What better time to take stock and plan ahead than the start of the new year? Follow the steps below to feel in control as your firm heads into 2021.
Have a handle on your financials by tracking metrics
In order to grow, you need to know where you’re starting from. Instead of relying on gut feelings – which are often influenced by what we want to be true – use metrics to understand your financials.
Although the relevance of certain metrics will vary according to firm size and practice area, these common metrics make a good starting point.
- Utilization – the percentage of hours worked that are billable to clients
- Realization – the amount of billed time for which money is actually collected
- Revenue – by practice area and attorney
- Profitability – by practice area and attorney
- Fixed fee hours – know the hours worked on fixed fee matters. It helps you assess if what you charge accurately reflects the hours worked.
- Client costs – are these included on invoices when the time comes?
- Overhead costs – rent, utilities
- Administrative costs – the amount of time staff is spending on necessary but non-billable tasks
- Repeat clients and referrals – if applicable to your firm’s practice area
Tracking these metrics is the first step. Then compare your numbers across months and years – this will help you see patterns. (And yes, 2020 may be an outlier year. Factor that into your analysis, but don’t use it as an excuse not to analyze in the first place.)
Gathering this information manually takes time but know that there are tools that can track these metrics for you. Use them – because not knowing the financial state and direction of your firm has consequences.
Have a plan
Once you’ve tracked metrics and analyzed financial patterns, then it’s time to come up with a plan. Individual plans will vary widely across firms, but the general template for planning tends to be consistent.
To start, identify realistic improvements. Then break those improvements into bite-sized steps. For example, say you’ve realized your firm spends twenty hours a week on billing, and you want to bring that number down to ten hours a week or less.
Use a 30-60-90 day plan to break that goal into manageable chunks. You might decide that the first thirty days will be devoted to researching practice management systems with integrated billing and accounting and then choosing a few software options that you think will work for your firm.
As you enter the next stage of the plan, you’ll want to test those tools with free trials. Then, to meet your ninety-day goal, pick the software that worked best for your firm and begin the data migration process. By the end of the ninety days, you should be up and running with software that will reduce time spent on billing and save on hours lost to non-billable tasks.
Know your ideal client
Along with streamlining tasks and workflows, it helps to draw the right clients to your firm. While it’s understandable to feel that any client is a good client, the truth is more complicated. You don’t want to pour energy into someone whose needs don’t actually fit with your practice area or expertise. And you do want to get referrals from someone who understands what you do.
Use your intake form to make sure you understand client expectations – don’t risk damaging your firm’s reputation with a dissatisfied client.
And while you’re doing intake, use your firm’s practice management tools to check for conflicts of interest. This might feel like a lot of up-front work, but it’ll save you time and energy in the long run. Remember – the goal here is to be in control of how your firm is growing.
Take back your time via outsourcing
Sometimes it pays to recognize when you’re losing too much time to a task – and that you’ll effectively save money by paying someone else to do it. This doesn’t mean you can’t do it. Just that from a financial perspective, you shouldn’t.
Knowing your firm’s metrics can help you identify these areas. Once you know which tasks need outsourcing, you’re not off the hook. Finding reputable help, confidentiality agreements, and consistent oversight are still your responsibility. But with the increase in remote working, collaboration with outsourced staff has become easier than ever before.
After such an unpredictable year, take steps to gain control of your firm’s growth. Track and analyze metrics, break goals down into 30-60-90 plans, improve your intake process for a client base more suited to your firm, and outsource time-sucking tasks. And don’t forget to enjoy 2021!