How much law firms spend on marketing and business development is always a question that generates much debate. Firms don’t want to be outspent, but at the same time, they often have a hard time gauging the return on their marketing investment and are, therefore, leery of potentially overspending.
With that in mind, we took a look at the firms in the Peer Monitor universe to see if we could distill some general trends around marketing and business development expenditures. Overall, the average firm spent just shy of 2% of their revenue on marketing and business development in 2018, exclusive of salary and benefits for marketing and business development staff. This translates to an average of about $19,000 per $1 million of revenue. You will often hear anecdotally in the market that 2% seems to be the target percentage, and the data backs that up.
But that’s not the end of the story.
We can go beyond looking at just the average law firm in the market and explore some nuances of the data.
The Rise of the Dynamic Law Firms
Many readers might be familiar with our annual Dynamic Law Firms Study. If you’re not, take a few minutes to look it over as it discusses what those firms that lead the market in terms of growth are doing from a strategic standpoint.
Most relevant to this discussion are the trends around what the Dynamic firms themselves, and what those with the best growth have done with regard to marketing and business development spend. Every year we’ve examined the data in this study, we’ve seen that growth in marketing and business development expenses among Dynamic firms has vastly outpaced growth in that category among what we call the Static firms, those firms that struggle to find growth in their business. In fact, it is not uncommon to see Static firms with year-over-year marketing and business development figures in the negative, indicating that they spent less than in the previous year.
Now, this can be a bit of a chicken-or-the-egg question as to whether paring back marketing and business development spend among Static firms contributed to their lack of a competitive edge, or was it instead a symptom of a lack of growth in other areas that resulted in less money to spend on marketing. The true answer is probably a little of both. But it is an inescapable fact that firms that struggle to find growth across their businesses tend to spend less on marketing and business development activities and are less likely to make substantial investment in that area. It’s equally true that it’s hard to find growth for a business when that business is not being marketed.
Spending for Growth
Looking at the numbers for the end of 2018, Dynamic firms outspent their Static counterparts by about $2,300 per lawyer. In fact, Dynamic firms outspent even the average law firm in the market by almost $1,000. Here again, it may be that these firms have had better growth, and therefore have more money to spend; but one has to wonder if the larger investment in marketing and business development isn’t contributing to the higher growth across the business. The data shows that the firms that spend more on marketing and business development are also the firms that tend to lead the market in growth in metrics like demand and productivity.
The datapoints around marketing and business development spend make for some interesting conversation, especially when you examine what you firm is doing in this area.
Download a copy of the Marketing Spend Infographic to share around your firm and build the case for what your marketing budget should look like.