Too many lawyers waste time networking at bar associations and other lawyer-groups. Yeah, I know, you're hoping that, if you form relationships with these other lawyers, they'll refer work to you. Intellectually, that's certainly a possibility. However, over the course of your career to date, what percentage of your business has actually been referred by other lawyers?
During the 25-year boom in legal service demand that ended in 2008, this strategy probably had value. When everyone has a lot of work, they're more likely to refer work that's outside their sweet spot. However, when things tighten up, lawyers tend to hoard work, even if it means stretching a bit to perform work that's outside their sweet spot.
Colleagues refer too seldom
This is easily demonstrated by frequent articles in the legal press about BigLaw partners hoarding work instead of handing off to other partners or down to associates. The idea of "overflow" work has become an artifact of the pre-2008 world. Everyone's holding onto everything they can to keep their billable plate filled.
If lawyers inside the same firm don't refer as much as they should, what are the chances that lawyers with whom you're not affiliated, or only loosely so, will refer work? Even if you believe that this is still a reasonable bet, how do you decide which lawyers you should invest in developing a sufficient relationship with to make this possible? If you had unlimited time, money, and willingness to network and develop the resulting chance encounters into relationships, you'd still have an enormously inefficient model. Those lawyers who grow close to you, and are inclined to refer work to you: How often will they have something to refer?
Concrete costs of a referral strategy
Let's put some economic meat on these conceptual bones.
Say that developing and sustaining a real relationship with one other lawyer requires you to
have lunch every other month,
speak on the phone monthly, and
share relevant information by email a dozen times per year.
The cost of doing this:
An hour-and-a-half for each lunch and travel (18 hours),
20 minutes per stay-in-touch phone call (4 hours) and
10 minutes to read and forward each news item (1 hour)
You'll invest 23 hours per year. If your billing rate is $300/hour, that's $6900. At a 40% gross profit margin (which used to be the norm, but is probably generous now) that lawyer in whom you’ve invested will have to refer matters worth $17,250 for you merely to break even.
Will she send you $17,250?
And that's if you guessed right and invested in the right lawyer, i.e., one who actually refers work to you. It's unlikely that you'll invest in only one lawyer. You'll take more of a portfolio approach, hoping that one of four, five, or six becomes a productive referral relationship. That raises your annual time investment to 92, 115, or 138 hours, and your business-received break-even level to $69,000, $86,250 or $103,500 respectively.
For most small firm or solo lawyers, $17,250 is a meaningful chunk of annual revenue. For someone to refer that much work to you, she'd have to have
no ability to do it herself,
no colleagues who can do it, and
no existing referral relationships who can do the work.
What kind of work is that exotic? And what’s the likelihood that the random lawyer you're chatting with at an event will encounter that much of it every year?
I've been unable to find objective data about what percentage of lawyers' practices come from referrals from other lawyers. However, I've trained and coached more than 7000 lawyers, and I've asked each of them this question. Most answered, "occasionally," or "a marginal amount." It’s serendipitous, at best.
I'm sure I'll get comments from lawyers who point out that they've gotten lots of referral work from other lawyers they met at bar events. I've encountered a few myself. I congratulate them. However, they're called "outliers." (I also haven't found many who have data to back up their perceptions of the actual statistical effectiveness of a lawyer-to-lawyer referral strategy. Humans are hard-wired for "confirmation bias," i.e., we only acknowledge facts that support our beliefs.)
Two weeks from now: A more rational business-getting strategy.