What’s Wrong with Law Firm Marketing Budgets


Friday, October 23rd, 2015
By Gideon Grunfeld


How much would you spend to promote a service that generated a $500,000 profit?

There isn’t one single correct answer, but so long as you didn’t have more lucrative options, it certainly wouldn’t be irrational to spend $100k in marketing to generate such a profit.

Too many aspects of law firm marketing and budgeting aren’t evaluated in terms of their projected or actual returns. Instead, law firms create preferred and forbidden zones of marketing that often have no relation to the returns they generate.  A partner wants to take someone out to lunch or dinner? No problem, that expense will be approved. The firm has been sending its lawyers to bar association events for years?  That sponsorship will often be renewed whether or not that event has generated a decent lead since the turn of the century. There is a seemingly unwritten rule that certain kinds of marketing are just what lawyers or law firm do.

This approach to budgeting is especially pernicious when applied to the marketing budgets that some firms allocate to individual partners. I have encountered numerous firms with 50 or more attorneys that allocate marketing budgets to partners in dysfunctional ways. One firm rewarded partners who had larger books of business; they received larger marketing budgets. Numerous firms enacted policies that allocated the same amount to partners, often between $5,000 and $10,000 a year. And like many government budgets, partners needed to exhaust that budget before year end or risk getting a reduced allocation the following year.

Together, these policies cause firms to misallocate and under investment in marketing, especially for projects and clients that have higher than average returns. A partner who can only spend $5,000 on marketing in a year will be deterred from going after a very big fish, whatever that term means for that particular firm.  And given that it generally doesn’t take ten times as many marketing dollars to bring in a case that generates ten times the revenues, this creates exactly the wrong incentives.

If firms want to increase their ability to grow rapidly, they need to make strategic choices to invest in marketing decisions that have the potential of generating high returns. And like a well-balanced investment portfolio, law firm marketing budgets should be diversified. They shouldn’t just replicate low-risk strategies that have been used before. Nor should firms solely rely on speculative strategies that might hit a homerun.

I can tell you from personal experience that it can be a challenge for law firm leaders to try to measure ROI on marketing expenditures. The very act of asking this question can be perceived as threatening. But there is a reason why ROI is a universally accepted concept in the business world. It has its drawbacks, but law firms would greatly benefit by evaluating marketing budgets on a ROI basis.

Image provided by Simon Cunningham under this license


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