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Tired of Paying Referral Fees? Seek Alternative Case Drivers

Talk to most contingency-fee lawyers, and they will tell you how critical referrals are to their business.
Then, ask them how much they enjoy writing referral checks once their client’s case is resolved. The truth is, most firms continue to rely heavily on referrals, yet despise paying the fees associated with getting their cases. Take a moment to add up how much you paid out in referral fees this year. Compare that to the total number of referred cases that you settled or won at trial. What is your total cost per referred case?
If your average cost per referred case is over $1,500, you should certainly consider some other avenues that would drive cases to your firm for less money.
From my experience, there are three types of referrals for contingency fee-based lawyers:

  1. Client Referrals
  2. Attorney Referrals
  3. Networking Referrals

This article relates mostly to attorney referrals, but could also apply to networking referrals where you pay out a referral fee.
Consider how those referring attorneys are getting the original leads. Where are they advertising? What is their messaging? What type of clients are they attracting?
Evaluating their source of leads and the method they are using to attract them will give you tremendous insight into reevaluating your own marketing and advertising efforts. It will also help you identify opportunities for less-expensive ways to get new clients.
The average firm that is sending out the bulk of referrals for personal injury cases is almost always a heavy advertiser. They have established processes for high-volume intake, strong closing skills, and (usually) a meticulous follow-up system. They also often have a set methodology for communicating with the firms they refer cases to, in order to track pending referral fees. In other words, they are making a killing off of you—all because you have yet to master a successful marketing plan for yourself.
Before we jump into the solution, consider the pros and cons of attorney referrals.

Pros of Depending on Referrals:

  • There is little risk to accepting a referral. If you don’t win, you don’t pay (other than your time involved and anything else you put into the case).
  • You are able to keep your overhead down significantly, primarily by avoiding marketing expenses.
  • You are able to avoid being labeled as an “ambulance chaser” by limiting your advertising.
  • Because of the above, you are seen as more credible and trustworthy by your peers, clients, judges and quite possibly future jury members.

Cons of Depending on Referrals:

  • If the referrals dry up, so does your entire business. You are completely dependent upon others for your livelihood.
  • You end up paying out significantly more than you would have if you originated the client yourself.
  • You fatten the advertisers’ pocket so they can invest even more into advertising—and further outpace you in your own marketing efforts.
  • It’s very difficult to control the type of clients to which you get access (beggars can’t be choosers, right?).

If you are cringing nearly every time you write a referral check, you probably have already considered these pros and cons. Regardless, they should be valuable reminders to you.
The truth is, in today’s digital marketing world, you have just as much direct access to your prospective clients as the high-advertising-budget referral mill down the street. Ken Hardison from PILMMA said that referrals are much less valuable to attorneys today, unless you are depending primarily on high-end, boutique, seven-figure cases.
TJ Saye, COO of Salvi Schostok & Pritchard, said “attorney referrals are not nearly as important today” for their business. “Fifteen years ago they represented 75% of our business. Today, with the onset of digital marketing and our ability to reach the mass public, I’d put it at closer to 40% with a large percentage coming from internet, branding work, past clients, and friends of the firm.”
TJ went on to say that he would rate his firm’s dependence on attorney referrals at a 6 (on a scale from 1 to 10, with 1 being not at all and 10 being the cornerstone to their success). He felt as though it should be a part of their overall mix—a good safety net when other strategies slow down, but not primarily relied upon.

10
Going Against the Grain

While this advice may seem like common sense to you, dependence on attorney referrals across the country is still widespread. A recent Hinge Marketing study found that the top-rated marketing plan for professionals was still: “Try to generate more referrals.”
The same study also suggested that over 80% of the people who are referred to you will go to your website to review your firm before taking action to call or contact you.
If you are seeking ways to cut down your referral fee expenses while simultaneously growing your caseload, you have to establish a sound marketing plan. With the growth and unparalleled use of the Internet, starting with your website and overall Web presence is a must. Marketing your firm on the Internet offers highly targeted avenues for getting your name in front of the right prospective clients—often, prospective clients who are actively seeking legal representation.

You also have the ability to better control your expenses as compared to depending on referrals in any given year. Imagine signing a high-value case where you did not have to pay out a hefty referral fee. What opportunities would that create for your firm? Where could you reinvest that additional revenue? How would that help further separate you from your competition?

While we certainly would never encourage you to give up on referrals altogether, you should always consider ways to reduce your expenses and grow your revenue. Start by performing a self-assessment of your own website and see for yourself what work needs to be done to be a little less dependent on referrals next year.

Tanner Jones

Tanner Jones serves as the Marketing Director for Consultwebs.com, the premier provider of innovative online legal marketing to ethical U.S. law firms seeking growth and profit. Consultwebs fosters professional, long-term relationships built on trust, integrity, high quality and results. Often the first contact clients have with Consultwebs, Tanner helps law firms develop their marketing strategies, including search marketing campaigns, responsive website design, social media and pay-per-click advertising. Tanner has spoken and presented at legal marketing seminars throughout the country including the PILMMA and M&L Legal Marketing conferences. He has been featured in Lawyers Weekly and Attorney at Law publications, and contributes frequently to LawWebMarketing. com, LawPracticeAdvisor.com, LawMarketing.com and NatLawReview.com.

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Filed Under: Featured StoriesPractice Management

About the Author: Tanner Jones serves as the Marketing Director for Consultwebs.com, the premier provider of innovative online legal marketing to ethical U.S. law firms seeking growth and profit. Consultwebs fosters professional, long-term relationships built on trust, integrity, high quality and results. Often the first contact clients have with Consultwebs, Tanner helps law firms develop their marketing strategies, including search marketing campaigns, responsive website design, social media and pay-per-click advertising. Tanner has spoken and presented at legal marketing seminars throughout the country including the PILMMA and M&L Legal Marketing conferences. He has been featured in Lawyers Weekly and Attorney at Law publications, and contributes frequently to LawWebMarketing. com, LawPracticeAdvisor.com, LawMarketing.com and NatLawReview.com.

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