide the best ROI. I’m in Houston by the way, and the market is competitive.

My response (slightly edited from the original) follows:

Spending money on marketing is great. Shooting money out of a shotgun is folly. From your post, it is hard to tell which you are about to do but I suspect the latter (“I just hope…” is a dead giveaway).

Marketing is important and useful and hopefully lucrative, but you need a plan. Here’s a suggestion:

Step 1: You must form a reasonable hypothesis about the ROI for your marketing spend.

That means you must know, at minimum:

(1) What is your typical value for a single client or matter?

(2) How many times does your phone ring before you land a client? (In other words, what is your conversion rate for phone inquiries? Same for emails or texts if those are ways that potential clients reach out to you.)

Let’s say you average $5,000 for a DWI case, and you convert 1 of every 10 phone calls into a paying client. You should technically be willing to spend up to $4,999 on marketing to generate 10 phone calls. That’s a pretty poor ROI, but it is still a positive return. (You can worry about relative ROI later when you have more actual information.)

If you don’t have good information about your client/matter value and conversion rate, then you should spend money and/or time and/or effort on measuring those before you spend a dime on external marketing. Go back through your closed cases to do the math on what your average client/matter value is, and also understand your deviations from that average. Keep track of your prospective client inquiries and (or go through your records if you have them) and see what your conversion rate is. This will give you at least a rough idea of what you should be willing to spend to generate phone calls.

Step 2: You must capture and measure actual data on how well a particular marketing effort performs.

So you know you should be willing to spend up to $4,999 to generate 10 phone calls, but how do you know that the medium you choose (AdWords, Bathroom Ads, whatever) will actually generate those 10 calls? Of course the people selling you those ads will tell you how great they are, but that’s their job. You don’t know for sure whether they will generate 10 calls for you. You also don’t know whether the 10 calls from one marketing channel will be of equal quality to 10 calls from your current channels. So you need to run a test.

I’ll use Bathroom Ads as an example since the complexity of choosing search terms for AdWords adds another layer of complexity (the design of the Bathroom Ad also introduces variability, as does placement of the ads, but we’ll touch on those later.) What you have today is a dearth of valid real-world information about the performance of bathroom ads for your marketing purposes, and you should be willing to spend a small amount of money on a small test to improve that information.

So come up with a hypothesis about how well you expect a bathroom ad to perform. Let’s say that based on the sales pitch you’re getting, plus the experience of others, you expect a small campaign to generate 25 phone calls in a month. Design a good-enough bathroom ad and spend your $1500-$2000 monthly allotment to place your ad in a reasonable number of establishments (not too many, not too few) for that one month. (And BTW, do this before taking out that big loan if at all possible).

Once that ad is placed, you need to become a scientist. You’ve established a hypothesis about your ad’s performance, and you are now running an experiment to test the validity of your guess. That means tracking the phone calls that come in from your ad and distinguishing them from your regular call traffic. Then you need to measure the performance of your ad. How many calls does it generate? Do those calls have the same conversion rate? Do those conversions generate the same quality of matter/client as your existing channels? None of this is very hard to do, but it does take a little planning and discipline. It is worth it.

The goal isn’t necessarily to prove or disprove anything, the goal is to get real knowledge about the real world performance of you marketing campaign.

Step 3: Make changes based on the new information you’ve learned and form a new hypothesis to validate the impact of those changes.

Say you hit your original hypothesis spot on: Your ad actually generated 25 phone calls and you get 2 new clients/matters out of it (consistent with our 1 in 10 average) that are of the same quality as your typical clients. That means you just spent $2,000 to earn $10,000. Seems like enough information to justify buying another month’s worth of ads.

You may even be tempted to expand the ad-buy to more bars or restaurants and I think that would be OK (after all, you have an extra eight grand to play with—who needs a $12k loan?). But before you do that, you should make a new reasonable hypothesis about what expanding that campaign will do. E.g. I plan to double my Bathroom Ad spend to $4k in order to double the number of locations for my ad. I therefore expect to generate 50 calls instead of 25 and land 5 new clients instead of 2. Then measure. Wash. Rinse. Repeat. (Or Plan. Do. Check. Act. if you’re into Demming)

But let’s say your original campaign falls short of your expectations (which is entirely likely). Now you’ve got some additional hypothesizing to do. Maybe your ad design/copy wasn’t good. Maybe you bought ads in the wrong bars. Maybe Bathroom Ads don’t actually work for you. You need to learn which of these is the case, and that probably means running another experiment.

If you think your ad was poorly designed, then get a new design and run your initial experiment again. Or if you think location was the problem, try a different mix of bars, or whatever. Just make sure you establish a new testable hypothesis about how your new campaign is going to perform and then measure the actual results of that campaign to learn whether your hypothesis was correct.

Step 4: Repeat.

Do this on a very small scale a few times to get yourself familiar with the steps you need to take to obtain validated learning about the effectiveness of your marketing campaigns. Once you get better at it, you can start to introduce some additional tools like A/B tests to accelerate your experiments (and therefore your learning).

In this way you will fairly quickly zero in on what works (and what doesn’t) for your practice and you will be able to spend your marketing budget intelligently. You also will more quickly generate a positive return on your marketing spend, which means that you can buy new marketing out of your positive revenue. Then you won’t have to put yourself into debt to finance a shotgun approach where you “hope business will pick up enough by then to continue to fund my ad campaign from the legal fees [you] generate.”

TL;DR Before taking out a $12,000 loan and buying a bunch of marketing to throw at the wall to see what sticks, spend a small fraction of that amount on a targeted campaign, test your assumptions about how well that campaign worked with actual data (i.e. measure your ROI), and then spend another small amount on a new campaign that is improved by your new knowledge. Test your assumptions and measure the ROI of that new campaign to gain more new knowledge… And so on and so on.

One more thing: All of this assumes that generating phone calls is the actual reason you aren’t making more money. Test that assumption too. Maybe you should be working on improving your conversion rate (people aren’t buyin’ what you’re sellin’). Maybe you should be working on getting higher-value cases. Maybe your workflows are poor and it takes you too long to process your cases (i.e. you could handle more cases if your processes or systems were better). I’m not saying any of these is true, but they have as good a chance at being true as any other thing you think you need to do. You won’t know for sure until you acknowledge that you’ve made an assumption, come up with a reasonable hypothesis about that assumption, and test it!

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