Reputation is to lawyers what real estate is to restaurant owners.
Stick with me for a moment, and I’ll explain. (Warning: this could make you hungry.)
Who Makes Money in the Restaurant Industry?
A smart real estate lawyer explained that the money in the restaurant business is made by the landlord. It’s not made by the restaurateur.
I was confused, so I asked questions. Now I get it.
Here’s how it goes down:
- Restaurateur leases space.
- Restaurateur invests lots of time and money in building out restaurant.
- Restaurateur then markets the restaurant like crazy.
- The restaurant takes off. The line is down the block. Everybody is talking about the place, and it’s fantastic.
- More restaurants move into the area. The neighborhood booms. Cool shops open. Even lawyers move into the area and lease space. This happens very quickly in some areas, and the entire neighborhood can transition in five or ten years. We’ve all seen it.
- The landlord raises the rent. It’s reasonable because this is now a hot area.
- The restaurant starts to struggle financially because of the new high rent. The restaurateur is suddenly earning less and less.
- The landlord, of course, makes more and more.
- The restaurateur ends up with a restaurant that's no longer very profitable. The landlord ends up with a very valuable parcel of real estate.
Who Makes Money in the Legal Industry?
Here’s how many lawyers have the same problem as restaurants.
- Lawyer leases office space.
- Lawyer invests lots of time, money, and education in setting up practice.
- Lawyer then markets the practice (much of it through advertising on Google, Facebook, Avvo, radio, etc.).
- Lawyer’s business takes off.
- More lawyers see what’s happening and start advertising in the same venues.
- The advertising medium raises the rates. It’s reasonable because it’s working for all the advertisers, and these newcomers bid up the prices.
- The lawyer starts to struggle to maintain earnings with the new higher advertising prices.
- The advertising company makes more and more.
See it now? See how we’re like restaurants?
The landlord wins in the restaurant business. Who wins in the law business? Here’s the Google stock chart.
It’s not fair. That’s my first reaction. Why should all the restaurateurs' work mostly end up benefiting the landlord? Why should most of the lawyers' work mostly benefit Google?
Google, Facebook, and the other purveyors of online advertising opportunities create a powerful algorithm that takes much of the profit and leaves just enough to keep ad buyers sufficiently engaged to keep playing the game and bidding up the prices. These powerful vendors are well funded, staffed with talented and motivated teams, and deserve to reap the rewards generated by their efforts. They've figured out how to take their share off the top, just like the landlords.
But it doesn’t have to be that way. The smart restaurateur could have avoided the problem by purchasing the building at the outset. Sadly, most restaurateurs can’t figure out a financial way to make that happen.
Lawyers have an option as well. And it doesn’t involve access to nearly as much capital or require the never-ending hunt for algorithm-exploiting secrets.
How Advertising Falls Short for Lawyers
We can build our reputations without advertising. At a minimum, we can use advertising only as necessary.
Most advertising, at least as employed on behalf of law firms, doesn’t stick. It's effective for the short-term but doesn't have much long-term impact.
It’s very difficult to find examples of law firms that have successfully branded themselves. They are few and far between. Most people don’t remember law firms, especially in the consumer arena, because we’re not important to them most of the time.
People remember Tide, McDonald's, Coke, etc. because they use these consumer products all the time. The advertising keeps the product top of mind because the products are relevant to the lives of consumers. Unfortunately, most of us lawyers are only thought about only once in a blue moon—usually, when something bad happens.
Services used infrequently are hard to remember even if they advertise frequently. Most people can’t remember the name of the funeral home because they use it only one or twice in a lifetime. The same is true for divorce lawyers or personal injury lawyers or other lawyers serving consumers. Advertising dollars directed toward consumers without a present need for the service don't get noticed. Most legal advertising works well if it hits people who need the service when they need the service (thus, the effectiveness of Google AdWords featured in the search results).
Consider the Race to the Bottom (of Your ROI)
I'm not suggesting that you avoid all advertising. However, I am suggesting that you be keenly aware of the long-term game. For most firms, advertising is not an effective long-term marketing tactic. The price of advertising goes up and up and up. It never goes down. Tactics that work and are affordable today won't be affordable tomorrow. It's a race where you're chasing the new thing year after year.
My personal, been there-done that experience illustrates the story.
