Here's where most lawyers in smaller firms consciously shoot their foot off in planning their use of time...

The Legal Trends Reports Clio produces annually are fascinating sources of information about what Key Performance Indicators drive small law firm success.

When I came across my first one, the 2017 report, I was astounded by the level of waste identified, and having been screaming from the rooftops for more than 4 decades how little real profit most law firms generate I am not easily astounded in that area!

The data for that first report came from a few sources, but, importantly, involved over 60,000 lawyers.

On average,?collected?billable hours a day was reported at 1.6.

While that number has improved slightly, it was still only sitting at a fraction over two hours in the report for 2019, pre-Covid.

With 2021-2022 Financial Year budgeting season in full swing for Australian law firms I decided that a direct comparison might be useful between the most recent Clio Report averages on the critical KPI’s and those in my client firms in Australia and New Zealand.

The most important number of comparison is the 2 hours a day ClientTime? collected in the latest survey, and the 5.4 hours of the KMS-firms’ average. N.B. Average invested hours are about 8 for each.

In simple numbers the horrendous difference means that as a direct comparison a “KMS” firm that might be achieving $5,000,000 in revenue at 5.4 hours collected, compares to the average firm in the survey collecting less than $2 million.

Obviously, revenue levels have a dramatic impact on profit, and unfortunately the survey results mean that the average firm is making losses, and lots of them!

That knowledge is not news!

What has emerged very clearly from a re-read of all the surveys from 2017 to date is that:

·???????the average lawyer involved believes they spend an inordinate amount of FirmTime? every day on work that is not directly billable, and:

·??????The average lawyer does not plan or record that FirmTime? in any meaningful way, so is only guessing about data on the impact of the most important revenue-smashing strategy in their practice.

For over thirty years I have forcefully encouraged lawyers to record FirmTime? and to use the data collected to keep fine-tuning the WorkPlans? of each unique team member so that their skillsets are ever-better aligned to the tasks needed to achieve the firm’s business plan.?

What has always been apparent is that the strategy provides data that proves that the average lawyer does not actually use as much FirmTime? per day as they think they do.

It also produces data that shows where less time should be spent or more time invested.

What consistent use leads to is appropriate amounts of FirmTime? invested across the firm in the right things, and appropriate amounts of ClientTime? invested that are invoiceable and collectable at very commercially-sound rates.

Firms following the better strategy outperform the average firms in the surveys by nearly three times in revenue generation, and large slabs of that additional revenue are achieved above break-even, the point where firms stop making losses.

With healthy genuine profits after Principals’ salaries and benefits, year after year, the firms are financially healthy, and can afford to invest confidently, even boldly, in their futures as the legal market continues to change.

Readers will be interested that for all the firms I’ve been involved with in preparing Revenue budgets for 2021-2022, based on team member WorkPlans?, of total time planned to be invested, FirmTime? runs at an average 27.75% (2.22 hours/day)??and ClientTime? 72.25% (5.78 hours/day).

In the average survey firm the actual numbers assumed (seldom budgeted) are almost completely reversed....ClientTime 2 hours FirmTime 6 Hours.

Without planning and monitoring FirmTime? practitioners are operating a business severely in the dark, and courting danger in terms of profit, liquidity, viability and professional indemnity risks.

Put another way, a firm operating on the KMS-firm averages set out above that did not plan and monitor FirmTime? would typically be ignoring an existing resource with an annual opportunity cost exceeding $2 Million. What business that hopes to have a secure future can risk doing that?