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Sep 07, 2016
Law Firm Profitability – How Do I Know if We Have Enough Work for the Attorneys?
I am the owner of an eight attorney estate planning firm in Jacksonville, Florida. Our firm handles estate planning and estate administration. For this entire year our financial numbers are way down and I am getting concerned. For example, compared to last year:
- Our revenues are down by 30%
- Our expenses are lower.
- Net income is down by 30%
I would appreciate any ideas on what I should do next.
Several of my estate planning/administration firms from different areas of the country are advising me that business is way down this year and they can't put their finger on the problem other than demand and timing.
I would start by:
- Take a look an your new matter intakes for the year – month by month.
- Examine the referral and marketing sources as to where this business is coming from.
- Prepare a open matter inventory report by attorney and matter type to get a count of the number of matters each attorney is handling
- Examine billable hours, non-billable hours, collected working attorney fees and realization rates for each attorney.
Compare each of the metrics above with last year and prior years. Meet with all of the attorneys and review their matters in progress and discuss their workloads. Also review your marketing budget and marketing programs to see if changes are warranted.
This should give you a feel for what is going on. You could have problems in the following areas:
- Attorneys simply not putting in the hours
- Attorneys have time management and timekeeping problems and need to improve these skills
- Attorneys do not have enough work.
While you may find that you have problems in each of the above areas I suspect that your biggest problem is that attorneys do not have enough work and your business is down. If this is the case I would question how they are using their non-billable hours – are they doing more business development and marketing – or they simply pacing their time so they fill an eight hour day.
If your problem is lack of work you are going to have to see if additional marketing can generate the business needed to support the attorneys you have on board or reduce your attorney headcount.
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