FISHING WHERE THE FISH ARE
Building A Practice With A Future (With The Practice Profile Matrix ©)

             There’s an old joke about the man who was on his hands and knees under a street light, looking for his contact lens. A stranger asks, “Where were you standing when you dropped it?”

             “In that dark alley, back there.”

             “If you dropped it there, why are you looking here?

             “Because,” the man replied, “the light’s better here.”

             And there you have a classic example of an all too common marketing and strategic planning syndrome. Looking for clients in the wrong place. And a distorted focus within the strategic planning matrix itself.

Strategic planning, as we’ve noted before in The Marcus Letter, begins with a market analysis, and not, as conventional wisdom has it, with the firm’s ambitions, financial goals, or skills. Without an understanding of the market for a firm’s practice and expertise, the firm’s goals are little more than dreams. This becomes particularly acute in today’s complex market for professional services, as well as in an increasingly intense competitive arena. The tendency to build a strategic plan based upon the dreams and ambitions of the partners, rather than on a realistic analysis of where the clients are, is like fishing in a mud puddle because it’s too great a chore to drive to the ocean.

In fact, despite the traditional view of the independent and exalted professional, it’s the client, not the professional, that’s at the core of every practice. The success and growth of any practice, then, is a function of understanding the client base, the potential client base, and the access to that base.

It’s here that targeted marketing serves best, by going directly – and efficiently – to the likeliest prospects, and the ones that can best serve the firm’s own practice objectives. For the smaller firm, directly targeting the marketing effort to a specific group – whether that group be geographic, economic, or defined by with a common need for the services a firm can supply – is frequently the most effective and cost effective way to market. For the larger firm, with the means to mount a broader marketing campaign as a backdrop, targeted marketing is equally effective and powerful to focus the message of that campaign to a specific audience.

            While target marketing is not a new process – indeed many progressive firms do it in a number of ways -- it’s not generally used as part of a firm’s strategic planning. Part of the reason for this is that the strategic planning process itself is, for most firms, just emerging.

            What can be most difficult, though, is the process of determining the target group. This is crucial, and key to successful marketing for any firm. Without this distillation, time, effort and money can be wasted.

             There are several approaches to finding the target group. See, for example, Sally Schmidt’s excellent article on the subject.

            A new way to determine the target market as part of the strategic plan is the Practice Profile Matrix (© Bruce W. Marcus).

             Some years ago, at one of the then-Big Eight accounting firms, we developed a matrix based on some work done by General Electric. That matrix is a particularly powerful tool in understanding the health of any law or accounting firm. It is even more valuable in strategic planning for a law or accounting firm of any size, because of its flexibility in profiling the practice in a way that helps define new pools of prospective clients. .

             In the early 1970s, the Big Eight firms measured their success in terms of the number of Fortune 500 companies each had as clients. At horizontal axis, we sorted the existing clientele of Fortune 500 companies into three size categories. At the vertical axis, we sorted the clientele into three categories -- declining industries; static industries; emerging industries.

             Filling in the boxes for each of the Big Eight firms we discovered that the most successful of the firms had a preponderance of the larger Fortune 500 clients in emerging industries, and the least successful firms had a preponderance of clients in declining or static industries.

             That same matrix, adapted to a planning mode, can accomplish two valuable things for any firm. It can map a firm’s health, and it can indicate where the new business effort must be made.

             It works this way…

             A firm makes two subjective determinations that are significant to it… the size of its clients, by any measure (sales volume, fee size, profitability, etc.), and the designation of each of its clients in each of the three categories (emerging, static, declining.) Large firms will likely have different criteria than small firms.

            By sorting each of its clients into the appropriate box in the matrix, a picture of the firm’s present condition in its business environment becomes clear.

             Because the profile of every law or accounting firm is different, the determination of each category on each axis is different, and to a degree, subjective. For example the range of company size can be within billions of dollars for one firm’s clients, or hundreds of thousands for the smaller firm.

             The categories in the other axis are also subject to a number of variables that can be flexible. Industries that are emerging, static or declining change with changing economic conditions (particularly in a global economy.) A few years ago, for example, the dot-com industries were emerging, as was the telecommunications industry. That, obviously is no longer the case. Economic conditions, locally, nationally, and worldwide, may cause a static industry to either decline or increase in importance and growth potential. An industry such as biotechnology may be emerging, but not necessarily in the near term.

