This is my next post on why the legal profession is struggling and what you, as an attorney, can do to ensure your success. My last looked at why the surplus of lawyers has brought down an attorney’s earning capacity. I also discussed why the surplus of human units with bar licenses is only going to grow. In this article I’m going to take a look at what you need to do, from a business standpoint, to not fall by the wayside. Let’s start by looking at why poor business management is hurting the legal field and what you can do to keep things moving.
Law firms have traditionally been, and continue to be, poorly run businesses
Ever heard another attorney say “I’m a lawyer, not a businessperson?” I truly hate that phrase. I’ve said for years that those who take such a stance won’t need to worry about the problem for long – they’ll be out of business so fast that the issue of being a businessperson will take care of itself. Well, now that’s actually happening. The thing is that, for the longest time, attorneys have been able to operate a poorly run business and still squeeze out a profit due to supply and demand – the restrictions of who can be an attorney (one needs a degree and a license that many don’t have) meant that there were only a limited number of legal service providers who could compete in the market. With only so many options to choose from, consumers were forced to give some of their dollars to the poorly run businesses. Well now, for the reasons I explained in my last post, there’s a surplus of legal service providers. This means that the days of being able to run a crappy business, and still make money, are over because the better run law firms are sucking up a disproportionate share of the profits. This is
slowly but surely quickly and brutally putting the poorly run law offices out of business. Interestingly, many of these firms are blaming going out of business on “their phone not ringing enough” and not acknowledging that part of it is due to their failure as a businessperson.
I started my 30 days to a better law firm series by discussing how the traditional attorney business model makes no sense and, in spite of that, people continue to follow it. One of the biggest problems with that business model is the high amount of administrative time that law firms devote to various tasks.
Stop and consider how much time is taken up in your office by administrative tasks. In spite of the fact that “non-billable” time is death to law firm profits, most lawyers don’t seem to make reducing it a priority. Here’s a news flash – reducing non-billable/administrative time is going to increase your bottom line! If you bill by the hour then the problem with administrative time is obvious. If you work on a flat fee basis then it’s equally problematic – that admin time could have spent pushing a case closer to conclusion. If, for example, you take a case for a $3,000 flat fee and you spend 20 hours (15 non-admin and 5 admin) completing it then you only made an effective rate of $150 per hour. If that same case can get handled in 18 hours (15 non-admin and 3 admin) then your effective rate jumps to $167 per hour. This means you are getting the same revenue with lower overhead; less administrative time means less need for staff and support services. Want to make your firm more profitable? Then you need to make reducing admin time a large, and ongoing, priority in your firm.
In spite of the obvious problems with administrative time, attorneys, for reasons beyond my understanding, tend to not make it a priority. I talk to many ‘a attorney who seem to think that the only way to make more money is to “get more phone calls” and grow revenue. They don’t stop to think that there’s two ends to the equation and that if you reduce the amount of time that goes into a case then, in turn, that case becomes more profitable. It’s not a surprise that these same lawyers see incurring a large amount of administrative time as “just the way a law firm works.”
Now that law firm profits are getting squeezed it’s time to start thinking about more then your revenue and start focusing on making your business more efficient. Attorneys who focus on efficiency and smart marketing (which I’ll be discussing tomorrow, are going to be the ones to clean up going forward.
Now let’s take a quick look at three ways that you can cut down your admin time and make your firm more productive/profitable.
Three ways for attorneys to reduce non-billable time and make their firms more profitable
Earning more money comes down to a simple equation. You work for so many hours in a week. The more of that time that gets spent working on the substance of a case, rather than administrative hassle, then the more cash that will be landing in your pocket. Here are three things you can do to shrink administrative time and increase profits:
Adopt the O.H.I.O. method – I’ve previously discussed how attorneys can be more efficient by deciding to “only handle it once.” Otherwise known as the O.H.I.O. method. I won’t re-has this approach but, ask yourself this question – how often do you read an email or a letter more than once before responding to it? You would be surprised at the portion of your day that gets wasted on things such as this. If you read an email, and respond to it later then the problem is you’re going to read it again before you respond to it. This means you’ve taken the time to read the email twice. If you read it, and respond to it immediately, then you’ve just cut your time reading that particular email in half.
Hold weekly calendar audits – A previous post discussed how lawyers can be more efficient by auditing their calendars on a weekly basis. How often does a day get lost to trying to get an extension or continuance? Also, how often do you have to continue something, that could have otherwise been resolved, because you needed documents from the client? The tips, discussed in my previous post, can save you hours of productivity each week by investing an hour or so into calendar management. Last time I checked, investing one hour, and saving several hours as a result, was a good investment.
Consolidate your vendors – Law firms are notorious for the philosophy of “why have one vendor when I can have two at twice the hassle?” I recently discussed this as part of a post on four mistakes which cost law firms money. You would be shocked at how much time you waste dealing with more vendors and software products than you need to.
Want to make your law firm more profitable? If the answer is “yes” then you need to go on the war path against the evil nemesis known as “administrative time.” You also need to understand that this should be a never ending quest. If you’re convinced that the only way to increase profits is to get more phone calls, and you keep churning out those non-billable hours then, well, good luck with that.
Why do you feel so many attorneys see having large amounts of non-billable time as “just the way it is?” Please chime in through the comment form below.