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January 1, 2014
It’s a new year: How much should I spend on marketing?

By The Florida Bar’s Law Office Management Assistance Service

LOMAS Practice Management Advisors are often asked, “How much should I budget for my law firm marketing expenses?” All the lawyers in the firm want a slice of this finite, shared resource pie. LOMAS has listened to many lawyers complain that determining a proper amount for the marketing budget is impossible because there are no benchmarks.

What Do the Benchmarks Tell Us?
There are some benchmarks available. The American Lawyer reports that the AM-Law 200 firms spend about 2 percent of gross revenues on marketing related expenses. Ask just about any law firm marketing director and they will tell you that number is low. Law firm management consultancies have long held that law firms (except for personal injury firms, who must spend more) should plan on spending 2 to 5 percent of gross revenues on the law firm marketing effort.

Should law firm owner management be happy if their number is on the high end of this benchmark, which might mean their marketing efforts are competitive? Or, should they be satisfied if their expense number is on the low end, which might mean they are watching every penny?

It’s OK to study the benchmarks and surveys for guidance, but no marketing budget has meaning without a marketing plan and knowledge of certain statistics about the firm’s marketing expenses.

The Marketing Investment — Can We Break It Down By Client?
This may seem obvious, but it bears saying anyway: The cost of acquiring a client should not exceed the revenue the client’s work will generate for the firm. Yet, many firms never crunch the numbers to determine this important information. Also important is the cost of acquiring new work from existing clients as compared to revenue realized from this work. Not all work need come from shiny new clients.

Comparing the Firm Against the Benchmarks
LOMAS receives calls from members who wish to discuss their marketing budget and expenditures. When we ask the caller what ****he spends on marketing, there is almost always a pause. This usually is our cue to discuss the chart of accounts for the law practice. How are expenses organized? That is, are all marketing-related expense accounts listed under an account heading of “marketing” expense? Or, do you have to look high and low through your chart of accounts searching for marketing-related expense accounts? Accounts that should be listed under the parent heading of marketing expense include entertainment, business development, website, brochures and other marketing printed material, business cards, charitable contributions, political contributions, firm-sponsored seminars, and club/civic/association dues. Law firm management can’t compare marketing expenses against the benchmarks until management is certain there is an apples-to- apples comparison.

Do Clients Wear Out Like a Set of Tires?
Of course not. But some clients do not return. Many clients do not return because, although happy with your work, they will not have a recurring need for your services. Every firm should know what percentage of its client base must be replaced every year. How many additional clients are necessary to meet the firm’s financial objectives? The core success of the firm’s marketing effort depends on this information.

What Are Your Firm’s Marketing Goals?
Marketing goals change from year to year. Are your firm’s marketing goals focused on preserving the existing client base, obtaining new clients, or forming a new practice area?

Before we can set a marketing budget, we have to set some expectations and have a plan. Law firm marketing plans are built from the bottom up. That is, firm management needs to know the individual marketing goals and motivators of its lawyers before a cohesive law firm marketing plan can be finalized. The most important reason for this exercise is that the individual plans may conflict with each other; deploying people and spending money on conflicting plans will result in only headaches for firm leaders. Another important reason is so management can determine where to spend its marketing budget: Who has the most viable plan?

The Marketing Budget Must Include Funds for Training
Law firm leaders have complained for decades about the lack of marketing skills among the lawyers in “the firm.” The fact is the majority of the general public at large do not have any innate marketing skills. This is particularly true for lawyers. Lawyers who have taken personality tests too often discover that their “character type” is light on innate marketing skills. Well, we all can’t be Bode Miller, but most of us can learn to ski. The art of marketing, good communication, and people skills can be learned.

How much should you spend on marketing? Review available benchmarks, identify the firm’s marketing goals, determine how many new clients the firm needs, then build your marketing plan, and you will have a good estimate on what you can (or should) spend on your firm’s marketing effort.

The practice management advisors with The Florida Bar’s Law Office Management Assistance Service (LOMAS) are available to help with your concerns about law office and law practice management. 850-561-5616.

[Revised: 11-19-2014]