             But industry opportunities are measurable both nationally and locally, and what might be an emerging or declining industry nationally, may be just the opposite locally. The real estate development market may be static nationally, but emerging locally. Good business judgment counts for a lot.

             Ideally, an economist is the best source of this information. But for the smaller firm, there are other reliable sources. The Internet is a major source of industrial information. Business Week and Fortune frequently have articles on the nature of specific industries. Publications such as The Wall Street Journal and The New York Times regularly report on the progress of specific industries. Libraries have up-to-date data. Regional and national Chambers of Commerce and industry associations are a major source. Assessing which industries are growing and which are not is not too difficult, and worth the effort to seek it out.

            In fact, no business – and no professional practice – can be managed without some understanding of the business climate in which it functions. Assessing the industries for the Practice Profile Matrix is just one further step.

             With these factors in mind, the Practice Profile Matrix can be shaped to serve a firm in strategic planning. And most significantly, it can be an effective tool in determining the target groups for targeted marketing.

             Following is an example of a firm that’s significantly healthy, with the bulk of its practice in the second price category in emerging industries. It may feel that for the future, it may want to target more firms in emerging industries in that, or possibly the higher price categories.
 

            Firm A…
 

             Another firm, might find the following configuration, with a preponderance of clients in static or declining industries. While that firm might be currently profitable, its weakness for the future is foretold. It’s a warning that it needs to target its marketing efforts to more firms in the emerging industries, in whatever size it’s capable of serving.

             Firm B...
 

              This format is also useful as a competitive intelligence tool, if it’s possible to develop a matrix for competitive firms, giving you a sense of how your firm is doing, compared to your competitors’.

            There are, of course, some caveats…

• The definitions of emerging, declining, and static industries are subjective, in that they vary from market to market, as well as nationally. Carefully define, then the foundations for your own criteria. Consistency helps.
• Understand that the economy – internationally, nationally, regionally, and locally, is dynamic. Random events and elements can change the dynamic at any time. The best method to deal with that dynamic is alertness. As we’ve seen, today’s emerging industry can become tomorrow’s declining industry (e.g. telecommunications and .com startups.)
• The size figures used in the matrix vary from firm to firm, and are predicated on each firm’s experience and ability to deal with clients of specific sizes. A firm geared to dealing with local retailers will use one set of figures; a firm serving national companies uses a different range.
• The Practice Profile Matrix© doesn’t suggest firing clients in declining or static industry categories. These clients may be profitable, they may help offset the cost of your staff people with special skills, they may be influential in getting other profitable clients, or they may be flagships in a particular industry. It does mean that a major expense or marketing effort to pursue other clients in those industries is not warranted.
• The Matrix may also indicate where new skills are needed and investment in training in those skills warranted.
• The profile of your firm shown by the matrix allows you a distinctive view of the firm, offering a number of different factors that should go into your planning.
• While the matrix was originally developed from the General Electric model for the accounting profession, it works just as well for law firms.
• In larger law or accounting firms, a different matrix would be needed for each practice group or area, as well as for the entire firm.
• Above all, your view of all elements of the Practice Profile Matrix© must be realistic. A wish list is not a plan, fudging the sizes of your clientele fools nobody, guessing the status of the industries available to you will, cost you more than doing it right, exaggerating your own sense of what your firm can do will waste your time.
• Any strategic plan, whether using the Practice Profile Matrix© or any other kind of plan, must be revisited frequently. Practice will lead to corrections. Conditions change. As your own business grows (or declines) you may have to rethink the elements of your plan. Anything dynamic needs attention, care, and feeding.
• While a key value of the Practice Profile Matrix© is to improve the use of target marketing as a marketing device, other marketing activities should not be overlooked. They serve as a backdrop to target marketing, in that they enhance your name and reputation, and project your firm’s values and capabilities.

       Given this kind of information, long range planning takes on a very different configuration. Rather than basing a plan on a wish list, or even an inventory of your skills, the matrix focuses on your client base in the context of the business community you serve. It is, as it should be, client-oriented.

 It shapes your marketing program by focusing it on specific targets and targeted companies, which means that your recourses and costs are better controlled.

Long range planning for professional firms is one of the least understood activities of professional firm management, which is why so many plans are misdirected and focused on factors that make the plan more of a wish list than a working tool. We know this from the number of plans, and planners, that focus primarily on the firm’s resources and skills, as will as the partners’ wish lists, and not on the market itself.

This matrix approach works, and has been demonstrated in practice for both accounting and law firms. It allows you to fish where the fish are, and not in swimming pools.

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