Business Law Firms Need R&D Departments to Increase Profits


Wednesday, December 9th, 2020
By Gideon Grunfeld


Many businesses formally invest in research and development (R&D) to improve products and services and to stay competitive. This is, in many ways, an unremarkable notion, but law firms have largely ignored it. This is even true for law firms that represent business clients and other entities where the potential for repeat business exists.

If you are wondering what a law firm’s R&D department would do, there is one great place to start: collecting and analyzing data about how much its services actually cost clients in the long-run.

Many business law firms that primarily charge by the hour assume that they can’t predict how many hours and resources a certain case might require. As we discussed in a prior post, it’s most effective to communicate your fees to prospective clients in terms of overall costs rather than hourly rates. This is especially true if your firm’s fees are higher than the market average.

While it may not be possible to predict the cost of a complex litigation case to the exact dollar, it is certainly possible to project the costs of various scenarios that might unfold.   Your R&D department should be able to tell you how much clients spent on average for various aspects of a representation. Fortune 500 companies have access to data aggregated by third parties which can tell them how much their outside counsel will likely charge, for example, to handle a summary judgment motion on a certain issue in a particular court.

There is no reason why a boutique firm couldn’t collect and otherwise analyze its own billing data in the same way. This would enable the firm to focus on total budgets for clients, not just hourly costs. Understanding this information would allow the firm to estimate fees more precisely, and it would provide a significant advantage in the sales process with new business clients.

The time has come for law firms to invest in R& D and to adopt the mindset that collecting information will help them innovate, stay ahead of their competitors, and increase profits.


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