I started with a small yellow pages ad. Then I went bigger to stand out. They went bigger. I went bigger. Then the competition went to two-page spreads. My return on my investment went into the toilet, so I switched things up and bought ads on the public radio. I was the only law firm on the station. It worked. Then other firms stepped in, the prices went up, and the return on investment went down. It was the same deal with the search engines. I was buying ads for a penny per click back in the day. Those same keywords today might go for $100. Now it's Facebook, and up go the prices. It happens in every advertising medium. Plan for it.
How Do We Fix This Problem of Making Others Rich?
How can we make sure the money comes to us and stays with us?
Restaurants can buy the building (not likely due to limited capital) or create catering/delivery models (which is increasingly common). They need to decrease their reliance on the landlords. Like us, restaurateurs are in a competitive business. Lawyers can build a reputation by getting people talking about them rather than relying on advertising.
Lawyers have a bunch of great options for building a reputation without creating dependence on the advertising vendors.
1. Build our networks.
Meet people. Get to know them. Stay in touch. Be real, generous, compassionate, and connected. Take my Networking 101 course if you find networking unappealing. (I've found a better way to build your business that won't make you as anxious). I'll walk you through it step-by-step. It can actually be fun, and you don't need to go to networking events at the chamber of commerce.
2. Create destination websites/blogs.
You know me because I started writing. (You're reading my stuff right now.) I've made a bunch of money because of my writing on the web. I'm spending that money right now in a ridiculously expensive coffee shop in Singapore. Thank you. You can do it too. Yes, you can! Our law firm performs pretty well also. It's no accident that we invest heavily in online publishing.
3. Share information.
Become a resource. Give continuing education talks to lawyers, engage with the media, produce webinars and podcasts, speak at civic groups, write articles for publications, and share your knowledge when the opportunity presents itself. Sharing your expertise is a bit like giving away a free bite at the pastry shop. One bite can entirely change your opinion. Let others know that you are full of helpful information, and they'll remember you when they encounter a problem.
4. Encourage client referrals.
Your clients love you. They tell you so. You can turn that love into referrals. Build a system for staying in touch, offering ongoing value, and being a useful resource. Don't expect them to remember you without help. Clients forget. Personally, I love my CPA in Miami. He's a really cool guy, and I like him a lot. After three years, can I remember his name? Nope. I have to check my notes every time I need to reach him.
5. Meet more people.
Just putting yourself near more people makes things happen. Join clubs, go to bar association events, get engaged in your community, volunteer in political campaigns, be a regular at a nearby restaurant, and be out and about. The more you see people, and the more they see you, the better. Meet the neighbors in your building, go to your kid's events, and loiter at the courthouse. Be out in the world.
There's nothing wrong with advertising. Just recognize that most of the value evaporates very quickly. It rarely makes a long-term impact. You're renting your audience instead of owning it. You're creating equity for the advertising seller instead of for your practice.
Most law firm advertising is of a direct response variety. We advertise, and they—hopefully—respond. It's not about building a brand. Brand building is very difficult for infrequently used services and is rarely successful in our universe.
That doesn't mean advertising doesn't have a valuable place in our business. It can be a great way to get the ball rolling if you're struggling and need business now. It works if you're willing to be vigilant and look for new opportunities as prices increase on the old opportunities. It's effective in spaces not yet crowded with competitors. Just be cautious about who owns the equity you're building.
Don't Let the Landlord Own You
Work for yourself. Create equity for you.
The value of your reputation needs to soar like the value of Google on the stock chart. It needs to climb steadily and then do the hockey stick thing up and to the right at some point. Clients, potential clients, and referral sources need to know you, like you, and trust you. They need to have good stories to tell about you and nice things to say.
That kind of reputation growth only happens when you invest in building word of mouth by doing excellent work and exploiting marketing tactics that engage your audience and encourage their investment in believing in you. Tactics like those build equity in you, not in the vendor selling the tactic.
Your reputation is like your bank account. It grows as you make deposits. The interest compounds when others are talking about you and spreading the word. It grows even faster when your reputation is generating substantial referrals and you no longer need to spend real dollars to keep priming the pump through advertising.
We're lucky that we can avoid the fate of many restaurateurs. We don't need huge amounts of capital to start our businesses. We can jump into business inexpensively and get started. But we only grow our bottom lines significantly when we invest the energy and effort required to get others talking about us. Renting an audience is a shortcut to revenue. Buying our reputation, by doing the work required, is how we build equity.